End of PayPal Friends and Family

[Peartree]

This may have been discussed, but i don't remember seeing it here so, in the interests if keeping everyone informed...

While still available to consumer accounts, as of July 28th, business accounts no longer have a PayPal "Friends and Family" option. All business accounts must charge seller fees on all sales and other PayPal transactions.

So, don't get mad at some of your vendors because they've stopped accepting friends and family sales. PayPal no longer gives them a choice.

Full article here:https://lowendbox.com/blog/bye-bye-paypal-friends-and-family-payments-to-business-accounts/#:~:text=Email From Paypal-,Effective July 28, 2022, PayPal will remove the Friends and,subject to the seller fee.

 

[Hobie1dog]

corporate profits determine the rules, always, "some things will never change, that's just the way it is."

 

[BEC]

Yeah, I saw that. I was wondering when they’d plug that fee loophole. Not that I’m particularly happy about it….

 

[rharshberger]

It happened to me recently with a sponsor for an upcoming event, they donated an object all I had to was pay shipping via F&F, I totally trust the individual so no problem....went to send the money...no F&F option to that email.

 

[Marc_G]

Not sure I see the problem here. If I buy from a business I wouldn't want to use F&F because it doesn't come with protections I would want. When exchanging with a friend, such as buying some of Woody's kits a month or two back, he's not a business so we used F&F.

Seems like just aligning things to remove potentially problematic loopholes. Then again, I rarely use Paypal so I might be ignorant of the nuances.

 

[mh9162013]

One of the benefits of using F&F is that transactions don't count to w/e dollar threshold exists ($600?) to generate a 1099.

 

[jderimig]

Outrageous that a company be compensated for the product/service they provide!

 

[cerving]

I agree with John. I do a lot of business through PayPal, they're certainly entitled to their service fee, just as other payment processors are. If I'm paying an individual vs. a business, I'll add the 3% to the amount that I send them to cover the fee.

 

[SecondRow]

My sons’ Cub Scout pack used F&F for dues. But PayPal is no longer allowing the pack to do so. It’s a hassle for parents and the pack losing this convenience. But it’s not the end of the world - we’ll just write checks.

I’m not going to fault a company that wants to be compensated. Although, I would argue that PayPal (and the other companies like it) is compensated plenty for being nothing more than a facilitator. They all hold the money for a certain number of days, earning interest on it before they pass it on to the payee. That seems enough to me. It’s not like F&F provides financial protection to the parties involved.

 

[mh9162013]

The problem isn't the fees. The problem is that a 1099 can be generated when not using F&F, even when there's no taxable income earned. This means that when you sell your rockets for $100 and get paid on Paypal with Goods and Services, if the 1099 gets generated, the IRS will automatically view that $100 as taxable uncome unless you tell them otherwise.

I always did enjoy an unofficial IRS audit...

 

[jderimig]

The problem isn't the fees. The problem is that a 1099 can be generated when not using F&F, even when there's no taxable income earned. This means that when you sell your rockets for $100 and get paid on Paypal with Goods and Services, if the 1099 gets generated, the IRS will automatically view that $100 as taxable uncome unless you tell them otherwise.

I always did enjoy an unofficial IRS audit...

And 80000 additional IRS agents will be checking to see if all those 1099s are accounted for on your returns.

 

[mh9162013]

And 80000 additional IRS agents will be checking to see if all those 1099s are accounted for on your returns.

Nice try.

The additional funding for the IRS doesn't require the IRS to hire any specific number of agents/auditors. Even if it did, what I'm referring to won't be affected, as it's computerized and beyond the IRS' control, i.e. a certain threshold is met and the 1099 gets generated by Paypal. Also, for the next 10 or so years, the IRS will lose about 30,000 - 50,000 or so employees due to retirement, quitting, etc. So even if 80,000 new IRS employees got hired, it'll be over the next 10 or so years and many of the new hires will replace those who are leaving.

In other words, I'm not talking about the unofficial IRS audit. I'm talking about what has to happen for that unofficial audit to occur in the first place.

The old rule use to be: 200 transactions AND $10,000 worth of transactions to create the 1099 from Paypal...or something like that. Now, it's just $600 (or a similar amount) worth of transactions (whether it's 1 transaction or 6,000) to create the 1099.

Awesome.

 

[cerving]

And 80000 additional IRS agents will be checking to see if all those 1099s are accounted for on your returns.

I can tell you from experience that the IRS definitely knows how much you got through PayPal. And yes, if it's under $600 you don't have to declare it... just like any other source of income. However, that doesn't mean that if 1,000 people give you $599 each you don't have to declare any of it...

BTW, the IRS is a bit clueless about how PayPal works... if you see me sometime, ask me about it and I'll regale you with my IRS audit story.

 

[Titan II]

corporate profits determine the rules, always, "some things will never change, that's just the way it is."

Good. Corporate profits are good for my IRA. It's about time they terminated that seriously abused option.

 

[tsmith1315]

I'm amazed it was ever offered as a free service. Very considerate of them, IMO. They certainly weren't obligated to do so.

 

[Bravo52]

Nice try.

The additional funding for the IRS doesn't require the IRS to hire any specific number of agents/auditors. Even if it did, what I'm referring to won't be affected, as it's computerized and beyond the IRS' control, i.e. a certain threshold is met and the 1099 gets generated by Paypal. Also, for the next 10 or so years, the IRS will lose about 30,000 - 50,000 or so employees due to retirement, quitting, etc. So even if 80,000 new IRS employees got hired, it'll be over the next 10 or so years and many of the new hires will replace those who are leaving.

In other words, I'm not talking about the unofficial IRS audit. I'm talking about what has to happen for that unofficial audit to occur in the first place.

The old rule use to be: 200 transactions AND $10,000 worth of transactions to create the 1099 from Paypal...or something like that. Now, it's just $600 (or a similar amount) worth of transactions (whether it's 1 transaction or 6,000) to create the 1099.

Awesome.

...and all that cost will be transferred to the customer. So that bit about no new taxes for the low and middle class, well, taxes come in many forms...sometime I call them stupid taxes. Like when I backed my car into a post and had to pay to have it repaired...

As mentioned the "Goods and Services" offered the individual (not business) some protection from fraud. I think most hobbyist wouldn't mind doing F&F with other hobbyist, the problem will be the fraudsters that infiltrate the community...

Another overlooked impact is small businesses who pay their employees through PayPal or other similar apps. Assuming they are compliant on all the government fees and taxes, this could impose a "tax on a tax" type situation.

 

[dr wogz]

Interesting.

I rarely use Paypal. But, being in Canada, Pay pal never really took off.. We are heavy users of 'e-transfers' from your local bank for little things (friends, family, some businesses), and credit cards for larger (insured!) purchases.

and that's something that never really took off in the US.. having your bank be involved in sending money electronically to friends & family..

 

[Bravo52]

Interesting.

I rarely use Paypal. But, being in Canada, Pay pal never really took off.. We are heavy users of 'e-transfers' from your local bank for little things (friends, family, some businesses), and credit cards for larger (insured!) purchases.

and that's something that never really took off in the US.. having your bank be involved in sending money electronically to friends & family..

that is very true! I got overcharged by a Canadian company doing business in the US and instead of just doing a "charge back" on my CC, they offered to pay me the difference. I was good with that until they tried to "transfer" the money from the Canadian banking system (INTERAC e-transfer). Seems they want you to have a Canadian bank! I asked them to just "PayPal" me the money (several hundred $$) and they asked what that was! Still haven't figure out how to get the money transferred

 

[mh9162013]

...and all that cost will be transferred to the customer. So that bit about no new taxes for the low and middle class, well, taxes come in many forms...sometime I call them stupid taxes. Like when I backed my car into a post and had to pay to have it repaired...

As mentioned the "Goods and Services" offered the individual (not business) some protection from fraud. I think most hobbyist wouldn't mind doing F&F with other hobbyist, the problem will be the fraudsters that infiltrate the community...

Another overlooked impact is small businesses who pay their employees through PayPal or other similar apps. Assuming they are compliant on all the government fees and taxes, this could impose a "tax on a tax" type situation.

What costs? What customers? I have no idea what you're talking about when you say "costs will be transferred to the customer." I'm genuinely confused; maybe you can clarify what you meant?

As for the small businesses, the new 1099 threshold probably won't make much of a difference (I'm not talking about Paypal fees, only the new potential tax reporting burden). If you're a small business paying your workers with Paypal, you were probably already taking steps to report any tax obligations you encounter before this new law/rule went into effect.

The issue I'm talking about here is for the average CONSUMER who uses Paypal to accept payments for hobby items and tchotchke items they sell online through eBay, Facebook, etc.

They're selling stuff that generates no taxable income - you know, that old boombox from 1994 they got in college that they sell for $20 or some Estes vintage rocket kits for $80 from some model rocket forum. None of these are going to create a tax liability in this hypothetical.

But if, during the course of the year, an individual who uses Goods and Services on Paypal to receive payments breaks the $600 or so threshold, BAM, they now have to prove to the IRS why those sales for the boombox or Estes model rocket kits ARE NOT taxable events. Of course, they can avoid all this by only accepting payments through F&F when using Paypal. But they'll be doing this not to avoid paying Paypal a fee, but to avoid having to take on a new tax reporting (not paying) burden.

 

[Bravo52]

What costs? What customers? I have no idea what you're talking about when you say "costs will be transferred to the customer." I'm genuinely confused; maybe you can clarify what you meant?

As for the small businesses, the new 1099 threshold probably won't make much of a difference (I'm not talking about Paypal fees, only the new potential tax reporting burden). If you're a small business paying your workers with Paypal, you were probably already taking steps to report any tax obligations you encounter before this new law/rule went into effect.

The issue I'm talking about here is for the average CONSUMER who uses Paypal to accept payments for hobby items and tchotchke items they sell online through eBay, Facebook, etc.

They're selling stuff that generates no taxable income - you know, that old boombox from 1994 they got in college that they sell for $20 or some Estes vintage rocket kits for $80 from some model rocket forum. None of these are going to create a tax liability in this hypothetical.

But if, during the course of the year, an individual who uses Goods and Services on Paypal to receive payments breaks the $600 or so threshold, BAM, they now have to prove to the IRS why those sales for the boombox or Estes model rocket kits ARE NOT taxable events. Of course, they can avoid all this by only accepting payments through F&F when using Paypal. But they'll be doing this not to avoid paying Paypal a fee, but to avoid having to take on a new tax reporting (not paying) burden.

Simple. Any cost generated by the new "burden" imposed by the USG and PayPal. The fees, the new taxes on the transactions or the new labor required to account for all of the new requirements. That will all get passed on to the customer. And that's just on the business side.

If you consider the amount of time you will have to spend (maybe, maybe not), or as you say "hassle", that accounts for something also. So in the broader sense it is a new "tax" on your time or in some cases, it will be an actual tax on you pocketbook.

 

[jderimig]

But if, during the course of the year, an individual who uses Goods and Services on Paypal to receive payments breaks the $600 or so threshold, BAM, they now have to prove to the IRS why those sales for the boombox or Estes model rocket kits ARE NOT taxable events. Of course, they can avoid all this by only accepting payments through F&F when using Paypal. But they'll be doing this not to avoid paying Paypal a fee, but to avoid having to take on a new tax reporting (not paying) burden.

Yes so? If you sell a boombox or Estes model rocket you are now a business. You will need to file a schedule C to reconcile those 1099-K forms.

 

[mh9162013]

Simple. Any cost generated by the new "burden" imposed by the USG and PayPal. The fees, the new taxes on the transactions or the new labor required to account for all of the new requirements. That will all get passed on to the customer. And that's just on the business side.

If you consider the amount of time you will have to spend (maybe, maybe not), or as you say "hassle", that accounts for something also. So in the broader sense it is a new "tax" on your time or in some cases, it will be an actual tax on you pocketbook.

Gotcha.

Yes, I agree, the "hassle" I'm referring to is definitely a cost. One such cost is only accepting Paypal payments through F&F. Another cost is that I have reduced the amount of selling I do online to avoid additional tax reporting (not payment) requirements.

I don't mind paying taxes. But I bloody hate having to report financial transactions to prove I don't owe taxes.

 

[mh9162013]

Yes so? If you sell a boombox or Estes model rocket you are now a business. You will need to file a schedule C to reconcile those 1099-K forms.

Are you kidding me? So everyone here who sells rocketry stuff, even individuals who are getting rid of personal supplies and equipment are businesses in the eyes of the IRS? No, they're not.

People who sell stuff online to make a living (and presumably sell a lot of stuff if they're making a living doing it) were already taking on the tax reporting obligations of a Schedule C or w/e they have to do in response to a 1099 being generated. All those people with eBay storefront or w/e were already dealing with the tax hassles.

I'm not talking about these people. I'm talking about people who use the Internet to sell a few items here and there as a part of their hobby or spring cleaning. You know, your average Joe who has a full-time job and uses eBay or some hobby forums every once in a while to get rid of crap they don't need anymore.

 

[cerving]

Yes so? If you sell a boombox or Estes model rocket you are now a business. You will need to file a schedule C to reconcile those 1099-K forms.

Not if it's a "yard sale" thing, and you make under $600 in the year.

 

[Bill S]

I'm not talking about these people. I'm talking about people who use the Internet to sell a few items here and there as a part of their hobby or spring cleaning. You know, your average Joe who has a full-time job and uses eBay or some hobby forums every once in a while to get rid of crap they don't need anymore.

I got to deal with a big hassle yesterday. Normally I use Paypal to buy stuff for myself (my son is a heavy buyer too on my acct). I had the nerve to sell two items yesterday, received the money - one guy sent me money FaF despite my warning him it wasn't a good idea, the other guy paid the Paypal fee like I specified in the item's ad. Same day I get not one but two "security" challenges. One was an Capcha that cycles every second or so, so you couldn't even click on anything (solved that one by hitting the red X button on the browser), and the second was when I tried to log in to confirm the money was there from the second buyer, and guess what? Couldn't even log in because they wanted me to enter a code they sent to my phone. Given that the phone is a LANDLINE and CANNOT receive texts, that was a no-go. Was locked out of my acct. Never happened in an acct I had open for 10+ years, now suddenly?

I think it was the FaF that triggered it. Customer service was TOTALLY useless, some chick in India, was dumbfounded that I didn't have a cellphone to send the text to. Apparently its some law that everyone has to have a cell phone?! She escalated it to a higher level, as they have had complaints about not being able to receive a text on an landline before. Idiots.

She had no idea why their "security" triggered on two small transactions, but I told her that if this was the way it was going to be, then I wasn't going to receive money through PP anymore as it their security was too paranoid.

I am definitely making sure I stay under the threshold to be reported as I don't want the additional hassle.

quote"I don't mind paying taxes. But I bloody hate having to report financial transactions to prove I don't owe taxes." Amen brother. Who keeps receipts for every single item they buy, for years, perhaps decades, just so they can prove to the IRS what they originally paid for the item? Nobody, that's who.

 

[Bravo52]

Interesting. I've never paid a fee for sending money for a purchase, either G&S or F&F. I do pay when I receive money. I sell models that I've purchased (and lose money on) and up until now, I never specifically "charge" for the PP fees. That is assumed to be included in the price of the item. The individual is who it is going to hurt the most. Go figure.

 

[jderimig]

Are you kidding me? So everyone here who sells rocketry stuff, even individuals who are getting rid of personal supplies and equipment are businesses in the eyes of the IRS? No, they're not.

Yes they are, if you get a 1099K you either declare it on your 1040 as income or file a schedule C and try to offset it. The better computers, code writers and agents are going to catch that. You may get a bill if you don't include that on your tax return. Where do you think the treasury is going to get that extra $800 billion from?

 

[jderimig]

Not if it's a "yard sale" thing, and you make under $600 in the year.

Yes under the table cash transactions are the way to go....... But if you get a 1099K, the IRS is free to add that to your declared income and send you a "notice of correction".

 

[mh9162013]

Yes they are, if you get a 1099K you either declare it on your 1040 as income or file a schedule C and try to offset it. The better computers, code writers and agents are going to catch that. You may get a bill if you don't include that on your tax return. Where do you think the treasury is going to get that extra $800 billion from?

Getting or not getting a 1099 doesn't determine when you're a business that owes taxes on your transactions.

Also, even if you get a 1099, that doesn't mean you have any taxable income. All that represents is the incomplete fact that the IRS thinks you earned taxable income and the onus is on you to either pay what you owe or to explain to the IRS why they're wrong. It's this latter obligation that I take issue with and it's an obligation that anyone may potentially have to deal with regardless of whether they're a business or not.

 

[Peartree]

Yes so? If you sell a boombox or Estes model rocket you are now a business. You will need to file a schedule C to reconcile those 1099-K forms.

Gotcha.

I don't mind paying taxes. But I bloody hate having to report financial transactions to prove I don't owe taxes.

And, this assumes that the IRS will care about your explanation. A few years back the state of Ohio kicked back our return and claimed that we owed them more money. Our tax preparer went over the return and said that it was correct. So, we requested, and received, a giant printout from the IRS, gathered some other stuff they said they wanted, and sent it all in... twice. And each time they just repeated their original claim that we owed them more money when it was apparent that they weren't even reading our letters, forms, or other explanations of why we didn't. Finally, our preparer just sent a check for what they wanted out of *his* pocket, even though he hadn't made a mistake.

I have complete confidence that the IRS will use those 1099s to demand more money from taxpayers... regardless of evidence to the contrary.