I'm not sure how paypal gets bye with a $20,000 1099 limit. The limit for independent contractors is $600. I don't know how they got around the $600 limit. Anything over $400 you are not only required to pay federal income tax (ie your marginal tax rate), you are also required to pay 13.3% of self employement taxes this year and 15.3% in every other year on 92.35% of your self employment earnings (Obama lowered FICA taxes by 2% for 2010).
My HOF PC:
Need Bidwill, Carr, Hewitt