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Thread: The IRS Gets It's Hooks Deeper Into PayPal

  1. The IRS Gets It's Hooks Deeper Into PayPal

    What Is IRS 6050W?

    Under the new legislation, PayPal will be required to report to the IRS the total payment volume received by PayPal customers in the US who:

    • Receive more than $20,000 in gross payment volume in a single year, AND
    • Receive 200 or more payments in a single year.

    The IRS changes will apply to all payment providers, including PayPal. They will take effect on January 1, 2011, with the first reports going to the IRS in early 2012. Our goal is to help PayPal merchants to understand and comply with the new requirements.

    If you meet the stated thresholds, you will be required to verify your identity by adding a SSN/TIN/EIN to your existing account. If you are currently using a Personal or Premier account, you will be required to upgrade to a Business account.


    Will All Merchants Receive 1099s?

    No. Only merchants who receive over $20,000 in gross payment volume AND receive 200 or more payments in a calendar year will receive Form 1099-K electronically or by mail.


    Are personal payment transactions received counted in the total that will be reported to the IRS?

    Yes. All payments received by an account will be used when calculating the total payment volume received.


    How is the $20,000 calculated? Will it be calculated based on net or gross transaction earnings?

    The $20,000 will be calculated by looking at a merchant’s gross sales volume.




    Read more here
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  2. #2
    It looks like the number of people using more than 1 paypal account will sky rocket.

  3. #3
    The IRS has been sniffing around eBay, as well. There are lots of people based in the USA selling new consumer items on eBay who are not reporting income or paying local state sales taxes.

    It looks like the IRS will probably nail them through their PayPal accounts.
    "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." -- Benjamin Franklin


  4. #4
    It makes sense to register your business with the tax authorities and have a separate bank account for all business transactions simply to eliminate stress and comply with the law. Also, you can easily deduct business expenses from profits and get tax refunds.

    Make it a habit to keep records of all money going in and out of your business so it is easy to prove what you did and not hide anything.

    I'm not US based so I don't know for sure what is best for US-based affiliates etc.

  5. #5
    I am all for being legal when it comes to taxes.

    Am sure that all those people who have been skirting the law when it comes to reporting their true income will not be happy.

    For having multiple paypal accounts?
    I have seen over the years people lose their paypal for that.
    With the new rules, paypal I am sure will look closely at every single account.

  6. #6
    Quote Originally Posted by iowadawg View Post
    I am all for being legal when it comes to taxes.
    If you don't, the Feds will lock you up in a heartbeat. It has happened to people that I know for cheating far less than Charlie Rangel, Tim Geithner, Tom Daschle, Kathleen Sebelius and many others.

    The politicians get a slap on the wrist. You and I would get locked up in jail.
    "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." -- Benjamin Franklin


  7. #7
    Hi,

    $20,000

    I wonder how many people that will really effect. Most webmasters do not make that type of money do they???

    I would never see moving that type of money through paypal anyway.

    If had any big item for sale house, car I would never allow it to be sold with paypal.

    Sami
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  8. #8
    Quote Originally Posted by Sami4u View Post

    $20,000

    I wonder how many people that will really effect. Most webmasters do not make that type of money do they???
    Most? No.
    Many? Yes, sometimes per month or maybe per week.

  9. #9
    Quote Originally Posted by Sami4u View Post
    Hi,

    $20,000

    I wonder how many people that will really effect. Most webmasters do not make that type of money do they???

    I would never see moving that type of money through paypal anyway.

    If had any big item for sale house, car I would never allow it to be sold with paypal.

    Sami
    That's vastly dependent on what type of business you are operating. If you buy and sell, adding a margin, you're very likely to earn $20k+ yearly gross profit.

  10. #10
    Quote Originally Posted by Will.Spencer View Post
    • Receive 200 or more payments in a single year.
    Like web hosting companies The amount of recurring transactions really adds up.

    Quote Originally Posted by Andy101 View Post
    It makes sense to register your business with the tax authorities and have a separate bank account for all business transactions simply to eliminate stress and comply with the law. Also, you can easily deduct business expenses from profits and get tax refunds.

    Make it a habit to keep records of all money going in and out of your business so it is easy to prove what you did and not hide anything.

    I'm not US based so I don't know for sure what is best for US-based affiliates etc.
    I am US based and have been doing exactly what you said for years. Business registration and strict book keeping, etc. My EIN is already registered with PayPal and Authorize.Net.

    Quote Originally Posted by Sami4u View Post
    If had any big item for sale house, car I would never allow it to be sold with paypal.
    That's unsafe even without IRS intervention. The buyer could do a false chargeback. And if you use craigslist instead.. well we all know anything can happen there.

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