Here is some news everyone is going to want to pay attention too. The IRS has in effect a rule that mandates everyone report 100% of earned paypal income as of 2011.
How are they going to properly in-force this? Easy..they are forcing banks to issue 1099-K’s to anyone receiving payment from PayPal or Ebay (same company owns both). Bummer right? The bank will summarize all payments and send the summary to you at the end of the year. This means that the IRS gets a copy too. 🙂
OK..so this raises 2 questions in my mind
- Are people going to switch payment processors in an attempt to avoid paying taxes. (I bet many are)
- Are people going to open bank accounts in other countries to avoid paying taxes. (Im guessing the IRS has no authority over non US banks)
While tax evasion is illegal, it is more common than you think. We suggest you form an LLC or S-Corporation of some sort. I would definitely go talk to an accountant if you make any substantial amount of money online.
UPDATES you must meet the following criteria, if you don’t don’t worry about this it will no effect you. (here r details at paypal)
- Receive more than $20,000 in gross payment volume in a single year, AND
- Receive 200 or more payments in a single year.
Here is a draft of the 2011 IRS 1099-K