Whether or not PayPal will require an SSN is up to them. They are a private company and can make their own rules as long as the rules do not violate any laws.
The IRS is fine with reporting under an EIN. HOWEVER - whether it is for a corporation, an LLC, partnership or sole proprietorship, the IRS also REQUIRES that a person be named as the responsible party. If the entity is a publicly traded corporation, then they will accept the name of a board member. If it is a small corporation, they will want the name of whomever is the PRIMARY BENEFICIARY of the money generated by the corporation. Keep in mind, this is information given to the IRS, NOT to PayPal.
NOW... With the new 1099K reporting requirements, YES, an EIN is accepted by the IRS. HOWEVER, the IRS also requires that PayPal take steps to verify the accuracy of the information being reported. So, you must provide them with the EIN and the NAME AND ADDRESS of the responsible party. The IRS does NOT require an SSN to verify this. The information is submitted to the IRS and it either matches their records or it does not. The IRS will NOT correct it for them, or give them any information - they cannot do that by law. Match or No Match. It is that simple. If there is not a match, then PayPal would be required to correct their data OR withhold 20% of your sales (that is SALES, not PROFITS) to be in compliance with the IRS rules.
So, an EIN will need a name associated with it at some point, as well as an address. I see no harm in using a business address that is different from your home address for this. I read over the rules for HOURS and could not find anything saying you could not do this. So, if PayPal does EXACTLY as the IRS requires and does NOT go above and beyond, then it is unlikely they would link on name alone, UNLESS multiple accounts were reporting under the same name and address.
The other possibility is to keep accounts under the threshold that triggers reporting. BUT, if you do this, be VERY SURE to file honestly and pay the taxes owed. Because if you get audited, and the IRS finds you did not report all of your income, do you REALLY THINK that there is ANY CHANCE that you could convince them that it was an error, and that you were only trying to be invisible to eBay and PayPal and not NOT to evade paying your taxes? Of course not.
If you don't believe me, just go to the IRS website and search for 1099k and EIN. It explains everything - there is a summary (short) and the exact rules (VERY long!). It also explains VERY CLEARLY about WHO can be the responsible party named in the EIN application, and WHO cannot.
This is NOT LEGAL ADVICE OR TAX ADVICE. Neither myself nor this forum is a tax expert, and you cannot rely on any posts here from ANYONE when it comes to your taxes. If you need this, then you should seek the services of a professional tax advisor (usually a CPA) or a tax attorney.
Last edited by jeffweico; 01-19-2011 at 05:56 PM.
| 
