The paypal website makes it clear that you have to trigger both the 200 transaction AND the $20k gross sales volume mark:
Quote:
Will I Be Affected by the 2011 Tax Changes if I Only Meet One of the Thresholds?
No. A merchant has to pass BOTH thresholds ($20,000 in gross sales volume and 200 transactions) in 2011 to qualify for the new requirements. A business receiving $10,000 in payments per year would not be affected by the new requirements.
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Some have suggested opening multiple accounts to get around this. From the paypal website:
Quote:
If I have multiple accounts that, when combined, meet the thresholds, but individually they don’t, will I still qualify?
Yes. PayPal and all other payment processors will report sales and transaction volume to the IRS by SSN/TIN/EIN.
For example, if you have two accounts tied to the same SSN/TIN/EIN with the following payment levels:
Account A - $18,000 in sales and 180 transactions
Account B - $2,000 in sales and 20 transactions
Your accounts will qualify under the new regulation.
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Look for the IRS or Congress to ratchet down the $20k limit over time and close the loopholes people have found to get around this reporting requirement.
Legal Disclaimer: None of this post is to be construed as legal advice or forming an attorney-client relationship; see your own tax professional.