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This is info found on another web post regarding this upcoming PayPal / IRS change:
The Housing and Economic Recovery Act of 2008, a major housing bill signed into law on July 30, 2008, requires payment providers such as PayPal to report to the IRS the total payment volume received by its customers. This provision, which goes into effect in 2012, also applies to banks that provide credit card services to businesses.
The vast majority of PayPal users will be unaffected by the new law. When the reporting provision goes into effect in 2012, PayPal will be required to report sales information to the IRS if a customer meets both of the following conditions:
Receives more than $20,000 in payment volume in a single year; AND
Receives more than 200 payments in a single year.
The provision goes into effect in 2012, meaning that PayPal will begin reporting payments received in 2011 for sellers who meet the above conditions.
We do not yet know exactly how the IRS will implement the law. We will be working with the IRS to develop rules that minimize the compliance burdens on our sellers and provide for the most accurate reporting possible. Once IRS rules are finalized, we will encourage all merchants to consult with their tax advisors to ensure compliance with federal tax laws.
Early versions of the legislation would have required payments companies to report total payment volume of vastly more customers, including those who received as little as $600 per year. PayPal and its users worked hard to inform Congress about the unique features of PayPal and our customers. We also explained that PayPal customers receive money from others for reasons not related to operating a business.
As a result of this dialogue, the legislation doesn’t overreach or negatively impact individual Internet users, the growth of small businesses, or the entrepreneurial spirit that makes the Internet so powerful.
To the many PayPal and eBay users who took the time to write to your U.S. Senators about this legislation, thank you. Your voices encouraged Congress to reject the initial overly-burdensome proposal and to limit the impact of the bill’s final version.
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Curious for clarification or thoughts ... what constitutes a PayPal merchant card? Is only income made receiving income through a merchant card effected? I have a business account verified with PayPal but to my knowledge have no card & have only used PayPal to process payments of some items I've sold on ebay in the past (ebay & paypal both collecting fees from those transactions, which weren't that much). Is a normal person or business effected by this ... and do they have to remain under the $20,000 and 200 a year limits?
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