IRS ro AUDIT PAYPAL!!!

theyre looking for people that are hiding $ in offshore accts and then using paypal as a means of spending it

from http://www.nytimes.com/2006/04/12/technology/12paypal.h...e0b22cbb1&ei=5087%0A

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WASHINGTON, April 11 (AP) — The Internal Revenue Service said Tuesday that it had won approval from a federal court to ask the online payment company PayPal to turn over information about people who may be evading taxes by hiding income in other countries.

A federal court in San Jose, Calif., gave the I.R.S. permission to ask PayPal for information on American taxpayers who have bank accounts, credit cards or debit cards issued by financial institutions in more than 30 countries that are reputed to be tax havens.

to read the entire article http://www.nytimes.com/2006/04/12/technology/12paypal.h...e0b22cbb1&ei=5087%0A

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How many on ebay REALLY tell the IRS..What their profits are????????

I do.

Me too. Everything is on board. My accountant warned me a couple of years ago that IRS is watching Ebay closely. There are too many who are not reporting their income. And it does not matter how much money you make. If you buy with the intention to sell - you are evading taxes - and they will catch you (if just to set an example to the rest). Frankly there are lots of reasons why it is beneficial to report Ebay income. I don't make enough and by the time I factored in the expenses, I am making loses. That helps with my overall tax situation. Of course, collecting sales tax and such may be a bother but you keep track of your sales on a spreadsheet, it is not too bad.

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Originally posted by California Girl:
...How many on ebay REALLY tell the IRS..What their profits are???????? Any feedback out there??? Personally I don't make enough for them to bother me...but some sellers make a good living!

I file my tax returns and list all the income I receive from my online sales and auctions. I don't always list every EXPENSE, however. It is good to show a profit, otherwise the IRS will consider your business as only a hobby.

By showing a profit, I do pay self-employed tax, but how can that be considered a bad thing when in reality I'm actually helping myself later on when I reach 67 years of age and apply for Social Security, and lo' and behold, I've actually had income reported (and taxed) that the Social Security Administration will have to use to figure out what my benefit will be! If you only put in a little, you only get back a little, but if you put in more, you get more. Okay, so it is not really a nice big "retirement" amount, but it is better than a kick in the head, as my grandfather used to say.

Unless you are taking your profits and putting them into retirement-type accounts or stocks or mutual funds, etc., and instead are just using your profits for household expenses and luxuries now, then I think in the long-run you might be doing yourself a disservice.

I suppose, though, it all depends on how much money is being made throughout the year ($50 or thousands of dollars), what the focus is (is it a business you are running or just a hobby?), and long-term goals.

I don't mean to sound preachy and I'm not trying to be. These are things I, too, thought about when I first started selling online, and these are some of the answers that work for me.

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It is good to show a profit, otherwise the IRS will consider your business as only a hobby.

Yeah, but does anybody know what happens then? Do they still want to tax your "hobby"?

I think at one time the IRS would let the self-employed claim a loss for something like three years but what came after that, I don't know.

there's different thoughts on whether hobby or business, especially if you read the IRS website about it. But i've always been told that general rule of thumb is profit within 3 yrs.

i often leave off some misc expenses. for example, i just did taxes and left out internet connection fees and a couple other things. figure that way if i do get audited and they find something i overlooked or disallow something, i have more deductions in reserve

and like mzchristy said, it's more $ towards SS, which means more when retire.

I asked the same question to my accountant. He said with my business licence, sales tax collection, etc. it will be hard press for IRS to consider mine a hobby even when it continues to make loses.

The IRS site says (this is NOT verbatim) that if what you consider a "hobby" makes a profit for three years straight, then you have a business, in point of fact. Therefore, they can audit you on those three years and collect the taxes you made on (what you now consider) your "hobby" for those first three years because it is really a business.

That being said, I have a great hobby.

BTW - for those of you who said you're going to get extra money from Social Security - I hope you're not too far off from being able to collect it now. I'm certainly not counting on it being around for too much longer.

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The IRS site says (this is NOT verbatim) that if what you consider a "hobby" makes a profit for three years straight, then you have a business, in point of fact. Therefore, they can audit you on those three years and collect the taxes you made on (what you now consider) your "hobby" for those first three years because it is really a business.

So what I'm wondering is if you file your hobby and show a loss for three years straight, then what? I think you can't continue to keep filing it as a loss so do you begin filing it again when it's no longer a loss?

For those of you who believe you will collect more by paying more into Social Secutity you are mistaken. If you are vested in SS (i.e. You have had a job and paid FICA for 20 years) you will collect the same no matter what else you put in. Right now if retired at 62 it is like $820 at 65 $1100 give or take. Giving more does NOT equal gettin more back.

i dont know the exact amount offhand, but right now the amount i'd get at retiring is only around $300 a month. So I *need* to pay in more and yes, it'll make a difference in my case.