Pay Pal Taxes?

I was wondering how taxes work for transactions made over Pay Pal?

Also, how do they work for Adsense and other ad services, for that matter?

 

PayPal does not come into tax issues unless you are working with their interest bearing accounts, then if you make more than $10 they will send you a 1099 and you are required to pay taxes on that.

If you make more than $600 with a revenue source(Adsense, AdBrite, Yahoo, Etc...) they will require that you submit a TIN or SSN. They should then generate a 1099 and mail it to you by Jan 31 of the year that taxes are due. For example, 1099's MUST of been sent by today in order to avoid a fine from the IRS for 2007 taxes.

 

Your information is very useful for me

 

I am from India, can I have interest bearing account? I heard that so many are doing that, but I could not find. I am thinking its only for US people. Is that so?

 

U.S. only is my understanding, yes.

 

However - if you generate income via paypal, you must report this as taxable income.

 

but how to distinguish if the money you made are INCOME or just someone has gave you a loan?

 

Very well said.

If the payment you get in the paypal account is a fee for service, that is income for your business and is taxable.

 

Same question like that here.
I have a donation button on my site and receive money. How can paypal tell whether its a fee for service or just money I got from my other account or friend just give me..xD

 

Its the same as a bank account (without the protection). The IRS knows about the money in the account, and if it is income, you are required to pay taxes on it.

 

PayPal cannot. That is your responsibility to keep track of.

Oh, and you could pull up a ledger report for each email, if you used a seperate email for the donation box and your regular payments, etc.

 

If they can't why should we report?
Also, did you know that the donation money is taxable too?..xD

 

Because you can be audited and fined/imprionsed for improperly filing taxes.

Donation money not with DOCUMENTED reciepts to a church, charitable orginization, etc are TAXABLE! If you do HAVE DOUCMENTED reciepts some cases are non-taxable. Check with your CPA for specifics.

 

But, if you make some money on Pay Pal then spend some of it on advertising, you could write that off, right?

 

Yes, you can write off any advertising expense

 

Yes, even though Paypal doesn't necessarily have your Social Security number (they do for some accounts) you must pay taxes on your income. However, make sure you write off expenses as well.

 

You can write off a LOT of expenses...such as registration fees, your computer, hosting, the space you use your computer at (home office), any purchases you make to facilitate your business ventures.

Both cases are income. Unless you plan to pay back your friend it's income.

To keep my own taxes low I just reinvest a LOT of my income back into my business. I buy a new computer just about every year and I keep track of all my registration and other fees. All told I spend thousands and it all gets deducted.

 

lol nice tips RectangleMan

 

RectangleMan is spot on, I do the same. Above all, if in doubt, get an accountant. They are expensive but ohhhhhhhhh so worth it. Haha

 

nice RectangleMan =)