Workshop - 2011 tax laws and your PayPal account

[Amanda411]

Starting in 2011, all U.S. payment providers, including PayPal will be required by the IRS to report sales information about merchants who exceed $20,000 and 200 transactions to the IRS.

Have a question about how the new tax law will affect your PayPal account and online business?  Please visit www.paypal.com/irs for more information.

Still have questions?   Join the PayPal team here on February 2^nd at 2pm EST,  11am PST for a 1 hour Q&A session.

 Please note, while PayPal is committed to helping our customers understand the 2011 tax changes, we are not qualified to give you specific tax guidance.

[Auggie]

What if I'm in a partnership, how will that be reported to the IRS.

[Amanda411]

Thanks for the questions! We're working on the responses for you now.

[Amanda411]

You get paid the shipping fees with your merchandise payment correct? Is that now going to be counted as your INCOME as well?

What is being reported Gross payment? before the fee deduction or after? How about returns charge backs and cancellations?

• Shipping fees are not netted out.  If you made a $50 sale and charged $5 for shipping, PayPal will add $55 to your gross payment volume to determine whether you have crossed the $20,000 threshold.
• Any sales tax included in your payments will also be included on your Form 1099-K
• Returns and chargebacks are not netted out.
• If a transaction is cancelled before you receive payment, that transaction will not be included.

You’ll need to determine the tax treatment of any shipping fees, sales tax, returns and chargebacks when you file your tax return.  Please consult your tax advisor regarding the tax treatment of your PayPal activities and related fees

[PayPal_William]

Auggie, If the PayPal account is in the partnership's name then the partnership's tax identification number (i.e., the partnership's Employer Identification Number or EIN) will need to be provided (when required) and the Form 1099-K will be issued to the partnership.

[renegade]

Hello,

For people over $20,000 in payments received and 200 transactions, WHAT information EXACTLY will be provided to the IRS?

1.  Will the IRS be able to obtain ANY information about your Paypal account PRIOR to January 1, 2011...including payments sent, payments received and Ebay transacations/information?

2.  Will payments between friends/family members that are marked "Personal" and not charged a paypal transaction fee be included in the 1099 total amount reported?

3.  Will any Ebay information/user-names be provided to the IRS?

Thank you.

[PayPal_Meg]

Hello Renegade,
 
For people over $20,000 in payments received and 200 transactions, WHATinformation EXACTLY will be provided to the IRS?
 
• The IRS has not provided a final 1099-K reporting form yet, but according to the current draft form, your gross payments for 2011 will be reported, broken down by month.

1.  Will the IRS be able to obtain ANY information about your Paypal account PRIOR to January 1, 2011...including payments sent, payments received and Ebay transacations/information?
 
• Only payments received starting Jan 1, 2011 will be reported on the 1099-Ks issued in January 2012 .  PayPal will not be issuing 1099-Ks for payments received in 2010 or before.

2.  Will payments between friends/family members that are marked "Personal" and not charged a paypal transaction fee be included in the 1099 total amount reported?
 
• No, personal payments that are not for the sale of goods or services will not be included.

3.  Will any Ebay information/user-names be provided to the IRS?
 
• No eBay account information or usernames will be provided.

Thank you.

[Amanda411]

Will we be notified if we approach the reporting threshold?

• If your sales approach the reporting threshold, we’ll contact you if we need information for accurate reporting to the IRS.

[Amanda411]

 I use PayPal to send and receive money to friends and relatives - everything coming into my account is NOT eBay income.

• Payments that are not for the sale of goods or services are not included in the calculation of gross payments received for 1099-K reporting.  If you receive payments for the sale of goods or services on eBay or off eBay, those payments will be included.

[Kocher_]

My fiance and I both us paypal. Being we aren't married we obviously still have different last names etc.  While I often come to or over the 20,000 Mark she doesn't normall exceed 5-10,ooo$ a year.  We have different accounts but use them from the same address and IP etc.  If I make 19,000 this year and she makes another 10,000., will that be combined and us be 1099'd or will the accounts remain seperate?  What can we do to ensure the accounts don't get combined?

[PayPal_William]

Hi Kocher,  Congratulations on your engagement.  We will issue Form 1099-Ks by Tax Identification Number.  If you and your fiance provide your individual TINs for your respective accounts, you will be issued separate Form 1099-Ks for each of your accounts (assuming you cross the IRS thresholds).