This isn't a beware regarding an artist or a commissioner, but rather a heads up to anyone who uses PayPal as a means of business transaction;
As of 2011, PayPal will now be reporting the total payment volume of the following to the IRS:
-Anyone who earns more than $20 000/yearly.
-Anyone who recieves more than 200 payments per year.
I don't see the former to be much of an issue for most of us here, but the latter may or may not be of some interest for those of us who like taking on tons of small commissions, i.e. the Iron Artist 100+ image challenges and anything similar.
More information can be found here:
https://www.thepaypalblog.com/2008/08/proposed-irs-reporting-requirements-become-law/
Edit: Thanks to Joecifur for pointing this out;
According to PayPal[see here: https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W ];
"-If a merchant meets both thresholds by receiving over $20,000 in gross payment volume AND 200 or more payments in a calendar year, PayPal will send Form 1099-K electronically or by mail for the 2011 tax year. This document will be made available in January 2012.
-Will All Merchants Receive 1099s?
No. Only merchants who receive over $20,000 in gross payment volume AND receive 200 or more payments in a calendar year will receive Form 1099-K electronically or by mail."
Apologies for causing a stir over nothing; the blog entry, from PayPal staff themselves is worded as though it's one or the other, not both.
As of 2011, PayPal will now be reporting the total payment volume of the following to the IRS:
-Anyone who earns more than $20 000/yearly.
-Anyone who recieves more than 200 payments per year.
I don't see the former to be much of an issue for most of us here, but the latter may or may not be of some interest for those of us who like taking on tons of small commissions, i.e. the Iron Artist 100+ image challenges and anything similar.
More information can be found here:
https://www.thepaypalblog.com/2008/08/proposed-irs-reporting-requirements-become-law/
Edit: Thanks to Joecifur for pointing this out;
According to PayPal[see here: https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W ];
"-If a merchant meets both thresholds by receiving over $20,000 in gross payment volume AND 200 or more payments in a calendar year, PayPal will send Form 1099-K electronically or by mail for the 2011 tax year. This document will be made available in January 2012.
-Will All Merchants Receive 1099s?
No. Only merchants who receive over $20,000 in gross payment volume AND receive 200 or more payments in a calendar year will receive Form 1099-K electronically or by mail."
Apologies for causing a stir over nothing; the blog entry, from PayPal staff themselves is worded as though it's one or the other, not both.
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I'm switching over to moneybookers, which thankfully handles a lot of countries in Europe that don't use paypal. So far, so good, and more world-wide friendly.
People have been switching to Alertpay and I'm not sure where I should go.
I quote the second line:
This legislation applies to all payment providers including PayPal and takes effect in 2011, so the first reports will go to the IRS in January 2012. Our goal when the legislation takes effect is to make it easy for PayPal merchants who fall under the provision to report their taxable incomes.
It's only a problem if you're evading your taxes by not reporting your income.
$20,000 and 200 payments is really reasonable. That is a lot of money to be coming solely through paypal payments. It shouldn't affect the way anyone does business.
The only thing I'd say people should be aware of is that in coming years I'd stake my life on the fact that that $20,000 is slowly going to drop down until the taxable threshold is low enough that even hobby vendors may need to be concerned about it.
But for now unless art is your business and you're a US resident this shouldn't bother you too much.
Just coming from personal experience, I both know and have seen artists take on an insane amount of commission work[I'm envious of these drawing machines], one of whom is well over the 200/year mark,
Not to mention that some people prefer to be paid in parts, half up front and half when its finished; this makes it two transactions per image, sometimes it can be even more. 200 transactions seems like a lot, but in the long run, it's really not. Especially if it's something like an Iron Artist sketch challenge; I've seen people fill those lists entirely, selling them for $3-$5 a piece. That's 100 transactions used already.
And do I have to do quarterly taxes now? ;__;
-If a merchant meets both thresholds by receiving over $20,000 in gross payment volume AND 200 or more payments in a calendar year, PayPal will send Form 1099-K electronically or by mail for the 2011 tax year. This document will be made available in January 2012.
-Will All Merchants Receive 1099s?
No. Only merchants who receive over $20,000 in gross payment volume AND receive 200 or more payments in a calendar year will receive Form 1099-K electronically or by mail.
So again if you guys are just taking like 200 small commissions this will not affect you. Only if you are also making 20k. Hope that clears up for some people who are worried. D:
Cause what if someone makes 200 payments, but its only like, 5-10 bucks per transaction. XD that leaves around 1k-2k a year, and depends on how much money you put into that, if you spend more than you make.. how does that work? Cause 2k is clearly not enough to live on.
Want to avoid the hassle if you make that much? Just use checks; they're so retro anyway. XD