PayPal Withdrawals to bank account classified as payroll deposits

[lorim9770]

I advise any sellers to check their bank statements carefully to see how the money withdrawn from PayPal balance is going into their bank. I recently noticed that payments were listed in my bank statement as "PAYROLL DEPOSIT  -PAYPAL PTE LTD" rather than the former "MISC PAYMENT - PAYPAL PTE LTD."  This began in Nov to me. I just noticed it recently, as normally I just check the statement for the correct deposit amount, not specifically how it was classed.

Contacted customer service at PayPal and the first person I spoke to said it was a bank problem, not them. Called the bank customer service and they said it was a problem with the company that processes payments between PayPal and the bank. Sent an email through the bank and was told that the problem originates with how PayPal codes withdrawal payments. Called PayPal again and this time was told once again that it was not a PayPal problem as they did not do "PAYROLL' payments.

I insisted on speaking to someone else, as no one was taking responsibility for the payment classification - I told both parties that someone had to be responsible, as PayPal was sending, and the bank was receiving, the payments. 

FINALLY, PayPal disclosed that there was indeed a glitch on their end, and added my name to "the list" of accounts to be "fixed." If you are receiving payments from PayPal and are not a business, I was concerned that there could possibly be taxation or pension contribution issues, although not sure how likely that would be. 

Just a heads up!

[momcqueen]

All proceeds from sales on ebay (and other online venues) must be declared as income on your personal taxes, regardless of whether you are registered as a 'business' account with paypal or ebay.

Whether you need to register with your local government as a 'business' in order to collect sales tax (provincial and/or federal) is another matter entirely and you should talk to your accountant about that.  

The fact it says PAYROLL now as it initially deposits into my account didn't cause me any worry at all. 

[ashleym958]

I am having the exact same problem, they will not help me and none of my paypal balance is from a payroll it's from selling and trading my girls dresses. How did this get fixed for you, I just spent hours between PayPal and the bank.

[momcqueen]

There's nothing to fix. 

Just because it states 'payroll' is irrelevant. You need to claim that money as income on your personal income tax regardless. Talk to your tax preparer about that. 

[jt-libra]

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@mjwl2006 wrote:

All proceeds from sales on ebay (and other online venues) must be declared as income on your personal taxes, regardless of whether you are registered as a 'business' account with paypal or ebay.

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I believe people who are selling their personal items are exempt from declaring it as income.  For example, people who sell a dresser through Kijiji or, formerly, newspaper ads, would not have to declare the proceeds as income.

[momcqueen]

That's where they need to talk to their tax advisor. That's true only to a certain extent and then it's income.

[thestuffofchris]

I'd like to link a post by Pierre which covers this topic. It's originally from 2 years ago, but I believe the information is still accurate today.

http://community.ebay.ca/t5/Seller-Central/GST-HST-PST-and-INCOME-TAX-for-eBay-Sellers/m-p/280593/hi...

"If you sell your own used personal items on eBay (and elsewhere) this thread is not for you. Sales of used personal items are generally not taxable."

[momcqueen]

Have you ever argued with an auditor from CRA as to whether you were selling used goods that belonged to you and not something else?

I say track it like you need to claim it and talk to your income tax preparation agent.

It is a slippery slope. 

[thestuffofchris · Accepted solution]

This information from the CRA was the same information our bookkeeper gave our family years ago:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/cmpltng/prsnls...

"If both the ACB* and the proceeds of disposition are $1,000 or less [as they are in my personal case], you do not have a capital gain or a capital loss. Do not report the sale on Schedule 3 when you file your income tax and benefit return."

* ACB = adjusted cost base

The asterisk and italics are my additions.

[momcqueen]

Yes, and that is good and fine, thank you for sharing.

But we have no way of knowing the situation of the Other Posters so hence my advice to talk to their income tax prep guy and not to worry about paypal calling it a 'payroll' line entry. The word 'Paypal Payroll' doesn't matter if you're under the threshold. If you're over, you're claiming it anyway.