Paypal 1099K Tax Law

[mx22]

To be fair to PayPal - they did send out emails in January 2011 (if I remember correctly) saying that if you sell over 20k worth of goods, you will be getting 1099k...

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..

 

[DarthKry]

I'm not blaming paypal at all, nor am I whining about having to pay. The problem I face is how do I prove what I paid for stuff that I obtained years ago. I don't want to get screwed here and end up paying money I don't have, money which I did not even profit from.

 

[gagaliya]

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.

it is in your case and i have no idea how you suppose to provide the cost basis other than just make stuff up...but keep in mind this is a law for all online payment portals for all customers, not just a few. I think the limit should be much higher something in the range of 500 transaction or $50k.

You need to talk to a tax accountant.

 

[DarthKry]

So am I better off saying I'm a business? For deduction purposes?

 

[ironman24]

Ya a guy from Paypal told me last week that If you have 200 sales on Ebay and take in $20.000 You have to file it on you taxes..It must be both so if you are high in one and low in the other you are good

 

[Darthrazz]

Ya a guy from Paypal told me last week that If you have 200 sales on Ebay and take in $20.000 You have to file it on you taxes..It must be both so if you are high in one and low in the other you are good

Just to be clear, it's 200 transactions as a SELLER , not a combo of both BUYER and SELLER?

 

[ironman24]

Yes you are 100% correct on that..As a seller..It is a bunch of BS

 

[Darthrazz]

Looks like money orders will be making a big comeback!

 

[thenammagazine]

I'm not blaming paypal at all, nor am I whining about having to pay. The problem I face is how do I prove what I paid for stuff that I obtained years ago. I don't want to get screwed here and end up paying money I don't have, money which I did not even profit from.

Did you finish reading my post?

 

[averone]

Looks like money orders will be making a big comeback!

Im doing MO's and gifts
Also opened up an account for my wife so now we use different SS#

It helps to have a good feedback rating here and other forums, people know you dont screw around.

 

[gagaliya]

It helps to have a good feedback rating here and other forums, people know you dont screw around.

but you dont have any feedback ratings on itrader here alex!! so stop screwing around and release the arh statues!


lol just messing with ya

 

[senbi575]

So am I better off saying I'm a business? For deduction purposes?

Yes you would be, but showing a loss that offsets your ordinary income is a big red flag for the IRS. This sounds more like passive income or loss, where passive income is taxable, but passive losses are not deductible. In terms of showing how to do the accounting, your revenue should be gross i.e. what was reported to you via paypal's 1099 and then you can deduct your cost of goods, shipping paid, ebay/paypal fees, and other expenses.

 

[Roc74]

About How much taxes would he paying on the $24,000 income?

 

[devilof76]

Too much.

 

[RUMADMAN]

About How much taxes would he paying on the $24,000 income?

15% - 20%

keep in mind paypal took at least 4% of the 24k
and if he sold on ebay.. thats about another 5% of that 24K

 

[averone]

but you dont have any feedback ratings on itrader here alex!! so stop screwing around and release the arh statues!


lol just messing with ya

LOL!

Do I need a feedback rating? LOL jk

Yes, yes... but you know this stuff takes time!
Dont you have to go sell a few statues ???

 

[Skiman]

LOL!

Do I need a feedback rating? LOL jk

Yes, yes... but you know this stuff takes time!
Dont you have to go sell a few statues ???

^^^ short answer yes you do!




Ski

 

[KillingYouGuy]

I don't recall the exact verbiage, but there is a way to file that a sale was a loss (but it may be a percentage vs actual cost ratio). As Nam mentioned, get in to see a CPA and let a pro have a go at it.. then let us know how to avoid it.

 

[galactiboy]

It is over $20K in sales and over 200 transactions; for those worrying gift payments are not part of the calculation.

I was a bit worried as I've gone over the 200 transaction mark, but am well below 20K (even with gift payments included).

They have still asked for my SSN, but I won't provide it until they actually lock my account.

 

[cokebabies]

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

Very stupid question, I'm sure: for the 200 transactions, does that only count incoming money, not money being paid?

Obviously, you wouldn't be taxed on money you paid, but say you had 50 payments incoming, and 200 payments outgoing...