Reporting Paypal earnings to IRS - How?

MyOwnDemon

MyOwnDemon

Face Rocker
Jan 28, 2007
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www.sitestomp.com
As far as reporting paypal earnings to the IRS -

1. How do I do this?
2. What forms do I use?

I realize I'm a bit late and am going to have to eat a late fee, but whatever.

Most of my earnings came through paypal this year and last year. Since paypal doesn't report directly to the IRS (not until 2011 anyway - so technically I have to report 2008 and 2009 before I get in trouble and huge debt later), just curious as to what forms I should be using? Do I just print out my statements and go to a tax professional?
 


It depends if you were being payed by a network. What type of stuff were you getting payed for? Services? The late fee is only 1% of half of what you owe. It goes up 1% after each month.
 
MyOwnDemon said:
Do I just print out my statements and go to a tax professional?
Click to expand...

All my earnings come from paypal as well. Just visit the "Reports" section. What I did was check out the monthly reports - go through each month and note the Net amount.

I also went through all transactions in each month (money paid out) to deduct business expenses.

Tally it all up, go to an accountant.
 
It's just money I received via paypal for doing design work.

Up until 2008, I've always had a normal job and just filed my W2. I quit my job a couple years ago so I don't have a simple W2 to file.

I need to file my 2008 and 2009 paypal earnings so I don't get raped later. Better safe than sorry, especially since I hear they will be reporting to the IRS in 2011. I'd rather just do it the right way than have to pay 4 years of backtaxes. Ouch.
 
dreamache said:
All my earnings come from paypal as well. Just visit the "Reports" section. What I did was check out the monthly reports - go through each month and note the Net amount.

I also went through all transactions in each month (money paid out) to deduct business expenses.

Tally it all up, go to an accountant.
Click to expand...

Okay, nice. I checked it out and it lets me print out a nice clean summary for 2009, but I can't find anything for 2008. I contacted a tax lawyer and they told me not to worry about it, just get it all filed. Now, I'm just trying to figure out how to do that.
 
Depending on how you do your accounting PayPal "earnings" should only be interest.

It works just like any other bank account - they are a clearing house for money, not an actual income source.

They would fall under deposits/withdrawals in your accounting but not as actual income or expense (except interest, see above).

Just get a CPA. It's worth it. Mine just saved me $6400.
 
hmm, i dont get it. when I reported paypal income I just went in and reported the incoming money and interest as rev.. and reported the going money as expenses ( that how I had it set up ) and was done.
 
^ This. If you use quickbooks, you can download your entire paypal history and assign it income and expense categories. So fucking simple, I can do 12 months of paypal bookkeeping in a couple hours, 12 months of offline bookkeeping takes 3-4 days.
 
MyOwnDemon said:
As far as reporting paypal earnings to the IRS -

1. How do I do this?
2. What forms do I use?

I realize I'm a bit late and am going to have to eat a late fee, but whatever.

Most of my earnings came through paypal this year and last year. Since paypal doesn't report directly to the IRS (not until 2011 anyway - so technically I have to report 2008 and 2009 before I get in trouble and huge debt later), just curious as to what forms I should be using? Do I just print out my statements and go to a tax professional?
Click to expand...

You are likely going to owe some under payment penalties (10% of underpayment) and possibly a late or failure to file penalty along with interest 8% annually. Overall it shouldn't be to bad unless you made a lot of money, that you didn't report.

In general the IRS is easier to deal with if you fix your mistake than if they catch you failing to report income. So it is best that you fix the problem sooner rather than later.

Seeing a tax professional may be your best choice based on the info in your OP and apparently limited understanding of taxes. If you wanted to be cheap you certainly could late file your 2009 return and amend your 2008 return using turbo tax or tax cut. You would need both the 2008 and 2009 versions of the software to file returns for each of the years.
 
Thanks for all the info everyone. Just going to figure out how much I made with paypal's monthly reports and then get to a CPA or use Turbotax. I realize paypal doesn't report to the IRS, but better safe than sorry. I'd rather just pay now than have to pay for several years of back taxes w/ interest penalties later.

@dably - thats almost exactly what the lawyer told me, so good advice. If they haven't contacted me yet, I am still in the clear if I take care of it now since it's not like I've been avoiding paying taxes for multiple years - just a bit confused and late on them.
 
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