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Julia Wilkinson AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

Julia Wilkinson is Editor of the AuctionBytes Blog and is author of the "eBay Price Guide," "eBay Top 100 Simplified Tips and Tricks," "My Life at AOL" and numerous ebooks about selling online. You can also find her writing on Yard Salers.
Mon Sept 5 2011 21:29:12

Is PayPal Pressuring Sellers to Provide Social Security Numbers?

By: Ina Steiner
Sponsored Link
PayPal has begun requesting social security numbers and tax ID numbers from sellers thanks to a new 1099K reporting law. But sellers who are nowhere near the level of payments required by the new law report PayPal is unnecessarily asking them for their tax ID numbers and, some are feeling coerced into providing the information, as we report in tomorrow's EcommerceBytes newsletter.

One EcommerceBytes reader wrote, "I can't find info on here regarding the PayPal policy of requiring either your seller tax ID or SSN in order to continue on using their service for sales or they will suspend your account. Do you have any info on this? According to PayPal you have to meet both of two criteria before they have to report to the IRS. I meet neither of those criteria, much less both, so why suspend me when they don't even have to report me to the IRS?"

PayPal would not provide EcommerceBytes with specific information about what would trigger PayPal to request a tax ID number, stating there were a "multitude of factors."

According to the new requirements, merchants who are required to but don't provide their federal tax identification numbers would become subject to "backup withholding." But on its website, PayPal states that sellers who don't supply Social Security number, Employer Identification Number, or Individual Tax Identification Number after PayPal requests it could face limits on their accounts.

Compounding the issue is that many sellers conduct transactions on PayPal for multiple businesses, on a consignment basis, or for friends. The reader referenced above said she sells for family and friends and said only half of the volume transaction that flows through her PayPal account belongs to her business.

Another reader said she has a PayPal account set up in her business name with a federal tax ID number, and also has a personal PayPal account used to make personal purchases for herself and to sell personal items not related to the business.

She wrote that on one occasion, she listed and sold a vehicle for her husband on eBay and the payment was made via Paypal. "I just spoke to PayPal and they said that since I have 2 accounts, all income/payments will be lumped together, from the 2 accounts, and reported to the IRS since I am over  $20k."

Many users are also skeptical about providing sites like PayPal with social security numbers due to fear of spoofs, scams and hacking. If you do receive an email from PayPal requesting this information, don't click on the links in the email. Rather, open a browser window and log in to PayPal as you normally would, and check your account for messages from PayPal.

And one more warning to sellers - if you conduct activity through any payment processor this year, you should remember to look for possible 1099K forms early next year. PayPal said it would not be mailing them to sellers in paper form. Sellers must proactively request paper copies, otherwise, PayPal will send the 1099Ks electronically - according to the PayPal user agreement, it's your responsibility to make sure you receive it.

If you've been impacted by the new reporting requirements, let us know.



Comments (43) | Permalink
Readers Comments

Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
This user has validated their user name. by: Ric
       
Mon Sep 5 23:44:18 2011
It is ironic that the company which pays it's CEO more in salary than it paid the Federal Government in taxes is taking steps which exceed the standards for individuals reporting taxes on PayPal transaction volume.

The original announcement from PayPal regarding individual tax reporting stated that sellers who exceed both $20,000 in gross payment volume from sales of goods or services and 200 payments for goods or services in a single year would be required to provide tax ID numbers.

Now, PayPal is saying " there is a multitude of factors" which trigger the information requirement.

Once again eBay/PayPal talks out of both sides of their mouth in refusing to disclose why sellers who do not meet the original criteria are now being required to provide information based on "a multitude of factors".

I do not see where $20,000 in gross payment volume AND 200 transactions constitutes the "multitude of factors" to which PayPal refers.

From all appearances, PayPal is leveraging the new tax reporting guidelines to invent new excuses to freeze accounts, hold revenue and benefit the company bottom line at the customers expense.

Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: mindelec This user has validated their user name.
       
Tue Sep 6 00:14:28 2011
i'm fairly certain that i will be above the limit, however i haven't heard a thing from paypal asking for info.  kinda strange, but since i already report all my sales, the new rule doesn't really make any difference to me.  just one more form to collect.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Visa DeCline
       
Tue Sep 6 00:43:45 2011
As far as I know, Paypal has no right in hell to request this information. The whole thing about income tax is pretty simple--it's up to the US government and the IRS to determine how much taxes we owe, and its all based in large part on our voluntarily offering this information to the Feds. Yes, your employer will send this info in to the IRS for you, but you still need to provide the return information on your own. TEchnically speaking, as I said, it's we people who volunteer info to the IRS so they can determine our taxes.

Paypal wants to 'help'...bwa-ha. I'm all about paying my fair share of taxes, but if I have a garage sale and earn over $600, I have to report it to the IRS...technically. But who really does? Only certain types who probably wait for the red light to change before crossing a street and never jaywalk.

's funny, but today with the federal government in such dire financial straits and so much in debt, there's perhaps a rally round the flag approach which says let's do our fair share! But then...it's the government who's spending too much money...not me.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Theo
       
Tue Sep 6 02:04:03 2011
There is still a massive amount of income tax and sales tax evasion on eBay. eBay knows it, PayPal knows it and the IRS knows it. 1099K will only scratch the surface.
Those of us who have been compliant with federal and state income and sales tax are sick and tired of competing with tax evaders. You know who you are. By evading tax you aren't just screwing the government, you are screwing those of us who obey the law, and it's coming to an end soon. Get ready.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Xander This user has validated their user name.
       
Tue Sep 6 03:46:26 2011
We recently switched merchant credit card processing companies and while I was interviewing these service providers, I learned more details about the IRS 1099K reporting and I’ll tell you, it was a bit of a shock!

First off, our previous credit card processing provider, F*rst Data was badgering us for our Federal tax ID number. We had received several letters saying we were required to supply our federal tax ID. The letter was written that everyone had to supply the tax info, there was no mention whatsoever of an annual minimum sales requirement. After the third letter, I took it upon myself to call customer service to clarify there was a sales amount and/or volume criteria which needed to be met before reporting was legally required. I was told, it was just easier for them to report everyone, regardless of sales volume!

We didn’t like their rates anyway so we started to shop around for a new provider. We found a small company without shareholders who appeared to have decent rates and a salesman who was very knowledgeable, especially about political history. It was this salesman who shared some details about what the IRS did earlier this year. He stated it is not uncommon for the IRS to create a law but stretch the rules in their favor by ignoring the guideline requirements as written. I was told that the IRS had sent teams of “gung ho” fresh out of collage IRS employees to all the payment providers to educate them about the new law and how it would affect them. We went on to say these IRS teams said, although the law is written with a minimum reporting amount, we wouldn’t mind getting all the payment data, regardless of amount… which is what we’re asking you to do, report it all.

I’m not sure if there were some form of threats made to the cc processors, or if there were some benefits they would get by accepting their reporting requests but it was made very clear that all the payment providers were going to report regardless of the amount, under 20K or not, it didn’t matter, 1099K’s were going to be sent to everyone.

I remember telling the salesman that paypal was using the 20K limits and was interested to know how they could do it while all the CC processing companies couldn’t.
His answer- Just wait, before the year is over, they will be doing it also.

I really enjoyed talking with this fellow as he didn’t like what was going on and felt the reporting was going to harm the economy further in which I agreed. I would have liked to know why they agreed to report everyone, it seems strange that they would all go along with something which might cause them to lose some clients so there must be a benefit or a exemption from a punishment otherwise some companies wouldn’t go along with reporting all sales instead of the laws written requirements.

I was considering writing Ina a letter about my experience but now I don’t need to as the topic is in the blog.

It just goes to show, give them an inch and they take a mile.

Absolute power and money corrupts.

Comments anyone?
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: anyone out there
       
Tue Sep 6 06:17:10 2011
I would think if you evade paying taxes all these years, giving your SS # to Pigpay might just upset you
BUT

Has anyone ever thought that just maybe Pigpay is just going to report everyone to the IRS via the 1099.

They aren't required to but I would think it would be a whole lot easier to report everyone instead of those over the 200/20000.

Kind of you are going to get a bill from the IRS no matter what. If you pay taxes on your income you are probably sitting back saying HA HA finally BUT if you cheat and now think you are going to get caught you are coming up with a million reasons why you shouldn't have to give Pigpay the number.

BUT I would think no number no using Pigpay in January.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: IdTrigger
       
Tue Sep 6 06:23:10 2011
''PayPal would not provide EcommerceBytes with specific information about what would trigger PayPal to request a tax ID number, stating there were a ''multitude of factors.''

If the IRS is right, then.

When an institution is required to file a form like 1097, 1098, 1099, 3921, 3922, 5498, or W-2G with the IRS they must request your Tax ID number, in this case if you do 200 sales that amount to $20,000 or more. But you are dealing with ''I want a reason to hold your money paypal'' so . . .
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Here We Go
       
Tue Sep 6 07:19:32 2011
Recently I was asked for my social from Paypal, When I asked ''why'' considering I'm not even close to the $ amt ($20,000), this is the response that I rec'd. ''The reason why you are being asked for your SSN even if you haven't
reached the $20,000 threshold yet is because you have amassed at least 150 individual transactions since the beginning of the current calendar year. Since you're nearing the 200-transaction limit, the system automatically flagged your account to remind you of the IRS requirements.  Please be advised that once you've collected more than $20,000 in gross payment volume AND 200 payments for goods or services in the same year, that's the only time you'll be required to provide your SSN in order to continue using the PayPal account. ''  Well the notice I rec'd and the msg that was on my paypal account stated that I HAD to give this information or else my account wouldn't be able to accept payments, etc.  Seems like the statement I rec'd from paypal contradicted itself in the same paragraph.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
This user has validated their user name. by: Tula
       
Tue Sep 6 08:21:55 2011
I'm not surprised to hear this. When I was consulting at Amazon last year, one task I did was generating a few different reports like the $20K/200 requirement in order to determine how much work (and expense) it would be to comply with the IRS rules. It can be a whole lot easier to simply include everyone than to match up the specific criteria. The database queries are certainly less complex :-) While I don't approve of how Paypal is going about this, I must say that I agree with Theo. Those of us who pay the proper taxes end up carrying the load for those who don't, so it's good that this particular playing field will be leveled somewhat. I wonder how many of these scofflaws are the same ones who bleat about corporations and rich people paying their "fair share" of taxes? Hypocrisy much?
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: john
       
Tue Sep 6 08:30:57 2011
Give them whatever they want. H_ll they have must of it anyway. Why not just give them all of it.

This way when we wake up one morning we may find our bank accounts drained. Our hard earned dollars gone towards payment of government debt.

We may even find our wage scale lowered overnight. Our politicians way of keeping us solvent in the world trade market. We will be paid like everyone else across the world.

While were at it we may as well reform the gun laws as well. This way when we finally wake up to everything we can stand there with our  allies and throw rocks at the government.

I'm gonna look on eBay for extra large jars of  Vaseline. I think I am going to need a lot of it.

JMHO of course.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: bogus
       
Tue Sep 6 08:59:52 2011
I have never sold more than $10,000 in any year since I started. My one and only best month was $2400 in sales; I've never sold above $2000 except that one month. I'm at about $8000 for 8 months of sales now so would need to more than double my highest ever month sales every month for the next 4 months to get close to $20000 - you and I know that is not going to happen. But I've gotten 3-4 at the edge of harrassing emails from paypal about this. I did get one person to reply to me and he said I had the potential to get that high. I said, fine, I have no problem giving you my SSN - if I get those sales. Until that point, you don't have to have my SSN. That's too valuable an ID to give out when it's not necessary.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
This user has validated their user name. by: Nan
       Web Site
Tue Sep 6 09:11:49 2011
PayPal is just over-regulating as usual.

Instead of giving your SS number to PayPal, you can give them a federal tax ID number instead.  It's free, just takes a minute, and you can do it online here:
http://www.irs.gov/businesses/small/article/0,,id=98350,00.ht
ml

Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: sharon
       
Tue Sep 6 09:52:58 2011
They have to do this because what would happen if at Christmas someone sells 20 items for 20K then they have to do it retroactively and risk not being in compliance. If you receive payments through Paypal or any credit card processor you will have to provide this information even if you don't meet the 20,000 20 transactions because you could, it's out of their control what the threshold is. It is the IRS you should blame. I am sure Paypal does not like the 1099k anymore than we do. As an ebay seller, I know there are problems on ebay and with Paypal however this was not something they passed. Unfortunately, it has to do with all the people selling that never paid taxes and are now complaining that they should have more privileges and that they wish it was like the good old days. Those who like the extra money but not the pain of paying taxes, those days are over. The internet has matured now and this is where all the money is being made. We will probably all be squeezed out by the big boys not on eBay necessarily but on websites. All are doing the flash sales etc sneaking them through so their distributors don't see they are selling below MSRP. The days of easy selling are pretty much over for the small seller. I am keeping my expenses down as much as possible. It makes me sad but there is nothing we can do about it. Things never go backwards and whining doesn't help. Just face it. It will be a huge pain reconciing each item and return, that's for sure.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Rich(y)
       
Tue Sep 6 10:51:37 2011
"Paypal:The world's most loved way to pay and get paid."

Hahahahahaha!
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Joanbet This user has validated their user name.
       Web Site
Tue Sep 6 11:55:04 2011
There is a simple, and reasonable, reason they are asking everyone - despite the sales amount.  Many people have multiple accounts, any one of which may not reach the 200 payments/$20,000 total threshold, but all of which may well exceed that threshold and require filing.  The only way for PayPal to be certain they are properly reporting to the IRS is to have tax numbers for all accounts.  What I hate more than taxes is tax cheats...   I am glad that PayPal is requiring the information from all accounts and I think they should close any accounts that do not comply.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: reader
       
Tue Sep 6 13:25:36 2011
'...PayPal would not provide EcommerceBytes with specific information about what would trigger PayPal to request a tax ID number, stating there were a "multitude of factors."...



Wow! Does that call for a facepalm or a laugh?
What part of the constant stream of bs does not scream 'fly-by-night'?
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: summer in the city
       
Tue Sep 6 13:41:36 2011

Wasn't this new requirement tacked onto Obama's health care bill? Considering the close ties between Donahoe and his wife and the Obama administration, I wouldn't be surprised if this were Donahoe/Ebay's idea to begin with -- to lay the groundwork for another Paypal money grab.

This has nothing to do with tax fairness: it's Donahoe's payback for raising a million bucks for the Obama campaign!
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: Joanbet This user has validated their user name.
       
Tue Sep 6 15:42:09 2011
This has absolutely nothing to do with the new health care bill.  Making sure that people who sell on-line pay taxes on their profits has been in the works since BEFORE Obama was even President.  Ina will be able to provide information on just how long ago this issue was first raised.  And it makes perfect sense.  People who run on-line businesses have been failing to report their earnings and pay taxes on them.  This is a way to capture those sales and collect the taxes due.  It has everything to do with tax fairness.  I have found it incredibly unfair that so many people have not been paying the taxes that are due.  If you have been paying your taxes all along, nothing will change for you.  If you have not, well then shame on you and its about time you start.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
by: AC_in_Mich
       
Tue Sep 6 19:15:53 2011
I think what Summer was thinking of was the proposed law (I'm not sure, but I believe it was repealed) requiring businesses that spent more than $600 to any person or business to send them a 1099.  So, the gas company, electric company, maybe the guy that plows your parking lot, telephone - anything and anybody.  Estimates were an extra 150 - 200 1099's per company.
Is PayPal Pressuring Sellers to Provide Social Security Numbers?   Is PayPal Pressuring Sellers to Provide Social Security Numbers?
This user has validated their user name. by: Ming the Merciless
       
Tue Sep 6 21:00:10 2011
My, my, my.

I guess some the self annointed elite's preconceived notions don't have to be grounded in fact for them spew.

But that's the beauty of this country. Even those grounded in ignorance and supposition can express their opinions irrespective of how provably false they may be.

Fact check much?
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