Virtual Assistant Forums | Work from Home

Tess · #1 (**permalink**) 01-20-2011

New IRS tax legislation requires PayPal, and all other payment portals, to report to the IRS accounts receiving more than $20,000 [AND] 200+ payments per year. If your account is impacted, starting in 2012 and every year following, if you pass the payment threshold, you'll rec'v a 1099 from PayPal.

It's really easy to comply, you'll just be asked to verify your name and address and to include your EIN or SSN.

Here's a bit more info from the PayPal website:

Starting in 2011, all U.S. payment providers including PayPal will be required by the Internal Revenue Service (IRS) to report sales information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal. We want to help you understand these changes.
* Applies to sellers receiving over $20,000 in gross payment volume AND over 200 payments
* Applies only for sales on or after January 1, 2011

How is the $20,000 calculated? Will it be calculated based on net or gross transaction earnings?
As required by IRC 6050W, the $20,000 will be calculated by looking at a seller's gross payment volume for sales of goods and services. Gross amount means that any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts will not be netted out.

In 2011, PayPal will ask impacted sellers to update their account(s) by providing a Tax Identification Number such as a, Social Security Number (SSN), or Employer Identification Number (EIN). PayPal will also ask impacted sellers to verify their name, physical address and email address to ensure we report accurately to the IRS. This information will only be requested from sellers that are potentially impacted by these requirements. If you are required to update your information, PayPal will notify you via email and include an alert in your PayPal Account Overview.

You can find complete info about these changes at the PayPal website.

arcvirtual · #2 (**permalink**) 01-20-2011

Thanks Tess! Great information. I am planning on using Paypal when I get started.

Right-Hand-Man VA Services · #3 (**permalink**) 01-20-2011

Thankfully it doesn't seem to affect us Canadians - yet.

JoCarole · #4 (**permalink**) 01-20-2011

Thank you Tess for posting this, very interesting!

Your Virtual Wizard · #5 (**permalink**) 01-20-2011

Thank you, Tess. Good to know.

Janine

JKVirtualOffice · #6 (**permalink**) 01-20-2011

Hmmm...interesting. I'll have to check my account for 2010 and see if I come close enough to have to bother with this. I've started try to take more payments through Intuit Payment network since it direct deposits to my biz account and only cost me .50 per transaction. There are some limits though so I still need my PayPal account.

@Tess- I'd be interested in hearing your thoughts about this.

RhondaHolscher · #7 (**permalink**) 01-20-2011

Thanks Tess for sharing that info!

Rhonda

leedrozak · #8 (**permalink**) 01-21-2011

Here is a great summary from Deloitte: "Part of the 2008 Housing Assistance Tax Act, Section 6050W can require retailers to file information returns, Form 1099-K, and report payment card transactions – including debit, credit, gift cards, and co-branded cards – as well as third-party network transactions, on a gross basis."

This is going to be required of all third party providers not just PayPal. Here is a great article on the summary of the process.

I believe this was enacted so that sellers on ebay and such will now have records of the transactions they process for tax purposes. Because the threshold is $20,000 AND 200 transactions it probably was directed at those sellers who now make a living on selling ebay stuff.