I was vaguely aware of this for the last couple of years but never translated it into what it meant for us here until I had a tax client who pays all of her subcontractors through Paypal and asked me to 1099 them and I realized we didn't have to.
If an MSC pays us through Paypal they *do not have to 1099 us even if we make $600 or more*. They *can* 1099 us if they want, but they don't have to.
So if you're expecting a 1099 from someone who pays through Paypal and it never shows up -- this is why.
You have to report the income anyway. But you won't have the piece of paper telling you how much you got.
Oh -- the reason for this is that Paypal will send you a 1099K under some conditions if you make enough money paid through Paypal. And that could be the sum of 50 MSC's each paying you $550, which would require none of them to 1099 you at all, but all together it could be enough for Paypal to have to 1099K you.
Not too many mystery shoppers will fall in that category but there could be some. But the bigger issue is that it lets a lot of companies off the hook for going to the expense of providing 1099's at all, which is a good thing for them. And a good thing for Paypal since it might encourage people to pay that way who otherwise wouldn't.
I wonder if that is the motivation for the handful of msc's that are "Paypal only." they'd rather pay the fees than have the hassle of the bookkeeping and expense of tracking 1099's.