I am starting an online company and I will be using the paypal account as an escrow to hold funds while jobs are being completed, then releasing the funds once the job is completed. I then will take a small percentage (11% to 22%) of the escrow amount as my commission.

My concern is that at year-end, PayPal will send me a 1099 saying I've earned a much larger amount (the total job amounts), rather than my actual earning of the 11% to 22% commission.

Since I intend to use this as an escrow account, what can we do to ensure that at year-end I will only get 1099 for what I actually earn as a business? Your help is greatly appreciated.

your clients are sending 1099-MISC forms to you as they pay you more than $600 for your ervices. Meanwhile, many of them have paid using PayPal. So PayPal is also reporting that income. Some of your income is double reported to the IRS, so it looks like you are making more money than you actually are. Which means an audit red flag could be raised because what you are reporting as income isn’t going to match what the IRS thinksyou are making, due to the double reporting from the new 1099K.To avoid double taxation,you need to keep detailed sales/commission records and deduct any payments also reported on the 1099-MISC form from the 1099-K before reporting, and also need to be prepared to explain the deductions to the IRS. The result is that you need to have to make sure you can match up which 1099-MISC forms come from people who pay you via PayPal. That way, if there is a problem, you can prove that you really haven’t made as much money as the IRS thinks you have. It means extra work this year and probably future years for you. Perhaps this situation can be resolved if you ask your clients who pay by PayPal not to issue 1099-MISC forms.