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4 Answers

When does Paypal report to the IRS?

Asked by: Jesica Hogan 2654 views YA Discussion

I’m aware of the new IRS regulation that Paypal will be reporting their user’s activity for the 2011 year. Some sites quote $ 10,000 or 200 transactions, others report $ 20,000 AND 200 transactions – as if you must meet BOTH requirements to be subject to this new requirement.

Can anyone help clarify when you should expect Paypal to be sending you a 1099-K form?

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4 Answers



  1. tro on Aug 19, 2011 Reply

    you say some sites, have you tried http://www.irs.gov? that should tell you which is correct

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  2. Bostonian In MO on Aug 19, 2011 Reply

    See correction below! My initial response was not correct, but I’m leaving it there for clarity.

    Payment processors like PayPal will cut Form 1099-K reporting gross transactions on all accounts that have 200 or more transactions OR $ 20,000 or more in financial activity per year.

    If either number is exceeded, they will cut a 1099-K. It could be 200 transactions totaling $ 200 or 1 transaction for $ 20,000.

    Note that this does not necessarily mean that any of this is taxable income nor does it mean that any of it must be reported on tax returns. What it does is gives the IRS an easier audit trail to chase down tax cheats who run on-line stores and don’t report all income properly.

    CORRECTION: After reviewing the 2011 From 1099-K, it appears that both numbers must be exceeded. Copied directly from Form 1099-K:

    You have received this form because you have accepted merchant cards for payments, or because you received payments through a third party network that exceeded $ 20,000 in gross total reportable payment transactions and the total number of those transactions exceeded 200 for the calendar year.

    My bad!

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  3. the tax lady on Aug 19, 2011 Reply

    And you are concerned because?

    Anyone who sells items for a hobby or profit has to report the income and keep the records to show their expenses.

    The government is absolutely convinced that people have not been reporting the income and is going to use the 1099-K to track down the largest sellers. You can bet if a 1099-K is an issue for 2011, 2006-2010 will also be reviewed. Getting Paypal’s records from those earlier years is a simple subpoena.

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