Everything you need to know about IRC Section 6050W
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.
PayPal is required to report gross payments received for 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 information reporting obligations, we have prepared the following FAQs. After reviewing the following FAQs, we recommend you consult your tax advisor to assess tax implications of Form 1099-K reporting.
If you’ve recently received a notice to update your PayPal account(s) information, please download the following PDF guide and refer to the FAQ’s.
What is Internal Revenue Code (IRC) Section 6050W?
Under the IRC Section 6050W, PayPal is required to report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:
How will I know if these rules affects me?
What does PayPal need from me when my PayPal transaction volume approaches the thresholds?
I am an individual seller. Do I have to provide my SSN?
What happens if I don’t provide my tax ID number?
How is the $20,000 calculated? Will it be calculated based on net or gross transaction earnings?
Are personal payments that I receive counted in the total that will be reported to the IRS?
If I have multiple accounts that, when combined, meet the thresholds, but individually they don’t, will my accounts be affected?
Will I receive a Form 1099-K if I only meet one of the thresholds?
Are non-profit organizations affected by IRC Section 6050W?
Are non-US PayPal accounts affected by this law?
Will I need to upgrade to a business account?
Will all sellers receive a Form 1099-K?
I didn't receive a Form 1099-K and thought I was supposed to. What should I do?
How does PayPal calculate the dollar amount shown on the Form 1099-K?
Why is there an amount listed in Box 1b on my Form 1099-K this year when that box has been left blank in years prior to the 2015 tax year?
How do I get a reconciliation report from PayPal?
Why did I receive more than one Form 1099-K from PayPal?
What if I have questions about my Form 1099-K?
What should I do if my Name or tax ID number is incorrect on my Form 1099-K?
What should I do if I feel the dollar amount shown on my Form 1099-K is incorrect?
Do I have to report the amounts from Form 1099-K on my tax return?
Will PayPal help me with my tax return?
Will PayPal provide any information to any State tax authorities?
What if I have questions that were not answered here?