![]() For this reason, it's really important to keep track of reversed transactions, especially if they resulted in withdrawals from your bank account or credit card. Remember that the figure reported to the IRS is the gross amount, so if you've had lots of refunds and chargebacks, then you may trigger a 1099-K even if you haven't actually earned a dime from PayPal. One of the things most likely to trigger an audit is a big discrepancy between your declared income and your 1099-K. That should make it a little easier for you to balance your 1099-K at the end of the year. ![]() PayPal can calculate tricky interstate and international transactions using this information, but there's also the advantage that your PayPal statements will show your tax payments. Just go log into your PayPal account, navigate to My Account > Profile > Regional Tax and follow the steps from there. If your business is collecting sales tax, you can use PayPal's Regional Tax functionality to automatically incorporate it into all sales transactions. If you are still running a personal account and haven't upgraded, now is the time to do so. Don't see that option? Reports are only available to business accounts. You can do this by logging into PayPal and going to History > Activity > View Account Statements. The simplest way to keep track of theses charges is to pull the totals from your monthly reports. Like all banking charges, transaction charges are an expense that can be offset against your tax liability. This is further complicated by the fact that senders can sometimes choose to pay charges themselves or pass the charges on to the recipient. If you go through your statement, you'll see that there are transaction charges, and these charges can vary a lot depending on the nature of the transaction and the location of the payer. ![]() PayPal is not, as some people seem to believe, a free service.
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