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.

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