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  1. #1
    ABW Ambassador Boom or Bust's Avatar
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    IRS Reporting - eBay/PayPal
    Proposal would require PayPal to report seller activity to IRS

    We are asking you to help oppose Internal Revenue Service (IRS) efforts to require "payment facilitators" - including PayPal - to report to the government the total amount of online payments received by each of their individual users each year.

    The stated goal of the IRS is to gather new information on the revenues of "small businesses," but the IRS is requesting data on people who are engaged in relatively small levels of activity, potentially, as little as $600 in payments per year - an amount that hardly qualifies as a genuine business.

    We believe that any new "reporting" on small businesses should only impact real and ongoing business activity. There should be a reasonable threshold, below which it is presumed that activity is personal and therefore not subject to new IRS reports.

    As a PayPal user, you know that PayPal makes sending money over the Internet easy and safe, whether for commercial or personal use. If the IRS creates new rules that appear to put new tax burdens on individual Internet users (rather than true businesses), some people will return to slower and riskier payment methods, such as cash, checks or money orders to avoid the headaches of new and unwarranted IRS scrutiny. This will hurt eCommerce consumers.

    Please urge Congress to oppose the IRS's "electronic payments reporting" proposal unless they determine a threshold high enough to prevent new burdens on individual Internet users like you.

    Click here to make your voice heard today .



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  2. #2
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    I support the opposite position, too many thieves and other tax evaders are using paypal to move money around.

    And you'd have a very difficult time convincing me that this reporting would be a burden on PayPal, technology they could use here could make this a fairly simple matter for them... remember, I'm comparing that the reporting burden on others in our society, for instance me... if I pay someone more than $600 in a calenday / tax year, I have to report that to both the irs and the person who was paid, and i do that manually. paypal could run their costs to cents per report.

    by the way, i also support the fiar tax and would love to abolish the irs and all this reporting - but if everyone else has got to do it, paypal shouldn't get a pass.

  3. #3
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    While on the subject, when reporting earnings, do you include the fees that PayPal takes out of what you charge, or just what you end up getting after they deduct their fees?
    Hi, I'm a signature.

  4. #4

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    Not all paypal payments are income. How does paypal or the IRS propose to differentiate between income or other types of payments?

    Say I loaned some cash to a friend and they repaid me by paypal? In truth that is not income but repayment of a debt and just one small example how this won't work very well and will mean a decline in many people using paypal at all.

    I believe our government should SHRINK and not expand especially when it comes to taxes. On this part Ron Paul has the right idea.

    Scammers and thieves will always find ways around the system, and use normal accounts just like everyone else. You think a scammer or criminal is going to use their real information for a paypal account?

    Only people this really hurts is your average user. It causes them to have to keep MORE paperwork to prove things weren't income and what was income even on small amounts.

  5. #5
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    Quote Originally Posted by Boomers
    The stated goal of the IRS is to gather new information on the revenues of "small businesses," but the IRS is requesting data on people who are engaged in relatively small levels of activity, potentially, as little as $600 in payments per year - an amount that hardly qualifies as a genuine business.
    Making over $600 is when you need to report so it makes perfect sense.

    Asking people engaged in business to act like a business - WHY THE NERVE!

  6. #6
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    I see no reason why PayPal should not report this information to the IRS - provided that other banks are also required to report accountholders who 'receive' more than $600 per year via transfers and/or deposits. (I doubt this would ever happen.)

    PayPal is a bank, just like Bank of America, and should not be treated differently.

    The better solution would be for eBay to report sellers whose sales exceed $600 - and for offline auctioneers to do the same.

    Tax evasion is a huge problem. The playing field should be level.

    Note that the IRS does not tax you on 'revenue' but on profit. They simply want you to accurately report income and expenses from business activity. I'm sure that thousands of people are active sellers on eBay, earning substantial profits, who are engaged in business by any reasonable standard, who conceal all this activity from the IRS. As a taxpayer, I want the IRS to take reasonable steps to identify these folks and compel proper reporting and tax payment. I do not want the IRS to treat an online bank differently than any other bank, nor treat online transactions differently than offline transactions.

  7. #7
    ABW Ambassador Boom or Bust's Avatar
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    Btw
    BTW, My opening post in this thread was a word for word email I received and no editorial comment was offered. I have yet to decide on the issue. My problem with it is that there is a mix of user types utilizing the service and it seems to me that reporting everyone would be inappropriate. Businesses should be reported, but casual private transactions[?], I don't think so.



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  8. #8
    ABW Ambassador simcat's Avatar
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    PayPal is a bank, just like Bank of America,
    actually the feds have ruled paypal is Not a bank. ("PayPal is not classified as a bank in the United States, though the company is subject to some of the rules and regulations governing the financial industry") wikipedia

    They don't pay interest, make loans, not reg'd br FDIC, etc.

  9. #9
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    I know that PayPal pretends that it is not a bank, and there has been litigation over the issue. Apparently PayPal prevailed in "not being a bank," and it would be ironic if it ended up losing this battle because it chose to pretend it's not really a bank.

    But PayPal's role is so functionally similar to that of a bank (and a PayPal account is so functionally similar to a checking account) that I don't think it would be fair (to consumers) to impose different tax-reporting requirements. The "rights" being impacted here don't belong to PayPal -- they belong to its millions of clients.

    Again, I'm not opposed to enforcement of tax collection laws, but the idea here is basically a pure "fishing expedition" into the personal financial records of millions of consumers. If the government can't force my local video store to reveal what movies I rented, then they sure shouldn't be able to view my PayPal account to see what movies I chose to watch online, and they shouldn't be able to see my financial transactions without a search warrant.

    I assume, of course, that PayPal (like the phone companies) readily cooperates with "National Security Letters," when presented; I'm not very comfortable with that because law-enforcement agencies are often caught abusing their discretion (despite intense secrecy laws protecting even the existing of such letters). I'm no more or less comfortable with the IRS having access to my PayPal account -- not because I'm doing anything illegal or improper, but because I don't want my government engaged in wide-sweeping fishing expeditions.

    The proper solution, of course, would be for the IRS to gather appropriate information on the identity of eBay sellers who are under-reporting their revenue, and then use that research as the basis for a search warrant (issued by a judge), compelling eBay and its PayPal subsidiary to produce specific financial information for the specific individual account(s) identified in that investigation.

    What the government always wants, of course, is greater efficiency in its law-enforcement efforts; if the IRS could get (without a subpoena or any other legal process) detailed financial data about ALL CUSTOMERS from banks and mortgage companies and from eBay and PayPal and Western Union and Wal-Mart's money order records, the IRS could probably collect billions of dollars in taxes from cheaters who aren't paying their fair share of taxes. Of course, that same "quest for efficiency" would probably also seek to impose a "presumption" that the receipt of money via PayPal is taxable income, which could sweep in hundreds of thousands of innocent people into IRS audits and default legal proceedings. Lazy law-enforcement agents who want to just "go fishing" (instead of investigating), are likely to be lazy and sloppy about other things.

    A side note: When I was engaged in bulk eBay sales of low-price items a few years ago, I found it incredibly burdensome and eventually impossible to account for "all PayPal revenue" and "all PayPal fees," so I surrendered and simply tracked the money transferred out of my PayPal account (which represented income minus PayPal's fees AND postage paid via PayPal; note that a single eBay sale can trigger not only a PayPal payment from the buyer, but also two or more separate PayPal fees, plus a related USPS postage transaction charged to my PayPal account). This could become an "audit trigger," if the IRS decides that I'm a tax cheat based on the fact that PayPal reports that I "received" $5,000 into my PayPal account but I only reported $3,500 in revenue from PayPal (after fees and shipping costs deducted directly from my PayPal account). (I have all the records to prove the actual "receipts" and "fees," but I could never import the data effectively or accurately into Quicken.)

    Finally, I must express my sympathy and support for IRS agents and staff, and for state tax-enforcement personnel; they are actually very understanding and flexible most of the time when an apparent problem arises. With some tragic exceptions, most tax-collection folks try hard to be fair. In my own dealings with the IRS and state tax agencies (both for myself and occasionally while representing legal clients), I've never felt that they were over-reaching or trying to collect money that wasn't owed. Of course, my perspective (as an attorney) is a bit different, because I'm not so easily intimidated as most taxpayers by correspondence from the IRS or from the California Franchise Tax Board.

  10. #10
    ABW Ambassador meadowmufn's Avatar
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    Quote Originally Posted by markwelch

    PayPal is a bank, just like Bank of America, and should not be treated differently.
    Exactly! Are banks required to report your sum total of deposits to your business account over $600? Or do they just report interest earned on the money in your account? I and my business partner whom I earned the money from are responsible for reporting income, and not my "bank". Are they going after other "payment processors" or just PayPal?

    If the point is to go after income people make on ebay, they should require ebay to report that, not PayPal, since PayPal may also be used for personal gifts/loans to and from friends/family. And what if ebay sellers don't accept PayPal? That money's still not going to be reported by getting the info from PayPal... but ebay has it.
    -Don't criticize anyone til you've walked a mile in their shoes. Then when you do criticize them, you'll be a mile away and have their shoes.
    - Silence is golden. Duct Tape is silver.

  11. #11
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    Is this real?
    Hmm. When I look at the page linked from the first post in this thread, it does not say what the post 'quotes.'

    Instead, it refers to a proposal that "would require 'brokers' to collect and report sales information on their users. Brokers, potentially including eBay, could be required to obtain a Social Security number...."

    Did eBay pull a "switcheroo" with their message? Or are we just debating the wrong issue entirely? I don't think I have any objection to eBay turning over its sellers' sale data to the IRS; most of the information they'd share is publicly available already. And when was the eBay page posted, anyway? It is undated, and a quick search turns up references to the eBay-reporting proposal in 2005 and 2007.

    The current page (found through the eBay link in Boomers' first post in this thread) doesn't mention PayPal at all, and I don't see any mention of this on the PayPal site.

    After some searching, I found some month-old anonymous forum posts claiming that the PayPal-reporting provisions are buried in a draft of Senator Chris Dodd's housing bill. More credible sources (highly-respected BNA and a somewhat less credible Chamber of Commerce blog) attribute the proposal to President Bush ("the Presidentís Proposal to Require Information Reporting on Electronic Payment Mechanism Reimbursements"). It's clear from these sources that the real issue is a requirement that credit-card payment processors (presumably including PayPal, but also including all commercial banks and credit-card processing companies) track and report sales volumes to the IRS, and withhold taxes in some situations. It's not really about PayPal; it's about giving the IRS access to the actual transaction-volume data for merchants. It's still a fishing expedition, but it's clearly aimed primarily at businesses and not consumers (although consumers would likely be caught up in the net if PayPal is required to report their receipts also).

    It certainly seems highly unlikely that both Senator Dodd (D-Connecticut) and President Bush (R) would be pushing for this type of proposal in an election year.

    Boomers - was this an email that appeared to come from PayPal, and if so, did you check for any signs that it might have been "spoofed"?
    Last edited by markwelch; July 22nd, 2008 at 11:59 PM.

  12. #12
    ABW Ambassador Boom or Bust's Avatar
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    Quote Originally Posted by markwelch
    Boomers - was this an email that appeared to come from PayPal, and if so, did you check for any signs that it might have been "spoofed"?
    Yep. It's legit. Received 7/16/08. The email contained my full name and eBay username. The link resulted in the correct page (same link as above in the opening post). I first tested the page by logging in with a fake eBay username and zip code which resulted in a failed login attempt. Then logging in with my eBay username and zip code gave me access. I also forwarded the email to spoof at ebay.com which responded that the email did come from eBay and is legit. Here is the resulting contents of the automated letter to my senator as created by the website...

    Wednesday, July 23, 2008

    Name
    Address
    City, State Zip

    RE: Please Oppose New IRS Electronic Payment Reporting Proposal

    Dear _____________:

    Note: The recipient's name and address will be automatically added to your letter


    As a PayPal user, I am asking you to oppose efforts by the Internal Revenue Service (IRS) that would subject "payment facilitators" to onerous new reporting requirements. The IRS is proposing that companies like PayPal collect and report customers' aggregate payments made in a given year.

    This proposal should not be considered unless it contains a high enough threshold to exclude reporting on people who occasionally sell personal items or use PayPal to receive funds for other personal transactions. Without a reasonable threshold, payment facilitators such as PayPal will be forced to report on thousands of people who simply want to sell their used golf clubs or collect payments from friends for a group birthday gift.

    PayPal enables anyone to send and receive payments without sharing financial information. Sign-up is simple, and as soon as someone is signed up, he or she can receive payments from bank accounts or credit cards (even as a non-merchant).

    While this proposal is intended to close the "tax gap" of underreported income, it does not address off-line cash or check payments, which are harder to track and less likely to be reported. PayPal makes sending money over the Internet easier and safer. Yet this proposal could encourage some to use slower and riskier payment methods, such as sending cash, checks or money orders to avoid having "income" reported to sell a pair of shoes.

    Please oppose the IRS's "electronic payment reporting" proposal and spare occasional Internet sellers the burden of additional IRS reporting requirements.

    Thank you for your support.

    Sincerely,
    ........



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  13. #13
    ABW Ambassador Boom or Bust's Avatar
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    BTW, the opening post is the text of the email received, not the resulting webpage.



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  14. #14
    Full Member Amy_S's Avatar
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    Quote Originally Posted by nakedgamer
    Not all paypal payments are income. How does paypal or the IRS propose to differentiate between income or other types of payments?

    Say I loaned some cash to a friend and they repaid me by paypal? In truth that is not income but repayment of a debt and just one small example how this won't work very well and will mean a decline in many people using paypal at all.
    Good point. A significant percentage of casual ebay sellers are people who are re-selling their own items at a loss- much like they would at a gargage sale. That's what I used to do, back when I was selling on ebay. Buy a book, read it, resell it. Buy an outfit, wear it a few times, resell it. I bought my wedding dress on ebay. Resold it after the wedding, at a major loss. For me, I was happy to sell all these things at a loss because being able to resell them at all was a big factor in my decision about whether and what to purchase in the first place.

    If they are going to pretend like all that is actual business income, it will be really problematic for a lot of people, me included.

  15. #15
    Full Member Amy_S's Avatar
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    People, paypal is NOT a bank!

  16. #16
    Full Member Amy_S's Avatar
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    ...Which doesn't invalidate the points you made though.

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