PayPal 1099 - bad news for MA and VT residents

[BobC]

Originally Posted by Jeffrompa

The wife and I have 5 eBay stores and have to pay tax on every sale . Just a reminder the penalty for underpaying the IRS is $ 25000 . I don’t think it’s worth the risk .

Just out of curiosity, where did you hear/get that $25K figure from? I know the IRS can charge you penalties and interest for underpaid taxes but, $25K?!?!?!? Been a CPA and doing taxes for about 40 years, and this would be a new one to me. Normally if you underpay your federal taxes there can be an underpayment of estimated taxes through the original due date of the return, which is basically an interest rate charged by the IRS that changes quarterly. It is based on the short term federal rate, plus 3% I believe. Once the return due date has passed, you could potentially get hit with an underpayment of tax penalty of up to 20% of the tax found to be due, plus they can also charge you interest on any amounts due until they are finally paid in full. Any amount of penalty due for not properly paying your correct income tax on time would be based on the amount of underpaid tax, not a flat $25,000 figure. So I'm curious to hear who told you that!