Paypal 1099K Tax Law

Not sure if this has been posted before or if anyone else has had this come up. Anyhow, I just got an email from paypal saying my 1099K tax form was available. I'm just as gung-ho about paying my fair share as the next guy, but this is just insane. It turns out I made $24,000 last year in payments sent to me. Of course I had no idea this was gonna happen at the begining of last year, so I never kept track of sales. Now it looks like I'm gonna be taxed an the $24,000. Which is not fair. Out of those 24,000 I must have only made about $4000-$5000 in profit, not including paypal fees, ebay fees, shipping and supply costs. Don't they factor in expense on the goods that you are selling? I basically sold items from my collection, that I paid money for and resold them for close to what I paid for them. Sometimes even lost money. Most of the stuff was loose parts. I guess my question is, how do I proceed with this? Anyone else having this issue...Please help..

when did your 1099k form arrive?

I am so sick of this.

lol doh! That's why you should have been smart and make 2 unrelated paypal accounts...

Should have.. Would have.. Did not thou..
It's kinda hard to do that when they ask you for SS# and lock your account until you supply it..

My electronic notice arrive today. You can view your online.

Its bullcrap how big businesses and banks get tax breaks and bailouts worth billions, but the little guys always get screwed..
We are the 99%.. Feeling it now more than ever!

I never had to verify my ss#, just verify deposits...at any rate, good luck

well that's something new, did paypal say they will report the earning directly to irs or did they just provide you with the form? You are screwed if they report the earning directly to irs, because if you dont put it on your return it's guaranteed an audit 2-3 years down the road.

Im in the same boat. I didnt fully keep track of anything until July.

I've never been asked for my SS #

Paypal keeps all records of your transactions. You can go back to see who made payments to you.
I do agree with all of you, its not fair at all.
I think we all should write to our local and state political offices and demand a change.
Power to the people. You have a voice and power of vote, use it.

ink said:

I've never been asked for my SS #

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200 transactions a year or over 20K and they ask for it. I think at least...

averone said:

200 transactions a year or over 20K and they ask for it. I think at least...

Click to expand...

Yeah you have to do both. It should have been incorporated at the beginning of the year 2012. I believe the "law" was passed July 1st 2011 and it backtracked and started Jan 1, 2011.

You're weaving the rope they'll hang you with.

Well as unfair as it sounds paypal doesn't know that you are selling statues you once bought. They just see you making money. So they are bound by law...not much they can do. I don't like it any more than you but there's not a whole lot you can do. I suppose if you have a tax guy it couldn't hurt to ask about loopholes to help minimize the tax.

I hit the 200 transaction limit (well, well under $20k) and had to provide my SSN.

At the sales volume you report, you probably need to talk to a tax professional, unless you are able to properly understand and apply the basic issues outlined here in whatever tax-preparation software you use.

The key issues will be:
1. Do you have valid records detailing what the items that you sold originally cost you?
2. Did you make a profit (sale price less cost and expenses)?
3. The frequency with which you have made a profit from collectible sales over the past five years.

ive sold maybe 10 things and they want a ss# or there will be restrictions on my account sooo i dont think the 200 20k thing matters.

edit: nevermind, found it.

Check below link guys, it has full detail. Basically 200 transaction AND $20k per calendar year and you are _____ed. Paypal will report the NET TOTAL INCOME DIRECTLY TO IRS. New law that went into effect in 2011.

If you guys received this for 2011, i strongly advise you talk to an accountant if not familiar with this stuff. Basically if you dont report the same # paypal did on your return, you have a high risk of getting flagged for audit down the road which will force you to pay the taxes owed + interest. If you just report the earning paypal did, the entire amount (not gross) is taxed. So on 20k in the 25% bracket, you are paying $5k more taxes. You need to provide the cost basis to figure out the actual gain, it's easy with stocks and capital gains but i have no idea how the hell you suppose to provide cost basis for this stuff.

Thanks to OP for the heads up, had no idea! Will definitely stay under 200 transaction so dont have to deal with this crap.


https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

Somme valid reasoning here guys.. But my point is, who really keeps all that?? I'm talking about selling items from a 14 year collection. I sold things which I bought in 1999 at toy shows, there is no way I have proof of purchase. Not to mention all the loose pieces sold. How do you pit an actual proof value/price on loose items. This is why I think its utter bullcrap. Now that I look at it, I know darn well that I must have lost money when you include things like fees and shipping. I'm guessing the only proof I have is holding the payments I recieved against the payments I sent.

Well, I think the major outrage everyone is feeling is because this is Paypal related. But in this specific case, Paypal is not at fault because it is the law. Taxes suck and yes placing value on loose items is arbitrary but the bottom line is you are getting money for an item so if you do A LOT of selling, you have to keep records for tax purposes. Doesn't matter if you are selling items from your personal collection or selling them in a store...the only thing Paypal sees is you making money.

DarthKry said:

Not sure if this has been posted before or if anyone else has had this come up. Anyhow, I just got an email from paypal saying my 1099K tax form was available. I'm just as gung-ho about paying my fair share as the next guy, but this is just insane. It turns out I made $24,000 last year in payments sent to me. Of course I had no idea this was gonna happen at the begining of last year, so I never kept track of sales. Now it looks like I'm gonna be taxed an the $24,000. Which is not fair. Out of those 24,000 I must have only made about $4000-$5000 in profit, not including paypal fees, ebay fees, shipping and supply costs. Don't they factor in expense on the goods that you are selling? I basically sold items from my collection, that I paid money for and resold them for close to what I paid for them. Sometimes even lost money. Most of the stuff was loose parts. I guess my question is, how do I proceed with this? Anyone else having this issue...Please help..

Click to expand...

It's still income and PayPal sent out warning notices repeatedly about income via their site now being taxed. I don't see how your oversight is their fault. That said, you need to go through and print out all your ebay invoices and PayPal transactions for 2011. Calculate the fees paid and the monies received and if you don't know how to do it yourself, take it to an accountant or Tax company and have them file for you. Don't forget to subtract the shipping the buyer paid from the totals. You can't count that as an expense since you charged them.