I am not 100% sure, but I would assume that if you make more than $600, they would have to send you a 1099. But then again, since Paypal is not actually paying you anything, only moving money from other people to you, it could get complicated!! hummm
Paypal doesn't report your balance to the IRS. They're not paying you for anything, nor is your balance considered true "income".
That is to say if you were to just use the debit card and never withdraw your balance . . . . They'd never report your purchases?
Paypal don't report to the IRS as a matter of protocol, but by financing laws, if the IRS requests information, Paypal are obliged to hand it over, I think.
I dont see how paypal would know your income. For example, someone buys your used laptop on ebay, thats not income.
it would be naive to think that if you have a lot of activity, especially with international payments, that the fed's are not watching and paypal is not playing ball.
If you ever get audited, the IRS would discover your Paypal account - it's tied to your checking account. So the IRS looks at your checking account seesdebits or credits from PP, they're going ask to see your PP account. Also, check out this piece on Paypal IRS Notice from Snopes.com. The IRS can go directly to PP and you might not know until you're getting fined for evading taxes.
Paypal does not. But if asked, they will hand it over. On another note, the government (US) CAN see all electronic transactions if they wanted to thumb your bung. My old college roommate works for Homeland Security out of Detroit, and has told me as much. If they are put in you for investigation purposes, they can go into some system and check for all electronic transactions to your account(s). Some FOC offices have access to this system as well. He worked there before H.L.S.. Luckily, most government agencies are too busy dealing with real criminals and do not have time to chase you down. But there is a simple solution. Pay your f'g taxes. The end.
If you deal with a significant amount of money the IRS will find out and will get records from PayPal. Dont try to evade taxes, you will eventually get caught. It's just not worth it. Wrong. They have people in the government working for the sole reason to deal with things like this.
If you are bringing in a lot of money through paypal it might be in your best interest to incorporate your business in a tax haven and setup a bank account and paypal account in that country. If done right it is perfectly legal and keep you out of jail if your audited. (This is only cheaper if your paying $x,xxx+ in taxes/year) As always talk to a accountant to see what works best for you.
I just love Pay Pal, They have saved me so much headache. There credit card is great and my account earns dividends. It is great they do not report to Tax Man but even if they did I would still use.