Today’s post is a guest post by Jennifer (Escalona) Dunn, Professional writer, blogger, and social media consultant. www.jennescalona.com What do you want to say?
Unexpected Mail: The PayPal 1099 is Coming
We know Halloween is already over, but be prepared to have the dickens scared straight out of you. If you haven’t seen recent reports, PayPal announced they will be sending you some unexpected mail come January.
No, not a coupon to offset their fees. Starting next year, certain frequent users will get brand spankin’ new 1099 forms for their taxes!
Whoa now, it’s ok, come back from behind the couch. It’s not really all that bad! Let’s take a look at this form and what it means for you – and what to do about it.
Well, first of all, you may not actually BE getting the new 1099 PayPal form. Only highly active PayPal users will get this in 2012. For one, you have to accrue at least $20,000 in revenue through PayPal – you can find this number by looking at your gross sales volume. Also, that $20,000 must be accomplished in over 200 PayPal transactions for the year.
As you can see, it’s not just everyone who gets this fun piece of paper in the mail for next tax season. Basically, if you just have a side eBay store you sell one or two items from a month, then you don’t have to worry about it. However, if this eBay store becomes your main source of income, then watch out come January!
Don’t Worry – Write Everything Down
But we’re making this piece of paper sound like it’s a missile crashing into your living room – and it’s truly not. If you’ve dealt with one 1099, you’ve dealt with them all.
The major thing to keep in mind about the PayPal 1099 is you must keep accurate records for your transactions. This is the first year PayPal and other payment processors will be sending out 1099’s, and there will be growing pains. Don’t rely on the information PayPal has given to the IRS to be totally correct. It’s up to you to make sure the IRS has the most accurate intel on your financial records. If not, then you’re putting yourself at the mercy of others, and this is the first time PayPal has done this!
Another reason you should keep accurate records of all your transactions is because the 1099 doesn’t cover everything your store needs for taxes. Namely, anything you paid out of pocket to fund your life’s work: business expenses. If you bought a new printer or shipping supplies and don’t report it on your taxes, then the IRS has no idea that happened and will expect you to pay taxes on that income.
This could result in you paying out way more than you really owe to the government. Then the PayPal 1099 really does become a huge pain – in your bank account! With proper record keeping (heck, it’s good for your business anyway), this new process becomes old hat.
At Outright.com we help online sellers quickly and easily track income, expenses and taxes. If you have any other questions, feel free to ask Outright on Facebook, Twitter or at [email protected] any day and time – we’re here to help!