Reporting requirements - U.S. merchant accounts beginning January 1, 2012 - IRS taxes

[Modee]

Beginning on January 1, 2012, all U.S. merchant processors including PayPal will report your gross receipts for the prior year if:

-that total is $20,000. or more, AND
-this represents 200 or more unique transactions

The reporting requirement begins for all transactions after January 1, 2011. So if in 2011 you process more than $20K and 200 transactions with ONE merchant, that merchant will report your gross receipts to the IRS at the end of 2011.

http://taxes.about.com/od/businessta...dreporting.htm

Credit Cards, The IRS, Form 1099-K And The $19,399 Reporting Hole

Even worse, under the new law if you do not provide a valid SS # or EIN, (Valid as in VALID and refers back to the correct name or entity) the merchant processor is required to withhold 28% of gross receipts. This is a sort of "withholding" requirement. The withholding requirement applies only after January 1, 2012 - so it will apply to all receipts to you in the year 2011.

This was also posted here
Taxes - PayPal, other credit card processors reporting income (gross receipts) to IRS - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
but is important enough to repeat.

What is unknown, is how strictly they are going to enforce the rule after 2011, and what the penalties will be for non-compliance. My assumption is that the penalty will be back up withholding - whereby the processor withholds a percentage of your gross receipts until you provide a valid SS # or EIN.

[teenerds]

Does Ebay/Paypal report to the IRS?

When you are selling on ebay and receive the funds through paypal, for high transaction amounts like generating 10000 a month, do they report to the IRS, can you get in trouble for tax? what to do? suggestions?

[John14789]

Well when you have the funds deposited in your bank account from your paypal account it is recorded right there. If your doing 10k a month and you if you have been doing so for atleast the past six month and are not reporting the income to IRS then you will pretty soon face a audit. It's better to pay the taxes and take your deductions then go through an audit. If you are doing that amount and are not incorporated than that's another thing you should get done immediately.

[John14789]

What if you make your Paypal account prior to 2011?

I'm guessing it wouldn't make a difference since they'll still have to report under the law.

So there's no way to avoid this, huh?

[Modee]

It doesn't matter when your account was created. Beginning on January 1, 2012, if you meet the criteria outlined above, your merchant processor will report to IRS your gross proceeds from 2011.

[guitarca18]

So at what point do you think paypal will require valid SSN on ALL Accounts that meet this criteria?

What about Amazon?

[Modee]

Probably by the end of this year a valid SSN or EIN will be required on all merchant accounts period, whether they meet the criteria or not (after all, how can the processor know how much you will process beforehand?). But the penalty for not providing one is BACK UP WITHHOLDING of about a third of gross proceeds.

The issue of whether an EIN will work in lieu of a SS # is complex, and will be discussed via tech support only.

[Dr.Yes]

So in other words there might be a 28% tax for not giving a social? Fine with me as long as the account isn't limited!

[guitarca18]

See that is another thing I don't understand..They are going to withhold 28%? Forever? For 6 months? How does that work? Are they going to withhold it for tax purposes? They can't really do that without the SSN?

Can paypal legally require everyone to give their SSN? I didn't think they were considered a financial institution.

[guitarca18]

I'm kind of with Dr. Yes on this one at this point..They can withhold my 28% and I'll claim it on my taxes. I just don't want my accounts limited or linked.

[Modee]

I'm pretty certain that PayPal will end up like most other payment processors are today - no SS #, no account.

I already have techniques to delay or bypass the SS # request from PayPal that should work for the future though.

[John14789]

My buds always one step ahead of the game! That's why you have to be a member of ModeeWorld in order to get ahead of Ebay and Paypal!

[Modee]

Because of these reporting requirements - if you process more than $20,000. and 200 transactions - the requirements for flying under the radar are even more stringent, but - eminently doable. In other words, YES, the latest short list and general Modee techniques will help you to avoid getting shut down, avoid getting reported to the treasury department and avoid having to give up social security numbers and even in most cases tax ID numbers and still be able to sell on Ebay.

The latest, most modern tech support techniques will help you stay in the Ebay and PayPal game, and make it YOUR game, not theirs.