PayPal Income Tax

[Annieo]

FYI for online sellers and users of PayPal

So new this year, Paypal will be sending out 1099 income tax forms to:

1. Sellers receiving over $20,000 in gross payment volume AND over 200 payments
2. Applies only for sales on or after January 1, 2011

I got a notice today that I would be receiving one. I may have over 200 payments, but I do not have $20k in gross payment volume. (I wish) I'll be curious to see what they send me as I don't meet BOTH those requirements.

I was the go-to girl for payments for my next year's reunion house deposits so I'm glad I keep good records.

One should never rely on 1099 as an accurate record keeping of sales as it just lumps everything together (money transfers, gift and goods and services.) (BTW, if that is the case, you might receive a notice from the IRS asking if you have accurately declared all your income if you have differences like I will.)

This will be the first year that I claim anything on my Schedule C for chinchilla stuff (I have had a small business, non-related, in the past), so I'm familiar with what I need to do.

Just a head's up for others that receive payments via PayPal. Time to get those records in order.

Anyone else receive a notice?

 

[Snickers]

I didn't get one since I didn't have that many transactions. I am glad that you posted this to let everyone aware of this. I guess the government wants to squeeze every penny out of everyone.

 

[Twilight Chinchillas]

I know I haven't had that many sales, or that much income, but I received the notice also.

 

[Annieo]

Yep Nan...just a matter of time with Internet sales (states wanting income tax). I believe this is the beginning.

Like I said, I'll be curious what arrives, if anything, as I don't meet the requirements to receive one.

Still good to have your records in order...just in case.

 

[AZChins]

I received a notice months ago that I would need to provide them with a Tax ID number. I'm not sure why they need it if I haven't made $20,000 in sales.

Honestly it bugs me because I have to keep records as it is and it seems like being we're being pushed more. What exactly are they going to learn from knowing what I got from paypal? It's just used as a merchant account and I have to keep receipts for it. I don't like having them check up on me like that. It will discourage small businesses from using paypal...and that will make it harder to track income.

 

[Annieo]

I agree with you Susan. I was offended they asked for my SSN as I clearly don't meet the requirements either.

 

[AZChins]

Maybe it would just be better to offer a slight discount for cash and checks? I know that I would rather give my customers the benefit of a small 3% discount than just handing over the money to paypal.

If my business ever really turns into a business where I draw an actual income, I probably would have my own merchant account and pay the monthly fee. The only reason why paypal is attractive is that it doesn't have that fee and it's easier for people making money from hobbies and really small businesses.

I guess I shouldn't really worry about it...I won't come close to the requirements for being tattled on. It's just not a pleasant feeling having big brother watching us....

 

[Twilight Chinchillas]

My feelings exactly! Big brother is just a bit to involved with our lives it seems!

 

[Spoof]

Paypal does make it easy to deal with and track money. I finally got an account because the lady who bought my saddle wanted me to use it so she was protected. Makes sense, she was even willing to foot the extra $30 fee on top of the payment for the security. For that it is worth it I suppose - and it helps track down fake sellers and such.

After extensively dealing with Paypal more recently putting together Ronda's site I can say it is a very easy way to go for payment gateways when you have a small site. Unfortunately the larger you get the worse it is to use. The alternative is a much more expensive payment gateway that have set fees of $200 or so a month and 1.5-5% on transactions. I figured the breakover would be when you reach $200/mo on paypal fees... and that's a lot of transfers! I had no idea there was so much money involved in moving money!

I personally prefer cash, but checks work too.

 

[alli713]

I agree with you Susan. I was offended they asked for my SSN as I clearly don't meet the requirements either.

I wouldn't be offended. because technically if you're selling online you're a business according to the IRS, even if you only make $500 a year. Anyone selling online should have a business tax id for their state for sales tax purposes and then either their ssn or ein for federal taxes.

 

[Annieo]

I wouldn't be offended. because technically if you're selling online you're a business according to the IRS, even if you only make $500 a year. Anyone selling online should have a business tax id for their state for sales tax purposes and then either their ssn or ein for federal taxes.

I stand offended. I always claim my income on a Schedule C regardless of whether PayPal asks for my SSN or not.

I am not comfortable with any third party asking for my SSN.

 

[alli713]

I stand offended. I always claim my income on a Schedule C regardless of whether PayPal asks for my SSN or not.

I am not comfortable with any third party asking for my SSN.

Yeah, just unfortunately a lot of people don't. There are tons of people selling on Etsy who don't and tons of people selling elsewhere too who don't )

I'm not saying I agree with them asking for a ssn but at the same time a lot of people don't pay the appropriate taxes.

 

[Annieo]

I agree Alli