PayPal & Taxes

So I was wondering for those of you who buy/sell via PayPal:

How much do you have to buy/sell in order to get contacted by the IRS?
Do you pay taxes for buying/selling?
What happens when you go over the 200 transactions/$10k+ limit?
Do you have people pay for goods/services or have them send as friends/family?
Do you think paying the PayPal fee is the better option?

Any extra info you have, please feel free to share! ^_^

 

If you earn more than the personal exemption limit where you live, then you legally should be paying taxes on it. This is somewhere around $10,000 in income per year but you'd have to find out for yourself specifically.

I believe once you go over the 200 transactions / 10k limit, paypal is legally required to notify the IRS, so if you don't file your taxes accordingly, the IRS will know you did make money and avoided declaring it, resulting in potentially paying a fine and/or interest on top of the taxes.

As for the fees, it depends. If you have a website the payments should be received as goods or services. You may be able to get around this when dealing with buyers directly through PayPal and ask them to pay you via friends / family to avoid the fees, but if you overuse this PayPal may limit your ability to receive money this way.

Personally I think paying the fees is the better option so you can receive friends/family payments when it is worth it to do so and not run the risk of losing that option entirely. Also Paypal is providing a valuable service to you and in my opinion is worth the 2-4% in fees on the transaction.

Confirm any or all of my points with an accountant as I'm not American and some of my advice could be factually incorrect.

 

Thanks for that info! I still have a few questions, though.

Say you Sell $10k worth of gold, but buy $9k. Would this count as $10k, or $1k in PayPal's eyes? Would you be able to say the $9k was a business expense?

I don't mind paying the fees, but doesn't that heavily cut into your profits? a 2-4% (sometimes even higher) cut from EVERY transaction must add up, no?

Also, since you pay constant PayPal fees, do you feel as if they take your side more often than not on chargebacks? Almost as if you're a renowned memeber or the like?

Cheers! ^_^

 

Yes the $10k is based on net income or profit. If you sold $10k in gold, that would be your revenue. Gold expense, plus any other expenses you can claim would be deducted from that to give you your net income or profit. You should be able to back up any expenses made with receipts or digital records (paypal reports are fine)

As for the fees, they do add up to a lot but it's something you can't really avoid since accepting a large amount of friends/family payments will certainly raise a flag with PayPal and they might prevent your account from accepting friends/family payments entirely. The fees you pay really have no effect on the amount of chargebacks you win.

 

You don't think having a business account + paying fees constantly would make your account have a higher chance of being accepted? I know a friend who has an outstanding Ebay rep and they take their side more often than not because of the benefit of the doubt.

 

Its $20,000 or 200 transactions as goods & services, not $10,000.

Just an fyi.

 

The issue is mostly the 200 transactions, no? I'd hit that far before I'd hit $10k-$20k hah.

 

I think when you have fully verified your PayPal, This includes sending them a picture of your ID and a bankstatement that states your address, this limit goes away.I could be wrong tho. If you want to know for sure,calling them is a good idea.

 

It's not a limit of how much you can send lol... It's a limit of how many transactions you can do before they send you a W2 form or the like.

Looking for real gold sellers here, please.

 

I believe it was around 100+ transaction might be wrong though.

 

According to Bus (he should know more about this than me) it's 200 transactions as goods & services. Seems like friends/family transactions don't count, so I'll be mixing them up.

 

just be safe and pay your taxes. on a few hundred - few thousand bucks profit, they're gonna be low anyway, and it's much easier to not worry about screwing the IRS out of a few hundred bucks for the rest of your life. you definitely don't want something so small to come back and bite you in the longer term

 

I'm not trying to avoid taxes, I'm trying to figure out how much I can sell without being concerned for taxes and how to properly pay taxes if it came to it (I'm not against taxes.)

 

It sucks that in most countries there are very vague and no specific rules or laws of how to pay taxes with money out of income such as we are getting. Same for Bitcoins in my country, really no actually specific rules or laws on it.

 

I don't even file my own taxes, so I'm really unsure as to how to claim my income/how much income I make/need to claim...

 

bump, still need help.

 

bump, help me out.

 

bumpps pls help

 

Unfortunately I can't help with the US taxes but with the Fed's I would advise to make the account a business account and call up and apply for merchant rates if you bring in £1500 (but the USD equivalent) in payment for goods and services. You would need to hit this target in a month before applying but there is different fee rates for the amount you bring in. In the uk it is between 3.4%+20p all the way down to 1.4%+20p.

 

Thanks!

Do you know if friends/family affects this in any way?