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Taxes - PayPal, other credit card processors reporting income (gross receipts) to IRS
 

I read the news saying IRS won the lawsuit in CA and will start ask Paypal to give them the seller information...

Does anyone know about this thing and any solution to avoid leaking info to IRS?

Vote Ron Paul for president and he'll do away with the IRS. problem solved.

HI- NO matter if they get the info or not, We have PLENTY of write offs to off set the income anyhow... (How many hours spent on this forum for research related to your business )?
--Or whoever you had do the research for you... :))

Won't they need out SS #'s for that?

I have never given them mine. :)

Nah Paypal doesnt want to do this because it means less money for them. If the IRS starts requiring they turn over info that means they have to start having real security on the website (money), people who can actually help customers (more money), and a resolution department that doesnt just send emails (more money). They would actually have to start taking responsibility for transactions and not just throwing up their hands and saying look we only took a payment.

Its the same thing with ebay and why they dont want the irs to know what peole are selling because they just wanna throw up their hands and go look guys we cant help you we are only an auction site.

Taxes - PayPal, other credit card processors reporting income (gross receipts) to IRS
 

Hey guys been a while, I been using this card works great, but it requires my social when registering for it t.t. Anyways do they report to the irs how much I make? On the registration part like others it is used to see if you are a real person with the social\Im pretty much a full time student. Just wondering before I file it and something goes bad on me =o. Thanks in advance. (i know its kinda late to file also) t.t !!

They only report when they send you a 1099 form.

If they don't send you anything, they're not reporting.

I learned that from Modee. :)

Well I got a 1099-DIV for like 17 dollars. So basicly report all my income I made from paypal to the irs n pay the taxes correct? This is from the paypal money market fund. Thanks in advance again!

That would be from january to december right?

HI:
I recd the same form for 4 of my pp accts for last year, i just give those to my acct, along with the other 1099's from the banks, he knows what to do with them.. :)

BTW- any stock losses will offset the gains earned in interest.. :)

needing a social security number for a credit/debit card and having to use real information with the post office is due to the patriot act in an attempt to keep terrorists from using credit/debit cards to transfer money

Okay Modee, question for you. Since Paypal isn't reporting money going through your accounts. When you withdraw that money, and it goes to your bank account, do you report that money then? Thats what I've been doing for the past few years. I just report that money as income.

Could I get away with not reporting that money? I have a feeling I'm going to be audited this year because I have tons of 1099 forums from different affiliate companies, and what I've heard is the IRS tends to audit people with multiple streams of income. Should I risk Paypal?

Or we don't have to report all money going into our checking accounts?

i would think that if you are audited the irs will have easy access to your bank statements, and see that you did or did not report all income coming through the account.

also i thought there were new laws just recently passed that would allow the government to have access to all paypal income. they are trying to catch people from the US who deposit money from their paypal into overseas banking accounts. if the government asked, then paypal would have to fork over your information.

man thats such bs. its just to keep regular people in check. if a terrorist really needs money, he's not going to go use a western union transfer.

i knew that the new laws were for overseas transactions, but i thought it would also aply to all accounts. i wasn't sure, guess i was wrong.

and that's what i meant about the bank account statements. if they ask for them you better come up with them.

and i really don't think someone is going argue to the IRS that the thousands of dollars coming in from paypal is all going to their business costs and you're just breaking even. especially if this is your sole income, and you do not have a job. it's pretty hard to explain how that person would be able to afford their, house, cars, credit card, payments, etc... granted some of the house, and cars can be written off as work related expenses, but not all. i have read before that if your stated income does not reflect close to the amount of what kind of house you can afford then a red flag will be raised to the IRS.

and yes, i aggree that you can get away with most anything you want, but if the audit ever comes then the person should have tons of info to back up the moves they've made.

no im just speaking if claiming things like your overhead cost. i'm not incorporated. i file self-employed, so that by it's self puts me at higher risk for being audited. then if my numbers do not look correct, or seem too low for what i own then they gives me an even greater chance of being audited.

and me personally i prefer to claim as much as i can because without a proveable income you can't get too far. couldn't buy houses, cars, etc...

Thanks, thats what I thought.

The money I withdraw is all my profit. Any cost are withdrawn to supplier banking accounts. And I just claim what I withdraw. Weird setup. :o

when submitting your tax forms you can deduct the interest paid on your house, and the taxes. by that amount you claim i would assume that, like you said, with the computer fomula they can tell that, hey this guy cannot afford a $300,000 house. he claimed his net income was $15,000.

i have always assumed that their system is like ebay and paypal. there really isn't too many people analizing everything you do, but they are alerted by a computer that says you should be looked into more closely.

yeah, thats' what i try to do, is be truthful on the returns. i'm too paranoid not to.

I know the banks report single deposits over 10 or 12k somthing like that to the IRS I made that mistake once.

xxxxrod, the magical figure in the USA is US $10,000 and in Australia it is AU $10,000.

Not sure if any of the poms would ever have any spare money so I
can not say what their amount might be. LOL.

what do people whos paypal accounts got suspended do, where you can't even log in to see your transactions...and you are audited and must prove every single penny.

i think that's why you're supposed to have paper copies of everything. i'm guilty of it too. it's hard to keep up with printing out all statements though.

how far back does paypal let you print out statements?

How about ebay statements, do you add all statements even if they have different names ???
and the oversea wholesaler invoices?

In Today's Wall St Journal - Online Sellers Face New IRS Rules
 

Online Sellers Face New IRS Rules

By MARTIN VAUGHAN
See Correction Below
July 30, 2008; Page D3

If you regularly sell items on online auction sites, you may find yourself on the Internal Revenue Service's radar. Recent legislation aims to help the IRS collect more taxes from online enterprises, many of which either don't know about their tax obligations or are ignoring them, according to the agency.
The provision, part of the housing rescue package that President George W. Bush is expected to sign within days, will require PayPal and other processors of online payments to report annual gross receipts to the IRS for all but the smallest online merchants.
Processors' Requirement
The new reporting requirement is similar to a proposal the Bush administration has put forward in its most recent budgets as a way to ensure that taxes owed are being collected. It also applies to intermediary banks that process card payments for restaurants and brick-and-mortar retailers. Congressional tax estimators predict the reporting change will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years.
The payment processors will be required to file a 1099 form for each merchant to the IRS and to the merchant. They won't have to file for merchants with less than $10,000 in gross sales and less than 200 transactions in a given year.
And they won't start reporting until 2011, giving the banks and the merchants a couple years' head start to make sure everything is in order.
Business Transition
Confusion about taxes may be more prevalent among eBay sellers than brick-and-mortar firms because it is comparatively easy and cheap to set up an eBay business. The transition from casual seller to profit-seeking business can seem almost spontaneous.
Like many eBay sellers, Sarah Davis didn't set out to be a business owner. But somewhere between her first online sale and last quarter's $560,000 in sales of second-hand luxury handbags, it dawned on her that she had become one. From the time she started selling in 1999, Ms. Davis reported income from her eBay sales on a Schedule C. By 2005, her business had grown large enough that she sought tax advice. Soon after, she incorporated her business, Fashionphile, as an LLC.
"You start out selling some stuff from your closet, and then the random clearance handbag," Ms. Davis said from her Beverly Hills, Calif., office. Mix in some shoes you never wore and "It's hard to say when you are really, 'in business.' "
Here are a few suggestions to help eBay entrepreneurs protect themselves and their profits, while complying with tax laws:
Report all income from online sales, even from casual or hobby selling. If you made a profit from goods sold on eBay -- whether vintage KISS action figures or hand-knitted doggy sweaters -- you owe income or capital gains taxes, and likely self-employment taxes, too. No taxes are owed, however, on used items that you sold for less than what you paid for them, essentially using the online service as a virtual garage sale.
If you mean to deduct expenses, act like a business. One of the most common mistakes eBay sellers make on their tax returns is to claim deductions to which they aren't entitled. The tax code allows deductions for business expenses, but deductions are limited for individuals who sometimes make a little money on the side from hobbies.
One rule of thumb the IRS uses to determine whether an individual is engaged in a business is whether they made a profit in any two of the past five years. Another is if the person would still, say, frame landscape photographs, or carve garden gnomes, or buy and sell rare 45s, regardless of whether or not they made any money from the activity.
"If the answer is yes, you may be on the wrong side of an IRS argument that you are taking a hobby loss," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.
Keep your personal and business accounts separate. Make sure you have a PayPal business account separate from your personal one, an eBay business account that is separate from any casual buying and selling you do, and a separate business checking account.
These steps will not only make it easier for you to determine how much you owe, but may help protect your deductions by signaling to the IRS that you are serious about running a business. "Everything you can do to treat it like a business will help," says Kristine McKinley of Beacon Financial Advisors, based in Independence, Mo. Ms. McKinley specializes in tax advice to eBay sellers.
Claim the home office deduction. While this deduction has fallen out of favor because of a popular belief that it triggers IRS audits, it is still a valuable deduction if you have a separate space in your home that you use exclusively for business purposes, according to Ms. McKinley. It's true that you will owe more taxes when you sell the home on amounts that you have depreciated. But the deduction can still be a major benefit because it will reduce your income for the purposes of self-employment tax, she said.

Good stuff, I always claim 100% of the income I make online and deduct as much as possible within the law and I'm fine.

Paypal will start asking for a SS# even sooner in a couple years.

Ssn Issue - does PayPal report income to IRS? No.
 

Hi, My sister let me use SSN and her information to create paypal account. However, she is afraid that she might have to pay taxes of amount I earn through paypal. Does government or credit company monitor paypal account if I put SSN?

I mean by borrowing her SSN , is there anything that might harm my sister?

There is 0 chance that she is going to create paypal account for her.

No Paypal doesn't report anything... Yet...

Soon they hinted they will, a couple years from now though.

Here's the link for this story if anyone is interested....

PayPal Required to Report Payments to IRS

great thanks

Thats easy to get around. LoL. All you have to do is log all your incoming payment totals and when you hit $19,999 just close it and start another paypal account, lol.

That was good info tho, didnt know this. Thanx.

I hope i have that problem to worry about!

The first reports won't go out until 2011...hopefully we all will be weaned off of paypal by then :D

Actually PayPal merely needs to tell the IRS the bank accounts you use so the IRS can check the bank accounts. Not social security number.

So does this mean eventually we will have to have a social security number in order to use Paypal, regardless of on eBay or not?

And what about accounts that take in less than $10,000?

What about accounts opened outside the US? I'm sure there are ways around this.

I think for eBay we will just have to resort to the virtual credit cards again.

This is just a US thing from what I read.

So in the event that it does go in to effect, we will either have to find a workaround or go international.

The issue isn't so much income tax. If America wants to end income tax, they'd elect Ron Paul was president and instead they chose John McCain for the Republican nomination.

The IRS only needs to monitor bank accounts that get a bunch of money coming in. They don't need paypal to get a social and if it really is an IRS issue, then someone can get a tax ID just for privacy and the IRS can know all their paypal income and paypal won't nosing around in their social security number. But funds into a paypal account aren't income, it's if you get ever the money out then it's income.

I do wonder how paypal does its taxes when it freezes $5000 of someone's money and never ever releases it. Do they declare it as income, or just funds on hold?

Jonas, you make a very good point.

In fact, Paypal could already be doing this (hence the demand for the SS# after you have a lot of income coming in).

FYI:
The Irs has very sophisticated Forensic Accountants , who can "reconstruct": ones income, believe me.. my husband was audited when we first met--He was under criminal investigation because his ex-turned him in..
2 US Treasury agents came to our house!!
--So PAY your taxes!!!! :)