PayPal reached an agreement to share seller income information with the IRS starting in 2012
The new requirement was mandated by The Housing and Economic Recovery Act of 2008 recently passed by Congress. President Bush signed the bill into law on July 30. The bill and applies to all payment providers but PayPal negotiated with the IRS to only provide information on sellers who receive more than $20,000 or more than 200 completed payments in any one calendar year.
I am not sure what sharing payment information has to do with Housing and Economic Recovery –this is typical of congress –sneak ways to collect more money into bills that have nothing to do with the subject. The White House said they were against the measure but they couldn’t veto it without vetoing the rest of the bill which was needed to help the housing and mortgage crisis.
If you are running a legitimate business and claiming your income and paying your taxes, this bill doesn’t really matter. Anyone making $20,000 a year should be doing this anyway. The problem is that the IRS will have data that won’t naturally match your claimed income. So PayPal will send one number to the IRS and when you do your taxes, you claim a different number. That will trigger a request from the IRS to explain the difference.
Sellers who are not claiming their income will have to start doing so, but I suspect the number of those is a lot smaller than the IRS thinks. All in all this will be a big paperwork mess that won’t result in any additional income to the government. I am all of the government going after tax cheats –but why do they do it in such a way to cause the rest of us grief.
- The Complete eBay Marketing System by eBay Power Seller, Skip McGrath
Updated for 2008. Complete eBay selling and marketing system – printed manual