Paypal holding my funds for a goods and service receipt - Need advice on how to deal with PayPal for 24% IRS Backup Withholding

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p64imp

p64imp

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Hi Guys,

I really need help here. I had a buyer for the first time insist on a goods and services payment as he didn't trust going by my feedback. This is the first time i ever received a goods and services payment, but decided i would just oblige and let him send g&s as he offered to cover the fee.

Paypal hits me with this:

Screenshot 2023-08-30 204146.jpg




The buyer then hits me on the side and told me he accidentally sent 50 too much, asked me to send him back $50 PPFF. I told him that I do not want this account set up with my ssn, so i told him i was going to refund his payment in full and let him send the correct amount to my wife's paypal account that is already connected with all this info.


So i go in to issue the refund, and paypal tells me it does not matter if i refund, i'm still subject to the G&S terms refund or not.

I issue the refund to the buyer, and it pulls the money out of my BANK ACCOUNT, not my paypal balance, it then converts my paypal balance to on hold funds that are on hold till mid november, at which point if i dont give my ssn, they are going to deduct 24% in IRS fees from my $955 payment (over 200 bucks!) that will go to the IRS to "satisfy the irs backup witholding".

What options do i have here? This is a literal nightmare. I'm not plugging in my ssn to paypal!

Do i have any recourse here? And why would Paypal not give me the option to refuse this given the terms? Somebody could send me another 1k out of the blue G&S no reason, and i'll just keep paying over 200 bucks a pop to the irs without a choice on my end. How is this allowed??? Can i un-do this???
 
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Further, this is for the admins. My buyer wanted G&S because the forum rules push for it for "seller" protection, as well as buyer protection. This is a star reason why this is not for "seller protection", and i fail to see how G&S will protect a buyer purchasing an auto knife - dispute = potential closer of both accounts for violation of TOS.

Why do the forum rules encourage such a risky path? My buyer wanted me to go down this road because he read the forum rules, now i'm in a mess.

1693461372369.png
1693461410832.png
 
You always have the option of dealing or not dealing with whoever you choose. Also, I don’t think it’s a forum rule to use PayPal G&S.
 
Looks like you've gone over the $600 threshold in a single payment, welcome to the infinite tax loop.
 
p64imp said:
Somebody could send me another 1k out of the blue G&S no reason, and i'll just keep paying over 200 bucks a pop to the irs without a choice on my end. How is this allowed??? Can i un-do this???
Click to expand...

Everybody should pay their taxes. $200 is nothing, trust me.

Too late to undo stuff. Should have sent him $50 in a separate transaction.
 
ferider said:
Everybody should pay their taxes. $200 is nothing, trust me.

Too late to undo stuff. Should have sent him $50 in a separate transaction.
Click to expand...
I think you missed the part where I had him send payment to my wife's account to clear this. I don't want Paypal to have my ssc. That's all this is about.
 
ferider said:
Everybody should pay their taxes. $200 is nothing, trust me.

Too late to undo stuff. Should have sent him $50 in a separate transaction.
Click to expand...
My impression is that he would be stuck even if he refunded 50 separately. PP still will want to send him 1099 and hold his balance until he complies.
 
p64imp said:
Further, this is for the admins. My buyer wanted G&S because the forum rules push for it for "seller" protection, as well as buyer protection. This is a star reason why this is not for "seller protection", and i fail to see how G&S will protect a buyer purchasing an auto knife - dispute = potential closer of both accounts for violation of TOS.

Why do the forum rules encourage such a risky path? My buyer wanted me to go down this road because he read the forum rules, now i'm in a mess.

View attachment 2305368
View attachment 2305369
Click to expand...

A couple things to note here and sorry as this is going to sound a bit harsh.

The forum is NOT encouraging a risky path, they are encouraging the safer route to take when dealing through PayPal. I don't know how they'd treat an issue when an auto is involved, but if the item is against their ToS then it is not fair to complain about the system not (potentially) helping you when you ignored their rules.


This issue did not stem from the forums suggestion to use G&S nor the buyer's insistence as it is generally a good idea. It stemmed from you not familiarizing yourself with it before moving forward.

This has been talked about on the forums now for a couple years now and surely can be found on PP's site but Uncle Sam lowered the PP (and other payment services) reporting tax threshold from $20,000 to $600 each year. This is why PP now requires a SSN attached to your account when using G&S and the IRS notices you're getting.


Regarding PayPal, that is quite lame that you can't just refund it in total and avoid the headache as when you refund in whole, there is no longer any income to report. Could just be automated. Might want to reach out to PP and possibly an accountant on this part.
 
benchwarmer380 said:
A couple things to note here and sorry as this is going to sound a bit harsh.

The forum is NOT encouraging a risky path, they are encouraging the safer route to take when dealing through PayPal. I don't know how they'd treat an issue when an auto is involved, but if the item is against their ToS then it is not fair to complain about the system not (potentially) helping you when you ignored their rules.


This issue did not stem from the forums suggestion to use G&S nor the buyer's insistence as it is generally a good idea. It stemmed from you not familiarizing yourself with it before moving forward.

This has been talked about on the forums now for a couple years now and surely can be found on PP's site but Uncle Sam lowered the PP (and other payment services) reporting tax threshold from $20,000 to $600 each year. This is why PP now requires a SSN attached to your account when using G&S and the IRS notices you're getting.


Regarding PayPal, that is quite lame that you can't just refund it in total and avoid the headache as when you refund in whole, there is no longer any income to report. Could just be automated. Might want to reach out to PP and possibly an accountant on this part.
Click to expand...
I refunded the cost of an item without fanfare (so no income), and the sale was still included on my 1099. I could only refute the “earnings” with my supporting documentation at tax time.
 
annr said:
I refunded the cost of an item without fanfare (so no income), and the sale was still included on my 1099. I could only refute the “earnings” with my supporting documentation at tax time.
Click to expand...


Thanks for sharing!

Sounds like the system is probably automated.
 
I only see 2 option
Give the ssn to avoid the withholding-it is in the PP rules
Or let them take the withholding and play it through with your tax filing
I guess there is a 3rd- get a lawyer spend a few 100 thousand and fight it to the Supreme Court.
Personally I would just give the SSN . It is hardly private with all that already have it.
 
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benchwarmer380 said:
Regarding PayPal, that is quite lame that you can't just refund it in total and avoid the headache as when you refund in whole, there is no longer any income to report. Could just be automated. Might want to reach out to PP and possibly an accountant on this part.
Click to expand...
I don't know if it is PP or the IRS behind it, but I had read that refunds would not cancel out the original tracnsaction being reported along with al non refunded. I guess it is something that needs to be sorted out when filing.
I don't like it, but not much you can do
Other than opting out of using services that report
 
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p64imp said:
Hi Guys,

I really need help here. I had a buyer for the first time insist on a goods and services payment as he didn't trust going by my feedback. This is the first time i ever received a goods and services payment, but decided i would just oblige and let him send g&s as he offered to cover the fee.

Paypal hits me with this:

View attachment 2305348




The buyer then hits me on the side and told me he accidentally sent 50 too much, asked me to send him back $50 PPFF. I told him that I do not want this account set up with my ssn, so i told him i was going to refund his payment in full and let him send the correct amount to my wife's paypal account that is already connected with all this info.


So i go in to issue the refund, and paypal tells me it does not matter if i refund, i'm still subject to the G&S terms refund or not.

I issue the refund to the buyer, and it pulls the money out of my BANK ACCOUNT, not my paypal balance, it then converts my paypal balance to on hold funds that are on hold till mid november, at which point if i dont give my ssn, they are going to deduct 24% in IRS fees from my $955 payment (over 200 bucks!) that will go to the IRS to "satisfy the irs backup witholding".

What options do i have here? This is a literal nightmare. I'm not plugging in my ssn to paypal!

Do i have any recourse here? And why would Paypal not give me the option to refuse this given the terms? Somebody could send me another 1k out of the blue G&S no reason, and i'll just keep paying over 200 bucks a pop to the irs without a choice on my end. How is this allowed??? Can i un-do this???
Click to expand...
^ Wow! These are the type of situations I was imagining, once this new Administration took total control and went completely berserk with their power, revamping our already overly regulated tax laws, using companies like PayPal to steal even more of our hard earned money.

Good luck trying to clean up this $$$hit storm & 1 big massive regulatory mess you'e currently in....
I personally only see, countless hours of frustration/outrage, moving forward. If it helps, I do feel your pain, & I sincerely do wish you the best OP, in finding a positive resolution, but I don't see that happening (and I'm an eternal optimist type guy).

Crag the Brewer said:
Automatically......... F'kd!
Click to expand...
^ You just summed up what 1 can expect when using PayPal, perfectly. 👊 🌈🖕👈
If this were me dealing with this clusterf%*k migraine headache of a nightmare/OP, I'd just go out, buy a BIG bottle of whiskey (& I don't even drink whiskey), pop a couple of Vicodin, then put on some of this guys music.....to hopefully help me try & self medicate from the pain & massive headache of hopelessness I'd be feeling......

RICH MEN NORTH OF RICHMOND


Peter Hartwig said:
I only see 2 option
Give the ssn to avoid the withholding-it is in the PP rules
Or let them take the withholding and play it through with your tax filing
I guess there is a 3rd- get a lawyer spend a few 100 thousand and fight it to the Supreme Court.
Personally I would just give the SSN . It is hardly private with all that already have it.
Click to expand...
In today's economic "BUILD BACK BETTER" times of massive inflation, a Plaintiff would be well into 7 figures $$$$$$$ if he/she were to file a case that made it all the way up to the SCOTUS, which this 1 clearly never would.
 
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Guys, let's leave the political and agency diatribes at the door and discuss reasonable and intelligent ways and means to address the issue...otherwise you know what lies ahead.
 
OP got screwed by the American Rescue Plan Act of 2021, not by PayPal, which is just complying with their legal requirements.

OP unable to fix getting screwed because he is unwilling to provide his SSN, which PayPal needs in order to issue tax documents they are now required to create because of the ARPA. I assume PayPal still requires this even though the effective date of this policy change was delayed (initially would have applied to 2022 taxes but now applies to 2023 taxes unless delayed again or repealed) since they have no way of knowing if it will be repealed or if they're just going to need to issue next year after all.

Since he was screwed and is unwilling to do what is necessary to get un-screwed... guess he just stays screwed.
 
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