ACCEPTING PAYPAL PAYMENTS AND NEW IRS TAX LIABILITY FOR PAYPAL ACCOUNTS:

This guide is intended for discussion only.  It is mostly concerned with the following two items:

1. SELLERS THAT ONLY ACCEPT PAYPAL AS A FORM OF PAYMENT.
2. NEW BILL SIGNED INTO LAW REQUIRES PAYPAL TO REPORT ACCOUNT HOLDERS SALES TO THE IRS.

Folks, I am really puzzled that there are so many sellers out there that will only accept PayPal for payments.  Can anyone please explain to me why these sellers will refuse to accept Money Orders, Bank Drafts, or my favorite, which is Bill Pay, a free service offered by most US Banks inlcluding my Wells Fargo Bank.

OK, yes it's convenient, yet it's fast.  That I understand.  However, sellers are charge huge premiums for using PayPal, approximately 3% of gross sales are deducted by PayPal.

By accepting other methods of payment, such as Bill Pay, neither the seller nor the buyer incurr any costs.  Bill Pay is fast and secure.  The bank directly sends the seller a Bank Draft (it is guaranteed, it can't bounce) which is immediately deducted from the buyer's bank account.  Safe, Secure, Trackable, Traceable, and FREE!

The next subject concerns the passing of a new Bill, entitled "The Housing Assistance Act of 2008".  This Bill was signed into Law on Friday, August 1st, 2008.  OK, so what?  How does this affect PayPal?  Well, in this bill, there are several items that were added and have nothing at all to do with Housing Assistance.  By the way, this is normal for our process of enacting new laws.  Our Congressmen and our Senators just can't resist adding minor bills directly into a major bill.   So, without further delay, here is the part of the bill that will have serious tax implications for people accepting PayPal payments for Ebay Sales:

This law requires Merchant Banks to send records (similar to a W-2) of gross sales to the IRS.  The records are required to itemize the details of each transaction, and the gross sales will be treated as taxable income.  The main intent of this bill is to create a mechanism by which the IRS can and will be able to tax income from eBay sales.  The Key is that PayPal, according to this law, is considered to be a Merchant Bank and as such will be reporting all PayPal eBay sales to the IRS. 

Implications:  Those sellers that use PayPal to conduct business should expect to receive hefty bills from the IRS, including severe Penalties for those sellers that fail to report their income.

If you found this guide at all interesting, or helpfull then kindly give me a "yes" for writing this guide.

Good luck to all fellow eBayers!