Questions For Americans: Paypal & Irs

[gray42]

I opened up a PayPal account so I can receive credit card payments and then transfer the money into my Bangkok Bank account. I think it'll be easier for my family and friends rather than dealing with multiple bank accounts or explaining to old timers how to do online transfers when they want to send me money for holidays, debts owed to me, etc.

What I'm wondering is, I know PayPal is now required to submit information to the IRS. If my family sends me money via credit card, and if a business sends me money via credit card, who's to know the difference? The payment from my family or friend could or could not be business-related and it would still look exactly the same on my record. So how does the IRS know if it's business income or not? Will they start asking me about every transaction on my account and I'll have to explain each one?

If anyone has experience with this I'd be curious to know your thoughts.

[flying]

I do not have a direct experience to share but................

In the scenario you outline I would guess none generally would know.

Same as any other income claimed by any other self employed citizen.

Where the heat gets turned up is if your ever audited or put under the magnifying glass.

At that point all is know & all is available to trace as to who made the payment by name/address of

the card holder.

If you are claiming it is family at that point it is your job to show/prove the relationship.

Again this is just speculation on my part using what I think would be common procedure.

At the end of the day I do not think auditing a expat who is making less than a 100K USD minimum

would be worth their time & expense....Mind you .....This again is speculation based on common business sense.

Whether the IRS has any I cannot say

Does make one wonder how they go about auditing an expat though.

[el jefe]

Almost exactly as "flying" says.

You report on your tax return whatever you want to report. If the IRS questions your income, it will be up to you to prove that some of the income in the commingled paypal account was personal and not business. The best way to avoid that problem, if you're worried about an audit, would be to set up two paypal accounts, one for business and one for personal.

[gray42]

Thanks flying, even though you don't have personal experience with this your thoughts are helpful. I think any money sent to me will be so minimal they won't give too much of a dam_n, but just want to be safe.

[gray42]

That's a good idea, el jefe. Thanks.

[Javabear]

El Jefe has it correct. Whenever dealing with business and personal money you should always keep seperate accounts. Co-mingling money can be a very expensive mistake.

[Lifer]

You would be remiss if you thought that the IRS is not monitoring Paypal, since it is such a large company, for money laundering and illigal activies. Don't you think they can tell the difference between a company sending money and parents sending money if they look at it or audit the activity by Paypal.

My advice is don't get advice from posters, decide for your self and then be responsible for your decision.

[chops]

If you live abroad you don't owe jack to them.

[el jefe]

If you live abroad you don't owe jack to them.

Amazingly, Lifer already replied to this before it was posted. See his last line in Post #7 immediately above.

[rakman]

If you live abroad you don't owe jack to them.

Not if you're an American. US citizens abroad have more reporting requirements to the IRS, and include wealth and income of your non-US citizen spouse.

Unless you give up your citizenship, you're never out from under the thumb of the IRS.

[MrRealDeal]

rakman thats not entirely true ..... if you file married but filing seperate you dont include any of that stuff , and your wife does not need to file.

[CaptHaddock]

What makes the OP think that money received from family is necessarily tax-exempt? It might be, if it were repayment of a debt, for example. If it were alimony, it would be taxable. On the other hand if it is a gift then the donor might be liable for the gift tax.

[gray42]

What makes the OP think that money received from family is necessarily tax-exempt? It might be, if it were repayment of a debt, for example. If it were alimony, it would be taxable. On the other hand if it is a gift then the donor might be liable for the gift tax.

Didn't even think of that. It really starts to feel overhwelming when you think of all the taxes. I mean, why should a cash gift be taxed? You're just transferring owners of the money, not spending it. Crooks...

[how241]

You would be remiss if you thought that the IRS is not monitoring Paypal, since it is such a large company, for money laundering and illigal activies. Don't you think they can tell the difference between a company sending money and parents sending money if they look at it or audit the activity by Paypal.

My advice is don't get advice from posters, decide for your self and then be responsible for your decision.

Good points.