I received a notice from PayPal that I need to give them my social security number for tax purposes. The reason is that if I sell more than $600 of things in a year, they will do a 1099 on me. This only applies to things sold as "merchandise", it does not apply to money transferred between friends (what many people call "Friends and Family").
The problem with getting a 1099 is that you then have to deal with it in your tax return. If you sold a tool for less than you paid for it, there would be no "income" for tax purposes. But, technically, you have to have a record of what you bought it for, and that increases the record keeping problem. We would now have to keep receipts for anything we might sell in the future.
You can avoid the problem by using other payment techniques: You can require cash for any in-person sales or you could have have a person send you a check.
Personally, I don't want to have to deal with making sure I keep records of everything I bought in the past and will just not sell with PayPal payment in the future.
Has anyone else heard of this? Any accountants have any comments about the tax issue?
I think this was done to force people who essentially run a business using PayPal payment to report their income but it could affect all of us.
Mike
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Here's something from PayPal about this.]
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Here's another source.]