PayPal starts reporting 2011 income to IRS
 

I just came across a post from PayPal that starting in 2011 they have to start reporting income received by merchants & individuals using PayPal to the IRS. From what I read & can tell, I "THINK" it only effects those who make more than $20,000 a year and who have more than 200 transactions per year; with the income made in 2011 being reported to the IRS in 2012.

Anyone else heard about & have further knowledge or understanding regarding the upcoming change & reporting to the IRS of income (something it didn't do or used to have to do). I know at one point they were going to have to report any income made over $600 by filing a 1099 with the IRS. Now, I think, it has to be over $20,000 or 200 transactions before a 1099 or information form is reported to the IRS. Is this correct?

That's going to kill a lot of ebay sellers & individuals using PayPal & people who make their living on ebay (which is a PayPal company, so ebay is likely going to fit under this same new requirement). This really sucks.

Anyone know of a payment processor that doesn't report to the IRS, especially one that will process adult memberships & payments (even if they are outside of the USA ... but reliable & trustworthy)?

They will get in all cells of our lifes

Why would that kill a lot of people??? because now there is a better paper trail that means they have to pay their taxes?

I believe the amount is $500 or $600. I really doubt the IRS made an exception for people using paypal and I don't think they care how many "transactions" you made.

here is a novel idea, pay your taxes like everyone else.

20.000$ and 200+ transactions.

Do you mean both of them? Eg if someone got 20.000$ and only 100 transactions he is clear?

Or its even one of those? But then it would not make sense if someone got 200 1$ transactions and thats only 200$ total per year.

not sure why anyone would ever think that Paypal, a USA company would be able to skirt the new KYC laws and not have to report income for all days. People have been using PP to scam the IRS for many years. the day has come. you now must pay your uncle.

My Spidey-sense is tingling. And not in a good way.

How is it going to kill people running a business? Either it's easy for them or they are fucked because they were doing something ILLEGAL before. Follow the laws or you get what you get.

$600+ = 1099, in general.

This is the info on the PayPal blog:

Hi, I’m Ken Swab, senior federal government relations officer at PayPal. You might have heard that Congress recently passed the Housing and Economic Recovery Act of 2008, a major housing bill that the President signed into law on July 30. The bill contains a provision impacting PayPal and our merchant customers, so I wanted to explain the requirements and what they mean for some of you.

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

receive more than $20,000 in payment volume in a single year; and
receive more than 200 payments in a single year.
This legislation applies to all payment providers including PayPal and takes effect in 2011, so the first reports will go to the IRS in January 2012. Our goal when the legislation takes effect is to make it easy for PayPal merchants who fall under the provision to report their taxable incomes.

I want to emphasize that this new law affects a small percentage of PayPal customers. Early versions of the legislation would have required PayPal to report total payment volume of many more customers, including those who received as little as $600 per year. We worked hard to educate Congress about the unique features of PayPal and the unique nature of our customer base. We also educated lawmakers about the many PayPal customers who receive money from others for reasons not related to operating a business.

It was important that this legislation didn’t burden entrepreneurs with new tax compliance demands or inappropriately raise reporting requirements on those who are not merchants.

With help from many of you, we conveyed these views to congressional leaders. And as a result of that dialogue, the legislation doesn’t overreach or negatively impact individual Internet users, Twitter moving to Cassandra from MySQL, the growth of small businesses, or the entrepreneurial spirit that makes the Internet so powerful.

Thank you, to the many PayPal and eBay customers who took the time to write to your U.S. Senators about this legislation. Your voices encouraged Congress to reject the initial overly-burdensome proposal and to limit the impact of the final version of this bill.

UPDATE (8/18/08): Thanks for all of your great questions! I have been responding to as many of them as I can. However, because the legislation has just recently been passed and we do not know exactly how the IRS will implement the requirements, we do not yet know the answers to some of the questions that have been posed. Rest assured that as more details about the requirements of this law become available, will provide updates as necessary.

In response to some of the questions below about business expenses (such as shipping, insurance, etc.), it is very important to point out that the figure PayPal will report to the IRS is only the total payment volume received by your business. Because of business expenses and other reasons, this figure may not match the yearly revenue or income figures that you report to the IRS in your tax forms. We encourage all of you to consult with your tax advisor when this law takes effect to ensure that you are complying with federal tax laws.

-----------------------------------

(see following post for more info on PayPal / IRS reporting change)

I don't get it, why would it suck? it's business as usual for anyone running an honest biz :thumbsup

This is info found on another web post regarding this upcoming PayPal / IRS change:

The Housing and Economic Recovery Act of 2008, a major housing bill signed into law on July 30, 2008, requires payment providers such as PayPal to report to the IRS the total payment volume received by its customers. This provision, which goes into effect in 2012, also applies to banks that provide credit card services to businesses.

The vast majority of PayPal users will be unaffected by the new law. When the reporting provision goes into effect in 2012, PayPal will be required to report sales information to the IRS if a customer meets both of the following conditions:

Receives more than $20,000 in payment volume in a single year; AND
Receives more than 200 payments in a single year.
The provision goes into effect in 2012, meaning that PayPal will begin reporting payments received in 2011 for sellers who meet the above conditions.

We do not yet know exactly how the IRS will implement the law. We will be working with the IRS to develop rules that minimize the compliance burdens on our sellers and provide for the most accurate reporting possible. Once IRS rules are finalized, we will encourage all merchants to consult with their tax advisors to ensure compliance with federal tax laws.

Early versions of the legislation would have required payments companies to report total payment volume of vastly more customers, including those who received as little as $600 per year. PayPal and its users worked hard to inform Congress about the unique features of PayPal and our customers. We also explained that PayPal customers receive money from others for reasons not related to operating a business.

As a result of this dialogue, the legislation doesn’t overreach or negatively impact individual Internet users, the growth of small businesses, or the entrepreneurial spirit that makes the Internet so powerful.

To the many PayPal and eBay users who took the time to write to your U.S. Senators about this legislation, thank you. Your voices encouraged Congress to reject the initial overly-burdensome proposal and to limit the impact of the bill’s final version.

----------------------------------------------------------

Curious for clarification or thoughts ... what constitutes a PayPal merchant card? Is only income made receiving income through a merchant card effected? I have a business account verified with PayPal but to my knowledge have no card & have only used PayPal to process payments of some items I've sold on ebay in the past (ebay & paypal both collecting fees from those transactions, which weren't that much). Is a normal person or business effected by this ... and do they have to remain under the $20,000 and 200 a year limits?

good news if true !

''Are you due'' ? :)

Any payment system that enables people to commit tax fraud and launder money with impunity will not be "reliable" by definition. :winkwink:

I too wonder if the "AND" means it must fit the criteria of 200+ transactions and 20K+...

Yea, that's the way I'm reading & understanding it ... it would effect only those PayPal folks who make over $20,000 "AND" process over 200 transactions a year. Was hoping someone knew or was capable of finding out more for sure. As a hobby, I find & sell quite a few things on ebay & process payment with PayPal (paying & getting paid). Most of what I make I re-invest with additional collections or purchases & expenses, so no real profit is made. There are a lot of folks similar to mine (who use PayPal to pay for & receive funds for our hobbies), but then there are the power ebay sellers who have made millions or some old people who count on PayPal or ebay to survive or get meds, etc ... its sort of like being double or triple taxed if you sell something you've already paid for & perhaps even sell at a loss. Guess folks will have to go back to selling stuff at garage or yard sales (lol).

If you keep track of your expenses then it evens out and you won't owe.

I don't think it should be a big deal for businesses that use PayPal, many already do report or should be reporting by themselves. I do though think it's a big deal for the small hobbyist that occasionally sells or buys things on eBay... it's doubtful that they will know how to or be organized enough to write off expenses as they would be allowed to, so they could potentially get stuck. Be interesting to see what happens.

I also wonder if families use PayPal to give each other money for spending or whatever. College kids, brothers, sisters, etc. Those people should not be taxed on that money, it's no different than exchanging hard cash.

This isn't a "PayPal thing" though, it's a new tax law stipulation.

Same here. The fact that people are up in arms about not being able to easily break their tax obligations anymore is kind of funny. Probably the same people that bitch about the rich not paying their fair share of taxes.

So? simply pay your taxes. It's not worth the risk.

good. fuck those in the ass who arent paying taxes.
ds

here is some clarification.... pay your fucking taxes. Now it will be more of an even playing field for the people who have been doing it legally.

those things were never a problem before and they wont be now. If you send a family member a couple hundred bucks you should be doing it via check or at worst wire transfer, you would be insane to use paypal and pay all the fees anyway, especially for larger sums of money. Paypal is good for people who do business and don't know the person they are doing business with, can't send cash in the mail, and they don't want to fool with checks from them.

If you run a business and use paypal for transactions then you better report the income and keep track of your expenses and write offs. This will really only affect the people with businesses who are trying to avoid paying taxes. Be lucky we don't have to pay sales taxes, and at least report your income. Unless you making a ton of money you should have a lot of write offs to off set it anyway.

A hobby is still a business if you are making a profit. If you are not making a profit and buying back more product (as you said) then why not just keep track of your profit and expenses and report it all like you are suppose to anyway??? Set up an LLC for a couple bucks, and you will find a whole world of write offs you could use that you were not able to do before. You will save yourself money doing it the right way.

all you fucks that voted for obama thank him...

he spent so much money now he has to steal it back...

correct me if im wrong but isint that the joy of the internet is .. income that you get that has no trail to it?

:thumbsup

All transfers 5 years back in time will be reported.

Paypal is very useful for receiving payments online.
It is too bad that Epassporte closed.

Shit, this is really bad news!

I pay my taxes, don't you?

Obama? Not for this one ... it was President Bush who signed the Housing and Economic Recovery Act of 2008 that imposes these new requirements into law.

However the health care reform package, which was signed by President Obama, imposes other new reporting requirements for all businesses ...

In 2011, as of now unless it's changed soon, businesses will have to generate a 1099 for every business / person they purchased $600+, cumulatively in the same year, of goods / services from...

For example, if a business bought $600+ of groceries (ie. to stock their breakroom), over the course of the year, they would have to 1099 the supermarket!

Ron

lol pay your taxes sleep better at night umm kay?

hahahahha stupid American government. they just want every cent to repay their trillion dollar debt.