The new Housing and Economic Recovery Act signed into law requires Paypal and others to report to the IRS. This law will take affect in 2011 and will be reported in 2012 for the 2011 tax year.
You are excluded from having your info reported if:
1. If you receive less than $20,000 a year in payments; and
2. If you have less than 200 payments.
You will have to make sure you keep good records. For more information visit the offical Paypal Blog for more information.