Tax Holds | Backup withholding | PayPal US IRS (Internal Revenue Service)
Backup withholding is a tax law that requires 24% of payments for goods and services to be withheld once $600 is received until taxpayer status is confirmed.
I received this link from PayPal about the IRS today.
- Thread starter jayman
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Iwishiwasrich
Well-known member
Total BS , I don't have a pay pal account and now that they seem to be a agent of the IRS I never will.
smiling_Hans
Well-known member
80k new agents. No surprise here.
Just curious here but do people feel they don't have to consider G&S income taxable? How else is this process to be handled? The IRS is the one making the calls, PP is just covering their ass. Not taking either side but am curious as why people are mad about this. The explanation in that link is pretty clear.
In these times people get mad when they don't get their way/Period. Pool players get mad when they make a mistake, don't read the rules and take it out on the ref when they take action.
smiling_Hans
Well-known member
I see what you did there.In these times people get mad when they don't get their way/Period. Pool players get mad when they make a mistake, don't read the rules and take it out on the ref when they take action.
Right now I believe that the $600 reporting amount has NOT applied to PayPal or any other online vendor - they are presently not filing 1099s with the IRS at $600 - this dollar amount has not been put into law - every year it gets put on hold .
However you, are supposed to voluntarily report sales above $600 to the IRS on your tax form and pay the tax withholding during the fiscal quarter of the sale. Since no 1099s are presently being received by the IRS at this dollar amount - it is all voluntary right now in terms of you reporting and paying the tax.
I believe that the 1099s reported by internet sales companies and payment vehicles is actually $20,000 in sales until Congress finally makes a decision on this that becomes law
However you, are supposed to voluntarily report sales above $600 to the IRS on your tax form and pay the tax withholding during the fiscal quarter of the sale. Since no 1099s are presently being received by the IRS at this dollar amount - it is all voluntary right now in terms of you reporting and paying the tax.
I believe that the 1099s reported by internet sales companies and payment vehicles is actually $20,000 in sales until Congress finally makes a decision on this that becomes law
Several independent contractors who work in my industry also said they received a PayPal notification asking for their Social Security info. Next year, PayPal will be sending out 1099-Ks, one to you and one to the IRS. They have been wanting to do it for several years now but at the last minute claim they will wait another year. Well, the tax year is 2024.
Read all about it here: https://thehill.com/homenews/448130...-on-my-venmo-cash-app-or-paypal-transactions/
Read all about it here: https://thehill.com/homenews/448130...-on-my-venmo-cash-app-or-paypal-transactions/
This seems pretty straight forward; After this one-time (60-day) grace period, we’ll start sending 24% of your payments to the IRS as backup withholding for any potential income tax due on a monthly basis. The remainder of your funds will be released to your PayPal account balance. As if every penny of a sale is profit. I've lost money at times but will now get the pleasure of PayPal sending 24% of the entire amount to the fine gents at the IRS. Without knowing any details of any transaction. That is 100% government bullshit! F&F only from now on for me plus no more Ebay sales either.
I think PayPal will do this IF you do not give them your Social Security info. If you give them your Social Security info, they will send you and the IRS a 1099-K at the end of the year.
smiling_Hans
Well-known member
24% is quite hefty and what is backup and withholding. Does paypal consider everyone as self employed, which is subject to payroll tax, but selling a few items doesn't make someone 'self employed.'
I would look more into it.
smiling_Hans
Well-known member
I already like fire sales and it means I can get sellers to lower the price with cash.
4k for that ivory cue? Risk of confiscation. Illegal to go over state lines. No certificate of authenticity.
I give you 1k.
Cash is still King.
4k for that ivory cue? Risk of confiscation. Illegal to go over state lines. No certificate of authenticity.
I give you 1k.
Cash is still King.
I'm aware of several American pool tournament promoters withholding a third of the winnings from pro players who don't have a Social Security number or appropriate tax form for the IRS. It happened in Vegas and in Virginia.
When you hit at the horse track or casino over $600, if memory serves me right, they require your Social Security information. Well, at least they used to. It's been a long time since I scored big at the horse track or casino.
When you hit at the horse track or casino over $600, if memory serves me right, they require your Social Security information. Well, at least they used to. It's been a long time since I scored big at the horse track or casino.
smiling_Hans
Well-known member
That is on the tournament director. Not having a SS# is on the player but the correct forms have to be given to the player from tournament director, while they have to send the information to the IRS too.
SS# isn't a problem if they are out of the country players. They can always apply for an ITIN# and send it to the tournament director or whoever is in charge of this.
How about this scenario? A person, you, me or anyone else buys a Predator cue for $1200. They use it for a month, and decide it isn't for them. Put it up for sale on AZ/FB for $1000, sold as goods to protect seller and buyer, what do they owe in taxes? What would the IRS think they owe in taxes?
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The IRS would think they owe nothing in taxes on this as long as the person reports it correctly. In fact, it could lead to the $200 loss being able to be deducted from the person's other income, thus resulting is slightly lower tax liability overall.
The amount on a 1099K is not looked at by the IRS as actual net income in the same way the amount on a W-2 is looked at. It is regarded as money received only. The taxpayer is able to report expenses related to any 1099K sales as well as the cost of goods sold, and deduct these from the total income reported on the 1099K.
I don't know the details about this P/P situation but as an accountant I deal with 1099's on a regular basis.
When we have a new vendor come online I request a W9 (link below). The vendor fills this out and it informs me if they are a corporation or not. If they are a corporation they do not receive a 1099 at the end of the year, if they are a sole proprietor AND we pay them more than $600 for the year they, and the government, receive a 1099 indicating this. It's a bit more detailed than this (LLC's are dependent on how they file - C or S corp or partnership) but this is the gist of it.
The W9 will also give a quick summary of backup withholdings which should not be required if you give them the applicable information.
In the end, it seems like if I were receiving payments on P/P I would complete a W9 and send it to them to prevent the backup withholding process?
When we have a new vendor come online I request a W9 (link below). The vendor fills this out and it informs me if they are a corporation or not. If they are a corporation they do not receive a 1099 at the end of the year, if they are a sole proprietor AND we pay them more than $600 for the year they, and the government, receive a 1099 indicating this. It's a bit more detailed than this (LLC's are dependent on how they file - C or S corp or partnership) but this is the gist of it.
The W9 will also give a quick summary of backup withholdings which should not be required if you give them the applicable information.
In the end, it seems like if I were receiving payments on P/P I would complete a W9 and send it to them to prevent the backup withholding process?
Ok boomers, go ask the president and administration in 2019 why they started this
It's not PayPal doing it, but they are following tax code
It's not PayPal doing it, but they are following tax code
The IRS has owed my wife money for over a year. How fun will it be to explain and show the details on any and every little stupid PayPal transaction. 'Uh Do have the receipts for those there pool cue type shafts you done sold on the ebay Mr. Jones? we need to be able to verify your returns...You understand... Oh and about that case thingy you sold I assume you have a receipt showing you base investment, right..yes? we'll be wanting that as well sir..You understand...
Then hope that some day you get your 24% back if they decide in there infinite wisdom that they owe you your own money back. They are so efficient now, but this could slow them down just a tiny little bit. Ya know maybe?
Our country is 30 plus trillion in debt so we need to get that $4.00 check as soon as possible Mr Jones or we'll have to add late fees and fines on that. You understand...
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Correct, selling a few items doesn't make you self employed but the government still requires you to pay taxes on your "earnings". Not saying I agree with it, I just know the rules.