I was just informed today of something I have been expecting to happen for several years now. Starting January 2011 all U.S. payment providers (most notably PayPal) will be reporting sales numbers to the IRS! This comes as a BIG warning to any American Internet Marketer who hasn’t been reporting all of their online earnings to the IRS!
Of course you should be reporting your earnings anyway. And those of us who are have nothing to worry about. It’s just not worth the risk of being audited (they often look back 5 years or more!) and you end up owing the government all of the money you were supposed to pay PLUS penalties.
Some Internet Marketers in the past have used PayPal to collect payments in order to avoid reporting all of their income, in turn saving them money when it comes time to report their quarterly earnings. That’s clearly a bad idea in the first place, but now it won’t work anymore.
This does only apply to those who receive $20,000 or more in gross sales volume AND 200 payments or more, but if you don’t fall into that category I still highly recommend you report it all!