Posted by ikando on 7/28/12 12:52pm
Msg #428461
PayPal problems
In light of a couple posts earlier, I thought I'd pass on an issue I've been having with PayPal.
The posts relate to being paid through PayPal and having an EIN for identity protection when signing up with various companies.
My issue: I have an LLC set up with an EIN. I have used a PayPal account with that information for several years. About the end of May, I noticed I couldn't add funds to my account because it had been limited. This is what they sent me:
"As of April, 2012, new Federal Regulations require Money Service Businesses, such as PayPal, to verify the identity of a customer before we can provide various services or product offerings. As a result, PayPal must ensure we have collected and verified important data such as customer name, address, date of birth, and national tax ID or social security number.
"Because we were not able to fully confirm your identity based on your current account information, we need to request additional supporting documentation from you. You will continue to have full access to your PayPal account, but until we are able to confirm your identity, we may be unable to process certain types of customer initiated requests such as adding funds to your PayPal account."
I have researched and can find no legislation effective in April 2012 that relates to what I understand they're referring to, which I assume are the bills regarding money laundering/anti-terrorism activities. Those bills, which have not been signed into law as far as I can tell, are not to go into effect until October, 2012.
Anyway, I attempted to provide them information about the formation of my company, with me as the appropriate officer, and those documents were not satisfactory. They insist I must provide my SSN and home address information.
As a side note, I rarely have any transactions of more than $500 go through that account at any time. The legislation I've found talks about transfers over $5,000. Plus, they still allow money to be sent from the PayPal account, but I cannot add anything to it from my own business checking account.
BTW, I noted on their own forum that many people are upset by this arbitrary "rule". There are also several sites complaining of the same thing.
Has anyone else had issues? Does anyone have suggestions of other online payment processing that might be available?
| Reply by Notary1/CO on 7/28/12 2:30pm
Msg #428465
See IRS Form 1099-K at www.irs.gov/form1099k
A payment settlement entity (PSE) (such as PayPal) must file IRS Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year, if the gross amount of total reportable payment for transactions exceeds $20,000, AND the total number of such transactions exceeds 200.
Income for an LLC can be treated several different ways, depending on how your LLC is structured. A single member LLC may be treated as a disregarded entity (sole proprietorship) and taxed under your SSN, or may elect to be taxed as a corporation. A multiple member LLC can be taxed as a corporation or a partnership, using a separate EIN.
See LLC tax info at http://www.irs.gov/businesses/small/article/0,,id=98277,00.html
| Reply by sueharke on 7/28/12 3:50pm
Msg #428468
The requirements for schedule K is gone for 2011-12. I hope it does not come back in 2013 or later as it is a PITB to do a tax return with.
Because of the issues of identity theft and people not reporting income, you get to suffer. Some questions -does your LLC have a DBA (doing business as)? Is your DBA registered with your respective state? Is you LLC a single person LLC who files a schedule C? If there are two or more people in your LLC, you may file as a partnership or Corporation. Is your EIN the same name as your LLC?
I'd talk to the Small Business Development Center (SBDC) of the Small Business Association to see if the requirements have changed and Paypal is not keeping up with the rapid changes.
| Reply by ikando on 7/28/12 4:14pm
Msg #428470
Notary1 and Susan, I appreciate you going over the possible tax implications, but since my husband is an Enrolled Agent, I feel confident that aspect of the issue is covered, and taxation is not my problem.
The issue PayPal is presenting which causes me concern is that although I have a legal and valid business, correctly registered in my state and which identifies me as the official representative, they continue to demand my personal SSN and home address in order for me to continue to use the PayPal account set up under my business name with my EIN.
As I am also a legal assistant and familiar with researching laws, I have been unable to find anything that explains to me why they are insisting I provide them that private information. If any other people who frequent this list who are also into legal research can show me where to look, I'd appreciate it.
| Reply by Moneyman/TX on 7/28/12 4:24pm
Msg #428474
I found PayPal to be very intrusive and constantly requesting private information that I refused to give them. I have had their legal dept on the phone so often in the past over issues that I noticed a change in their signup policies within hours after I pointed out that what they were requesting went against their own policies.
Now, I have a special notice on my account that warns their operators not to give me any information that could be used to identify exactly who I am speaking with (such as an emp. # or even their city location). I only know of it because after one of my last calls with a legal dept. representative the very next representative was so shocked to see the notice he told me about it. He had been with them for over 5 years at that time and had never seen such a notice.
I only use it now as a last resort.
| Reply by sueharke on 7/29/12 12:48am
Msg #428511
This is one problem people have with paypal. I suggest google pay or a square cc reader in lieu of paypal. Thank you for clarifying your background in accounting (spouse) and as a legal assistant.
| Reply by Notary1/CO on 7/28/12 7:06pm
Msg #428490
PayPal User Agreement
Here are some of the terms of the PayPal User Agreement.
https://cms.paypal.com/cms_content/US/en_US/files/ua/ua.pdf
2.3 Identity Authentication. You authorize PayPal, directly or through third parties, to make any inquiries we consider necessary to validate your identity. This may include asking you for further information, requiring you to provide your date of birth, a taxpayer identification number and other information that will allow us to reasonably identify you, requiring you to take steps to confirm ownership of your email address or financial instruments, ordering a credit report, or verifying your Information against third party databases or through other sources. We may also ask to see your driver’s license or other identifying documents at any time. If you use certain PayPal Services, federal law requires that PayPal verify some of your Information. PayPal reserves the right to close, suspend, or limit access to your Account and/or the PayPal Services in the event we are unable to obtain or verify this Information.
4.7 Taxes. It is your responsibility to determine what, if any, taxes apply to the payments you make or receive, and it is your responsibility to collect, report and remit the correct tax to the appropriate tax authority. PayPal is not responsible for determining whether taxes apply to your transaction, or for collecting, reporting or remitting any taxes arising from any transaction. You acknowledge that PayPal will report to the Internal Revenue Service the total amount of payments for goods and services you receive each calendar year into all the Accounts you own if you receive into these Accounts (i) more than $20,000 in payments for goods or services, and (ii) receive more than 200 payments for goods or services, in the same calendar year.
| Reply by Deborah Breedlove on 7/30/12 3:59pm
Msg #428675
Sue, you said "The requirements for schedule K is gone for 2011-12."
Do you mean the 1099-K? If yes, please tell me where you heard that.
| Reply by Moneyman/TX on 7/28/12 4:17pm
Msg #428472
I used to get a similar "limitation" with the same requests years ago from PayPal (they never mentioned any certain law with my warnings).
I just called them. After the first time, the limitations were usually lifted while I was on the phone. From what I was told at the time, it was their internal computer programs that were causing the issues with my account. I used to sell online a lot which may have triggered something in their systems. I had another family member that also had an online store that would get the same notice from time to time.
| Reply by ikando on 7/28/12 5:57pm
Msg #428481
So, Moneyman, what do you use for online payments now?
| Reply by MW/VA on 7/28/12 6:49pm
Msg #428486
I can see why they want some sort of personal
info/verification. I'm sure there are a lot of bogus & fraudulent cos. being set up to get their money through PayPal & don't want to be traced.
| Reply by LKT/CA on 7/29/12 12:08pm
Msg #428553
I dumped paypal...they were a pain to deal with. Signed up with Google checkout (FREE). Now that Square and Inuit are on the seen, I signed up with Intuit - you can take payments online or with their card reader.
Check out Intuit.
Square (2.75% swipe rate) vs. Intuit (2.70% swipe rate): I initially signed up with Square before I found out that my previous phone (Blackberry Style) was not supported by Square and they had no manual feature for entering cc info. I had to disable that account.
Intuit also didn't support the BB phone type I had but..... they DID have a manual feature for entering cc info. Also, I can go online on my desktop or laptop and manually enter cc info. I now have an android phone so now I can use Inuit's cc reader. I vote for Intuit.
| Reply by Jodith/WA on 7/30/12 4:53pm
Msg #428686
I only use my PayPal account to tie into my business account and to accept payments. I never actually put funds into the account. I have it set up so that if I purchase anything with my account, it automatically draws from my business account.
Needless to say, I have an extremely secure password that I guard with my life.
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