IRS, Taxes & 1099s

EBAY


What are the requirements?
Starting January 1, 2011, new IRS regulations require all businesses that process payments to file a Form 1099-K for all sellers with more than 200 transactions and $20,000 USD paid to them. Because Half.com processes payments, we are subject to these new IRS regulations. If we have determined that you are likely to meet the above criteria, then we'll need your Tax Identification Number (TIN) or Social Security Number (SSN) so we can generate a Form 1099-K for you. Review the IRS proposed regulations.

What is a TIN and who needs to provide one?
A Taxpayer Identification Number (TIN) is a number used by the Internal Revenue Service (IRS). Your TIN could be your Social Security Number (SSN), or if you run a business, you may have an Employer Identification Number (EIN) issued for that business by the IRS. Individuals can request a SSN through the Social Security Administration office near you. Business owners can apply for an EIN online at the IRS website. Learn more about Taxpayer Identification Numbers.

Under the new IRS regulations, all US sellers who we have determined are likely to have more than 200 transactions and $20,000 USD paid to them by Half.com during a calendar year are required to provide Half.com with a TIN. If you have multiple accounts, they will all be taken into consideration when calculating your volume status. In other words, all of the sales from all of your accounts with the same TIN will be combined to determine if you meet the 200 transactions and $20,000 USD threshold. The combined sales will then be reported on one Form 1099-K.

Note: Beginning in 2012, we may need to have TINs from all sellers regardless of sales volume.

This regulation change impacts all businesses that process payments, not just Half.com.

How do I give you my TIN?
You'll be able to give us your TIN online in the Personal Information section of My Account.

Important: For security purposes, you'll never be asked to provide your TIN over the phone. Please do not call with or email us your TIN.

How does Half.com protect my personal information?
Your TIN will be kept secure in accordance with privacy laws and security standards. This includes the secure storage and transmission of private information such as your credit card number, Social Security Number, and Tax ID Number. Read our Privacy Policy or visit our Security Center for more on how we keep your information secure.

What will happen if I don't provide my TIN?
We're required by the IRS to collect your TIN for reporting purposes. If you don't provide your TIN before you reach the IRS thresholds, we may take certain actions such as withholding tax from your payments, suspending or removing your listings, or suspending your ability to sell on Half.com. We want to avoid any disruption to your selling, so please make sure you give us your TIN as soon as we request it.

If your selling privileges have been suspended because you didn't provide us with your TIN, the quickest way to resolve this issue and regain your selling privileges is to provide your TIN online in the Personal Information section of My Account.

How long does it take for my TIN to be validated once I have provided it?
Your TIN will usually be validated within 1 day of when it is provided. We will notify you if your TIN is invalid.

Will I receive a Form 1099-K for sales in 2010?
No. While we'll base whether or not we need your TIN on your 2010 sales history, the 1099-K requirement only applies starting in the 2011 calendar year.

Where will I receive my 1099-K?
Your Form 1099-K will be mailed to the registered address we have for you on Half.com. Please be sure that your contact information is up to date.

What information will be provided to the IRS in the Form 1099-K?
The IRS will receive the same information that is provided to you on Form 1099-K. This will include your gross payments for 2011 which will be reported by month. You can view a Form 1099-K here.

Only sales starting from January 1, 2011 will be reported on the Form 1099-K which we will send to you at the beginning of 2012. No Form 1099-K will be issued for sales occurring in 2010 or before that time.

Will any information about each individual transaction be given to the IRS?
No, for purposes of Form 1099-K reporting, individual transaction level details will not be provided to the IRS.

Will eBay information (for example, User IDs and email addresses) be provided to the IRS?
No eBay account information, such as User IDs and email addresses, will be provided to the IRS as part of the Form 1099-K reporting.

Will the Form 1099-K include my gross sales amount or my net sales amount?
Your gross sales amounts will be shown on your Form 1099-K. For example, if you made $40,000.00 in sales and paid $1,600.00 in fees, your Form 1099-K will list $40,000 in gross sales. It will be your responsibility to determine the deductibility of fees that you have been charged when you file your tax return. Please consult your tax advisor regarding the tax treatment for your online sales activities.

What about chargebacks and returns?
Chargebacks and returns will be included in the amount reported on Form 1099-K. You will need work with a tax advisor to decide how to handle chargebacks and returns when you file your taxes.

What about listings from my Half.com inventory that sell on eBay.com?
When a buyer purchases your Half.com listing on eBay.com, the transaction is recorded as an eBay.com sale and payments are deposited in the account you have on file with eBay for payment processing, such as PayPal. Half.com listings that sell on eBay.com will not be included on your Half.com Form 1099-K. These eBay transactions may be reported in a Form 1099-K issued by another payment processor, such as PayPal, if you exceed the IRS thresholds with that payment processor.

Note: In order to sell Half.com inventory on eBay, you must first qualify and opt in. Learn more about selling Half.com inventory on eBay.

What if the sales on my Half.com account need to be split over more than one TIN?
Form 1099-K reporting will be based on the Tax Identification Number (TIN) listed on each account. Only one TIN per account can be used at a time. All sales on a single account will be combined and reported on one Form 1099-K under one TIN. If you want certain sales to be reported under a different TIN then you will need to open a different Half.com account and provide a different TIN for that account. Remember that all of your sales from all of your accounts using the same TIN will be aggregated for reporting purposes.

What if someone I live with uses a different account to sell items?
We will issue Form 1099-Ks by Tax Identification Number (TIN). If you and the person you live with provide your individual TINs on your accounts, you will be issued separate Form 1099-Ks for each of your accounts (assuming you both cross the IRS thresholds). While we may need separate TINs for your accounts to avoid combining them, we will only issue a Form 1099-K if an account exceeds the IRS thresholds. Remember that all of your sales from all of your accounts using the same TIN will be combined for reporting purposes.

If I'm in a partnership, how will that be reported to the IRS?
If your Half.com account is in the partnership's name then the partnership's Tax Identification Number (i.e., the partnership's Employer Identification Number or EIN) will need to be provided (when required) and the Form 1099-K will be issued to the partnership.

What do I do if I have questions?
If you have any questions or concerns, please don't hesitate to contact us. However, we can't give tax advice, so you should consult your tax advisor if you have questions about how this new regulation may affect you.

Starting in 2011, Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal. These new rules apply to sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year. In order to help you understand these changes, we have prepared the following FAQs.
Questions? Login to your account or call 1-877-569-1129

What is Internal Revenue Code (IRC) Section 6050W?
Under the new legislation, we’ll report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:

$20,000 USD in gross payment volume from sales of goods or services in a single year
200 payments for goods or services in the same year
The IRS changes apply to all payment processors, including PayPal and include all sales that occur on or after January 1, 2011. Our goal is to help PayPal sellers understand and comply with the new requirements.

Before your payment volume exceeds the reporting thresholds, you’ll be asked to add your tax ID number, such as a Social Security Number (SSN) or Employer Identification Number (EIN), to your existing account(s), if you don’t already have one on file.

How will I know if IRC Section 6050W affects me?
PayPal will track the payment volume of your account(s) to check whether your payment volume goes above both of these levels in a calendar year:

$20,000 USD in gross payment volume from sales of goods or services in a single year
200 payments for goods or services in the same year
Before your payment volume exceeds the reporting thresholds, you’ll be asked to add your tax ID number, such as a Social Security Number (SSN) or Employer Identification Number (EIN), to your existing account(s), if you don’t already have one on file.

If you cross the IRS thresholds in 2012, PayPal will send Form 1099-K to you and the IRS for the 2012 tax year in early 2013.

What does PayPal need from me as a result of the IRS changes?
PayPal will ask affected sellers to update their account(s) by providing a tax ID number, if they don't already have one on file. Your tax ID number is one of these:

Your Social Security Number (SSN)
Your Employer Identification Number (EIN)
Your Individual Tax Identification Number (ITIN)
Please use the guidelines below to determine which tax ID number to provide. You should use the tax ID number that you use when reporting any taxable income related to your PayPal activity to the IRS.

Business Entities with an EIN

Provide your company EIN and company name.

Sole Proprietors with an EIN

Provide your company EIN and your own name. Do not provide a business name or a DBA name (“Doing Business As”) with your EIN.

Individual Sellers and Sole Proprietors without an EIN

Provide your SSN or ITIN and your name. Do not provide a business name or DBA name with your SSN.

PayPal will also ask affected sellers to confirm that their account name matches the tax ID number provided and to confirm their physical address so that if Form 1099-K is issued, we can report your information accurately to the IRS.

Tax ID numbers will only be requested from sellers whose payment volume, in a single PayPal account or in multiple PayPal accounts when aggregated, approaches the IRS thresholds. If you need to update your information, PayPal will notify you via email, alert you when you log into the PayPal site, and display an alert in your Account Overview.

What happens if I don’t provide my tax ID number?
If you do not provide your tax ID number (Social Security Number (SSN), Employer Identification Number (EIN), or Individual Tax Identification Number (ITIN)) after we've requested it, we may place the following limitations on your account:

You’ll be unable to receive funds into your account.
You won’t be able to close your account.
The limitations will be removed after your provide your tax ID number.

How is the $20,000 calculated? Will it be calculated based on net or gross transaction earnings?
As required by IRC 6050W, the $20,000 will be calculated by looking at a seller’s gross payment volume for sales of goods or services. Gross amount means that any adjustments for credits, cash equivalents, discounts, fees, refunded amounts or any other amounts will not be netted out.

In addition, the reported amount will include any shipping and handling, sales tax or other fees which are included in payments you receive. We realize that these amounts may or may not be included in your taxable income, but we are required to report them. You should work with your tax advisor to determine how these items should be treated for tax purposes.

Are personal payments that I receive counted in the total that will be reported to the IRS?
No. Personal payments that are not payments for the sale of goods or services will not be counted when determining if the IRS thresholds have been reached and will not be included on your Form 1099-K if you exceed the thresholds. However, all payments received for the sale of goods or services will be used to calculate the gross payment volume to be reported. PayPal monitors accounts to ensure that personal payments are not being used for sales of goods and services.

If I have multiple accounts that, when combined, meet the thresholds, but individually they don’t, will my accounts be affected?
Yes. PayPal and all other payment processors are required to determine if the IRS thresholds have been met and, if so, to report payment volume to the IRS by tax ID number such as a Social Security Number (SSN), or Employer Identification Number (EIN).

For example, if two accounts have the same tax ID number on file and have the payment levels shown below, PayPal will report both accounts on separate 1099-K Forms under the new regulation.

Example:

Account A - $18,000 in payments received for goods or services and 180 transactions
Account B - $3,000 in payments received for goods or services and 30 transactions
Will I be affected by the 2011 tax changes if I only meet one of the thresholds?
No. A seller has to exceed both IRS thresholds ($20,000 in gross payment volume and 200 separate payments) in a calendar year before a Form 1099-K is required. However, we may require that you provide a tax identification number before you reach these thresholds.

Are non-profit organizations affected by IRC Section 6050W?
For purposes of IRC Section 6050W, non-profit organizations are treated the same as for-profit organizations. Non-profit organizations will be required to submit their Social Security Number (SSN) or Employer Identification Number (EIN) before exceeding the payment volume thresholds. A Form 1099-K will be sent to non-profit organizations that exceed the thresholds for sales of goods or services.

Are non-US PayPal accounts affected by this new law?
Internal Revenue Code Section 6050W requires PayPal’s non-US subsidiaries to comply with the new law. As a result, non-US account holders may need to certify their non-US status and their address. US sellers using a non-US PayPal account may be required to provide a tax ID number (Social Security Number (SSN), Employer Identification Number (EIN), or Individual Tax Identification Number (ITIN)) for those accounts. If you have an account with one of PayPal’s foreign affiliates you will be contacted when you approach the IRS thresholds.

Will I need to upgrade to a business account?
If you have a Personal or Premier account and you provide an Employer Identification Number (EIN) to PayPal, you will be asked to upgrade to a Business account. If you have a Personal or Premier account and you provide a Social Security Number (SSN) to PayPal, you will not be asked to upgrade to a Business account.

Will all sellers receive a Form 1099-K?
No. Only sellers who exceed the IRS thresholds will receive Form 1099-K. Sellers exceed the IRS thresholds when they receive over $20,000 USD in gross payment volume for the sale of goods or services AND receive over 200 separate payments for goods or services in the same calendar year.

I didn't receive a Form 1099-K and thought I was supposed to. What should I do?
If you feel you crossed the thresholds for reporting and did not receive a Form 1099-K from PayPal:

Log in to your PayPal account.
Click History.
Select Tax Documents from the drop-down.
If a Form 1099-K was issued for your account, it will be listed here and available to download or print. If a Form 1099-K is not listed, and you still feel like you should have one, contact PayPal for assistance.

How do I read Form 1099-K?
PayPal is working with its sellers to help them understand the new requirements. Please refer to the links section on this site for more information on the process and forms. Also, check back often for future information updates on this site.

How does PayPal calculate the dollar amount shown on the Form 1099-K?
The dollar amount shown on the Form 1099-K is your total gross sales for goods or services that were received through PayPal for the previous calendar year. As required by the IRS, this amount includes all fees and/or payments associated with your sales, including shipping fees or sales tax received.

As the dollar amount on your Form 1099-K is a gross amount, any adjustments for credits, cash equivalents, discounts, fees, refunded amounts or any other amounts will not be netted out.

How do I get a reconciliation report from PayPal?
To get a reconciliation report that shows all of the transactions PayPal has included in the dollar amount reflected on your Form 1099-K for the 2011 calendar year:

Log in to your PayPal account.
Click History.
Select Reports from the drop-down.
Click 2011 Financial Summary and download the report.
Why did I receive more than one Form 1099-K from PayPal?
PayPal and all other payment processors are required to report sales and transaction volume to the IRS by tax ID number. We will prepare Form 1099-K at the PayPal account level. If you have multiple accounts, that either individually or when combined, cross the thresholds, you will receive a Form 1099-K for each account associated with your tax ID number.

What if I have questions about my Form 1099-K?
If you have questions about your Form 1099-K, please review all of the information on this site. PayPal is not qualified to give you specific tax guidance and asks that you contact a tax professional.

What should I do if my Name or tax ID number is incorrect on my Form 1099-K?
To change the name listed on your Form 1099-K:

Log in to your PayPal account.
Go to the Profile Section.
Click Change next to your Name to change your name.
Click Change next to Business Information to change your business name.
In the description field, please include your request for a corrected Form 1099-K.
To change the tax ID number on your Form 1099-K, call PayPal using the telephone number provided on your Form 1099-K for assistance.

What should I do if I feel the dollar amount shown on my Form 1099-K is incorrect?
If you feel the dollar amount on your Form 1099-K is incorrect, you can access a reconciliation report for your accounts on the Tax Documents section of the website.

If the dollar amount seems high, note that:

Shipping income IS included in the total.
Refunds and returns have NOT been excluded from the total.
If the dollar amount seems low, note that:

It only includes gross sales for good or services that were processed through your PayPal account.
Transactions processed after December 31st are NOT included on the prior year’s Form 1099-K, but will be reflected in the next year’s Form 1099-K.
We only report your PayPal activity. Other payment methods are not included.
If you feel a correction is needed to your Form 1099-K, contact us for assistance using the telephone number provided on your Form 1099-K.

Will PayPal help me with my tax return?
While we're committed to helping our customers understand the tax changes, PayPal is not qualified to give you specific tax guidance. Please contact a tax professional.

Is PayPal planning to make any changes to the IRS reporting process during 2012?
This is a new law and the IRS may issue additional guidance over time. As a result, we may make changes to this process during the year. In addition, certain aspects of this new law do not take effect until 2013. We will communicate any changes required by these new provisions during the year.

Will PayPal provide any information to any State tax authorities?
Yes. At the present time, California, Hawaii and New York require payment processors to provide copies of Form 1099-Ks issued to their residents. In addition, states generally have the ability to obtain data from the IRS.

Is my personal information safe with PayPal?
Yes. PayPal automatically encrypts your confidential information in transit from your computer to ours using the Secure Sockets Layer protocol (SSL) with an encryption key length of 128 bits (the highest level commercially available). Before you even register or log in to our site, our server checks that you’re using an approved browser – one that uses SSL 3.0 or higher.

Once your information reaches us, it resides on a server that is heavily guarded, both physically and electronically. Our servers sit behind an electronic firewall and are never directly connected to the Internet, so your private information stays private.

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