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Online Sellers - New PAYPAL/IRS Reporting Rule Here - Watch Out

by MaxReferrals
10 replies
For U.S. based Warriors, Paypal will report you to the IRS when you receive $20,000 or more in payments AND 200 payments (transactions). They have your FEIN/SSN and they intend on using it.
I think they released this back in 2008, but it goes into affect during 2011, reporting starting Jan 2012.

Read:

https://www.thepaypalblog.com/2011/0...n-for-sellers/

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Starting this year, an IRS rule is going into effect that requires all U.S. payment processors including PayPal, to provide information to the IRS. While we have been informing our customers about this requirement for some time, we wanted to make sure you're aware of and clear about it. Under the rule, IRC 6050w, PayPal is required to report gross payment volume from sales of goods or services received by PayPal users in the U.S. that:
Receive more than $20,000 in gross payment volume from sales of goods or services in a single year


AND

Receive more than 200 payments for goods or services in the same year.
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#online #paypal or irs #reporting #rule #sellers
  • Profile picture of the author JSThompson
    I don't see what the concern is. Brick and mortar companies have to pay taxes. Why should your online one be any different?
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  • Profile picture of the author MaxReferrals
    I'm not saying there's any concern. I'm certainly not concerned.

    Just telling people to be aware.
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  • Profile picture of the author TrafficGuy Claude
    What should we watch out for?

    If you're running a legitimate business you're already keeping your own books and paying your taxes without Paypal reporting your income on your behalf.

    And even if Paypal doesn't report you, your bank will report your income after your total deposits exceed $10,000 anyway.

    This is only of concern to people who are interested in illegally dodging taxes.
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    • Profile picture of the author Steven Miranda
      Originally Posted by TrafficGuy Claude View Post

      What should we watch out for?

      If you're running a legitimate business you're already keeping your own books and paying your taxes without Paypal reporting your income on your behalf.

      And even if Paypal doesn't report you, your bank will report your income after your total deposits exceed $10,000 anyway.

      This is only of concern to people who are interested in illegally dodging taxes.
      I agree with you. This seems to be for all the so called businesses that are flying under the radar with the IRS just because they are an online business.
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    • Profile picture of the author Tina Golden
      I don't see this as the government being intrusive. This was instituted mainly because so many people get online, start making money and don't report it as income. Look how many times someone posts in the forum about when they should pay taxes or when does it count as income... far too many treat their online income as "under the table" money.

      Why would it be okay to have companies reporting the income for their employees yet it be considered "intrusive" for PayPal to report details of your income?

      All this does is move PayPal closer to bank status (which I'm told may have happened already) and I, for one, think that's a good thing. When they have to follow all the regulations set forth for banking establishments, we should stop seeing the horror stories about frozen accounts.
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  • Profile picture of the author noble
    You should all be filing quarterly anyways

    Now they need to regulate PayPal like a bank so it doesn't have complete dominance to do whatever it wants with your account/funds.
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  • Profile picture of the author Michael Oksa
    I have no problem with this, in theory.

    My concern is how they will prevent double reporting; once by the business owner and once by PayPal.

    Other than that, it is truly amazing that so many people believe dangerous myths about paying taxes. I am not pointing fingers at anybody in this thread, but speaking in general terms.

    All the best,
    Michael
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    • Profile picture of the author Tina Golden
      Originally Posted by Michael Oksa View Post

      My concern is how they will prevent double reporting; once by the business owner and once by PayPal.
      I was thinking that PayPal would have to issue you a copy of what they send the government and then you would include that like a W2. Not sure of that but it seems like the reasonable way to do things.

      I think the IRS would be comparing numbers to make sure we're all reporting what we're supposed to. It's the same thing that happens with a regular job. The company sends all that data to the IRS but we get W2s and report it ourselves. We don't get double-taxed on that income.
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  • Profile picture of the author LB
    The issue here is twofold:

    It's another level of government regulation to require businesses to report this. The costs of compliance will be passed on to the consumer in higher fees and/or worse customer service in an effort to cut costs.

    Double reporting- What happens when an affiliate program pays you via Paypal? The affiliate program reports your income and then Paypal reports the same income. Congratulations, the IRS thinks you made double what you actually did. Enjoy straightening that out.

    Both of these issues were brought up as this was being debated, but of course, the government got what they wanted.
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  • Profile picture of the author Paul Myers
    Paypal notified their US-based customers about this directly. That being the case, I see no purpose in letting the nastiness and political commentary that I've been deleting continue.


    Paul
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    Stop by Paul's Pub - my little hangout on Facebook.

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