Why Paypal ask me to add tracking info for receiving money from friends?

[StephanX]

Hi!  I'm using PayPal US, and my friend is using PayPal in another country. I'm not selling anything. She had some money in US dollar in her Paypal account and wanted to transfer to me. I received it, deducted by some fees but that's ok. Then I noticed the money was in holding status. After about a day, I was notified it was cleared and the mondy was in my account. Then I noticed there are two buttons under this activity "Print shipping label" and "Add tracking info".  That's what confused me. I'm not selling goods. This is just an ordinary cross-country money transfer. But seems this actively was treated like I'm selling something for making money, which should be taxed and reported to IRS the next year.  I do not understand. Why does PayPal treat this as a purchase actively? My understanding is money fransferred from my friend should not be taxable, no matter where she is or what account she is using. Anybody can help me?

[kernowlass]

@StephanX 

Its down to how the payment was SENT to your account.

1. If they sent using money > goods / services option then paypal would see you as a seller and apply the new seller hold. They would also charge you a fee.

2. If they had sent using the send money > family / friends option then you would have had the payment instantly with no fee. 

[StephanX]

@kernowlass 

Thank you for explaining. As to PayPal US account, yes, every time I want to make a transfer to friends, I will be asked the purpose of this transfer, either "goods/service" or "to family/friends". However, my friend is using  PayPal China. When she made transfer(small amount, $1k~2k or so) to me she was not given such options (to my knowledge, only PayPal US account provides such options) .  My friend has called custermer service of PayPal China, and got reply that PayPal China does not have "goods/service" or "to family/friends" options when a user makes a transfer. On my side, my PayPal account asked me to "add tracking info", which does not make sense. I'm still confused, why PayPal automatically recognized an international transfer as purchase payment. I intended to call custermer serivce and found it impossible during the COVID19 pandemic.

[kernowlass · Accepted solution]

@StephanX 

Well it may have helped if you had said the sender was in China in the first place.

You are correct China ONLY have the goods/services option so that is why your funds were put on hold as you can't receive a friends/family payment from China.

And you are incorrect in that only the U.S have the friends/family option as most countries have it but some in Asia in particular do not. 

[StephanX]

My apology. I said my friend is using PayPal in another country but didn't say it's China.

So, does that mean, I will have to pay tax for money transferred to me from this friend via PayPal?

Or there is another way to cope with this?

Many thanks, already helped a lot.