Taken from the PayPal blog: Quote:
Hi, I’m Ken Swab, senior federal government relations officer at PayPal. You might have heard that Congress recently passed the Housing and Economic Recovery Act of 2008, a major housing bill that the President signed into law on July 30. The bill contains a provision impacting PayPal and our merchant customers, so I wanted to explain the requirements and what they mean for some of you. Under the legislation, PayPal will be required to report to the IRS the total payment volume received by PayPal customers in the U.S. who:
- receive more than $20,000 in payment volume in a single year; and
- receive more than 200 payments in a single year.
This legislation applies to all payment providers including PayPal and takes effect in 2011, so the first reports will go to the IRS in January 2012. Our goal when the legislation takes effect is to make it easy for PayPal merchants who fall under the provision to report their taxable incomes.
I want to emphasize that this new law affects a small percentage of PayPal customers. Early versions of the legislation would have required PayPal to report total payment volume of many more customers, including those who received as little as $600 per year. We worked hard to educate Congress about the unique features of PayPal and the unique nature of our customer base. We also educated lawmakers about the many PayPal customers who receive money from others for reasons not related to operating a business.
It was important that this legislation didn’t burden entrepreneurs with new tax compliance demands or inappropriately raise reporting requirements on those who are not merchants
With help from many of you, we conveyed these views to congressional leaders. And as a result of that dialogue, the legislation doesn’t overreach or negatively impact individual Internet users, the growth of small businesses, or the entrepreneurial spirit that makes the Internet so powerful.
Thank you, to the many PayPal and eBay customers who took the time to write to your U.S. Senators about this legislation. Your voices encouraged Congress to reject the initial overly-burdensome proposal and to limit the impact of the final version of this bill.
UPDATE (8/18/08): Thanks for all of your great questions! I have been responding to as many of them as I can. However, because the legislation has just recently been passed and we do not know exactly how the IRS will implement the requirements, we do not yet know the answers to some of the questions that have been posed. Rest assured that as more details about the requirements of this law become available, will provide updates as necessary.
In response to some of the questions below about business expenses (such as shipping, insurance, etc.), it is very important to point out that the figure PayPal will report to the IRS is only the total payment volume received by your business. Because of business expenses and other reasons, this figure may not match the yearly revenue or income figures that you report to the IRS in your tax forms. We encourage all of you to consult with your tax advisor when this law takes effect to ensure that you are complying with federal tax laws.
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hxxps://www.thepaypalblog.com/2008/08/proposed-irs-reporting-requirements-become-law/
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