Paypal/IRS

[proclan]

It's finally here as of 2012 Paypal will be issuing 1099's for all income brought into your US Paypal account. This may be the end for the kiddie hosters as they will be required to report the income to the IRS. It's not an option, you will receive a 1099 from Paypal that is reported to the IRS.

 

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 from sales of goods or services in a single year, AND

Receive over 200 payments in a single year.

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

 

Before your payment volume exceeds the reporting thresholds, you will be required to verify your identity by adding a Tax Identification Number,such as a,Social Security Number (SSN), or Employer Identification Number (EIN), to your existing account(s).

 

You can read about it here and you should be getting an email from Paypal.

 

https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

[studeggle]

Receive more than $20,000 in gross payment volume from sales of goods or services in a single year, AND Receive over 200 payments in a single year.

 

20,000 / 12 = $1,666.67/month

 

A lot of kiddie hosters fall below this, and that the up today gone tomorrow hosters will often fall below the yearly total. What stops kiddie hosters from opening multiple paypal accounts, I've already seen that game played by companies I think are juggling the books. Then add to that receiving a 1099 does not mean the recipient will file taxes. Every year there are tons of 1099's unaccounted for the IRS has to evaluate the 1099 left out and decide if its worth going after.

 

If you file and leave out 1099 for 1/2 grand or more I'd wager you will be getting close to audit time. But if you don't file at all such as kiddies I'm guessing the level is quite a bit higher, just look at the figures for how much you can make before you owe anything in taxes, and that is assuming there is nothing to offset the income. Almost every (if not every) 1099 has expenses that are not shown that will offset the amount.

 

So I think your dreams of the kiddie hosters going bye bye is nothing more than a dream, frankly I doubt we'll see more then 5% -10% of them truly affected by this. Only thing I see by this is perhaps I better double check my record keeping on any non-business (according to the IRS) transaction that flows through the paypal account as the likelyhood of having to go over with an auditor why that transaction isn't recorded on my taxes has gone up.

[Feltz]

It may hit the bigger providers more than you think also. Thats going to cut into their profits

[proclan]

Whether somebody decides to claim a 1099 they received is entirely up to them but the IRS will track you down it may be a year or it may be 4 years but they will catch you as it was reported income on your SS or fed number. Anything over $600.00 USD you are required to report. You are probably right about the sales/ transactions but hitting 200 transactions per year is not hard to do. I did see this coming and I don't know how many of you use the Paypal business account but they do have options to download financial reports, sales transactions and a few other reports now. I'm just waiting for the States to follow this as some are already requesting online purchases to be reported on your tax return (legally you owe sales tax for an online purchase in some states). This is also going to happen with your merchant gateway provider for anybody receiving credit card transactions. It's just another way for the IRS to try and bilk the small business owner out of what little profit they make. If your already doing this then you really have nothing to worry about but if your padding your income......

[studeggle]

Whether somebody decides to claim a 1099 they received is entirely up to them but the IRS will track you down it may be a year or it may be 4 years but they will catch you as it was reported income on your SS or fed number. Anything over $600.00 USD you are required to report. You are probably right about the sales/ transactions but hitting 200 transactions per year is not hard to do. ......

 

 

The they will come after you is not true as I said earlier they weigh stuff out as the only time fees are assesed is if you owe taxes that were not paid as all fees are percentages of what is owed. A percentage of nothing is still nothing so while technically there are fees for not filing or not claiming as long as you don't owe after all tax is computed there is no fee.

Over 10 years ago when I was young I had several 1099s from a failed business venture. As 1040 are far longer then 1040ez and I had expenses to offset all 1099 I just said screw it and simply did a 1040ez knowing if they came after I could actually collect a slightly bigger refund. Audit never occured despite not claiming the 1099s

No I don't recommend playing games as audits are a pain in the but when they happen but don't think that 1099 from paypal will result in every kiddie filing taxes or being audited.

 

 

Also the 200 transactions is an and, so ...

5000 transactions totaling $15000 = no 1099

$25000 in 100 transactions = no 1099

I'd say it's the big guy that has more to be concerned about as they must ensure they can account for any diffs between 1099 and what they claim.

[DougK94]

It is about time......

 

I have been reporting my Paypal income for over 10 years.

[proclan]

The they will come after you is not tru as I said earlier they wiegh stuff out as the only time fees are assesed is if you owe taxes that were not paid as all fees are percentages of what is owed. A percentage of nothing is still nothing so while technically there are fees for not filing or not claiming as long as you don't owe after all tax is computed there is no fee.

Over 10 years ago when I was young I had several 1099s from a failed business venture. As 1040 are far longer then 1040ez and I had expenses to offset all 1099 I just said screw it and simply did a 1040ez knowing if they came after I could actually collect a slightly bigger refund. Audit never occured despite not claiming the 1099s

No I don't recommend playing games as audits are a pain in the but when they happen but don't think that 1099 from paypal will result in every kiddie filing taxes or being audited.

 

 

Also the 200 transactions is an and, so ...

5000 transactions totaling $15000 = no 1099

$25000 in 100 transactions = no 1099

I'd say it's the big guy that has more to be concerned about as they must ensure they can account for any diffs between 1099 and what they claim.

 

Your wrong there your talking 10 years ago if you claim you made 50k for the year and they get a 1099 from paypal stating you earned another 10k from online sales your in trouble buddy no questions about that. You can't go back and say " hey I did make more money but I have more write offs too" And if they catch you 4 years down the road your paying taxes and penalties (4 years of penalties and interest) on that 10k you earned. You forget the IRS can go back as far as they want (look at Wesley Snipes). It doesn't matter if your an 18 year kid starting out or a 50 year old small business owner.

[{-SMAKU-}_MotorMouth]

In NC if Perdue gets her way we will have to collect taxes for services. As of know if it's a service it's tax free. The GOP will stop her now.

 

In 2002 I lost my State forums moving into my house and said "well I'm getting a small refund it will cost more to have them refiled than the refund I want worry." Five years later it cost me $2000 in fines, interest and penalties.

[SickPuppy]

Every business from Sole Proprietor to Corporations are required by law to keep accounting records that conform to GAAP and they must keep a general ledger. This ledger and other finical records can be as simple as hand written forms or complex accounting and book keeping software. The IRS has the authority to audit your accounting records at any time.