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Old 04-29-2015
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Default 200/20k IRS and Paypal Question

I just got back from my accountant and I wanted to see what he would say about my stealth adventures.

I mentioned that paypal allows sellers to sell up to 200 items and 20k in sales until they ask for a ssn/ein.

I also mentioned that once they do that, I stop selling and just keep whatever I made since they can't send the info if I don't provide the ssn/ein to the irs to end up with a 1099.

He scared me saying that any income needs to be reported and paid for, regardless of a 1099 or what paypal says is allowed. He also mentioned that having bogus info on these accounts is also not a good idea and that this kind of stuff can be 3-5 years or 100k in penalties.

So I'm wondering if that's true, because I just wanted to make accounts, sell and avoid the 1099 at the end of the year. Of course I would have my regular account paying taxes, but stealth accounts I wouldn't. What do you guys think?

Edit:

I called paypal and asked, and the rep said that they still report it to the IRS. I asked how do they do that and she said that they send the info to the irs under the persons name...does that sound right?

Last edited by talos; 04-29-2015 at 12:39 PM.
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Old 04-29-2015
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Default Re: 200/20k IRS and Paypal Question

Technically speaking it might be true. Technically.
Then again he is an accountant and it is his job to let you know the technicalities.
Will this happen? highly unlikely.
If the IRS had to go after every guy selling a bunch of stuff on ebay theyd be bogged down in paperwork forever. Especially if they needed to figure out who the real person behind a stealth account was. Its practically impossible for them to do so because they don't have the resources.
That's why they have the 200/20k rule and that's why they make sure paypal demands the SSN of the person. This way they let paypal do the work for them and only go after accounts that are actually worth it.
Also what the paypal rep told you is not true. In order to report anything to the IRS the SSN or EIN is needed. There is no other way to associate the information otherwise. Too many people named 'John Smith' out there to do it any other way. Don't put stock in anything a paypal rep tells you. Call in 5 times and youll get 5 different answers.
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Default Re: 200/20k IRS and Paypal Question

Quote:
Originally Posted by slokor View Post
Technically speaking it might be true. Technically.
Then again he is an accountant and it is his job to let you know the technicalities.
Will this happen? highly unlikely.
If the IRS had to go after every guy selling a bunch of stuff on ebay theyd be bogged down in paperwork forever. Especially if they needed to figure out who the real person behind a stealth account was. Its practically impossible for them to do so because they don't have the resources.
That's why they have the 200/20k rule and that's why they make sure paypal demands the SSN of the person. This way they let paypal do the work for them and only go after accounts that are actually worth it.
Also what the paypal rep told you is not true. In order to report anything to the IRS the SSN or EIN is needed. There is no other way to associate the information otherwise. Too many people named 'John Smith' out there to do it any other way. Don't put stock in anything a paypal rep tells you. Call in 5 times and youll get 5 different answers.
The checking accounts I have that I withdraw from paypal are under my tax id though. So there is a link to me.

I also went ahead and opened up a CapitalOne 360 checking account because one of my stealth accounts got suspended and I needed to withdraw money. I'm assuming the ebay account got suspended was because I didn't add a bank account in paypal...I think...nothing else seems to have caused it to be suspended...anyways CapitalOne asked me for my social to create a checking account. So when I withdrew that few hundred from that dead paypal, it did go to my social. I'm sure a few hundred isn't an issue, but I'm just saying that a social or tax id is still associated with the bank. If I'm doing taxes with the business checking account, wouldn't the IRS be able to see that my other sub-accounts have received money since there is a tax id associated?

I mean, it just seems there really is no clean money haha
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