I have been using Paypal Business Account and I have recently Paid around $15000 to a contractor in a break down of 3 invoices $5000 for each invoice. The invoices were paid as Services based on the invoice I received from the Contractor.
Some of my information:
I own a Web Development Agency.
- My Business Paypal is containing my C-Corp Company EIN (Employment Identity Number)
- As per PayPal, I have been keeping my limits under $20,000 to make sure there is no tax on it.
- Another Income, that came to my PayPal is from a Freelancing Platform (Upwork) which I simply load into my Bank Account (Attached to my Paypal) and it never counted under my PayPal limit @$20,000 (What PayPal Said to me)
Here is what I have been doing in this tax year:
Over the period of this Tax Year, I have paid so many invoices through Manual Links, Invoices Received on my Paypal, Services Payment Manually from (Send Money) option under PayPal. All of these amounts were paid from my PayPal Balance or from the Attached Debit Card & my Bank Account.
Some of them are US Base Contractors, Some are Non-US Contractors and some are Online Service Providing Companies from where I purchased their services.
There are two things which I would like to ask:
- How can I break down all of them and show them to my Schedule C -1040 Tax Return Form?
- The service Fees I have paid on the Paypal Invoices (I Paid), can It be shown on Schedule C -1040 Tax Return Form?
- The Service Fee I have Paid on the amounts I received under my $20,000 cap which is not taxable, can It be shown on Schedule C -1040 Tax Return Form?
- Do I still have to send the 1099-K form to the Contractor I paid $15000 as it looks like the Contractor who received the amounts in his PayPal is still under the $20,000 Cap which is not taxable?
The above information which I have asked is for the Schedule C form which I am about to file at the end of the next Quarter and it will be very much appreciated if the community helps me to get the right answer since its just my first post on this Forum.
Feel free to ask any questions regarding the above-stated information for further clarification.
Actually, there's no need to answer the other questions because based on what you're telling us, I can tell you right now it's going to raise *BIG* flags with the IRS. Your methods as I understand them the way you are describing them, are classic money laundering techniques used by those funneling money back to drug cartels and illegal arms traffickers.
My Business Paypal is containing my C-Corp Company EIN
So every single penny passed through that account (in and out) "MUST" be reported, one way or other on the 1120 Corporate return. The SCH C doesn't play into it. (But it can if you set things up right - assuming it's not to late.)
You *NEED* to get with a tax professional yesterday, if not sooner to get things right so you don't get flagged by the IRS. From my understanding of your post, you won't be getting a simple paper audit via the mail from the IRS either. On top of that, if your state taxes personal income that's gonna be a double-whammy when the initial audit notification letters come.
Please, please please! For the sake of your wallet get with a tax professional ASAP!
"As per PayPal, I have been keeping my limits under $20,000 to make sure there is no tax on it. "
Thats NOT what the $20k limit means. Business income is business income and must be reported.