Under the Housing and Economic Recovery Act of 2008, the Internal Revenue Service requires the PayPal corporation to report payment details for its customers who bring in more than £13,000 a year to their account or receive more than 200 payments per year. All PayPal users who receive funds through the service for work or the sale of goods are required to report the transfers as income on their taxes. For tax purposes, PayPal is considered identical to a bank account.

Log in to your PayPal account. Click on the "History" tab. Click on the "Payments Received" link to filter your accounts. Change the dates displayed to show the calendar year for which you are paying taxes. Click the "Print" button to get a hard copy for your records. If you don't have a printer, you can just record the transactions for later viewing.

Declare any income that you received through PayPal. If you normally report your income using a W2 form, report the income you received through PayPal there. PayPal functions as a bank account for tax purposes. Even if you transferred funds from your PayPal account to a bank account after the year ended, the funds are considered income on the date they arrived in your account. When declaring received payments as income, the fee that PayPal takes out of transactions can be subtracted from the amount.

Declare the PayPal income you received for the year on the IRS's form 1040 if you are self-employed, instead of using a W2.

Double-check to ensure that the PayPal income you reported is accurate. You don't need to report income that you transferred from your PayPal account to a bank account twice if you accurately report the PayPal income.


If the IRS has received a report on your PayPal account because you exceeded the annual account-activity requirements set by the Housing and Economic Recovery Act of 2008, any discrepancies may trigger an audit.