PayPal 1099-K changes for 2023*

Discussion in 'Marketplace Discussions' started by markshan, Aug 23, 2021.

  1. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    Or, if you are like most people, you don't keep receipts for unwarranted stuff you bought years ago--and you just have to make a reasonable guess...
     
  2. gklainer

    gklainer Forum Resident

    Happy Holidays.

    Does anyone have a list of all of the selling costs that can be deducted on schedule C for selling CDs, records and audio equipment?

    Thanks.
     
  3. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    Store fees you pay to eBay (if you have a store)

    PayPal/eBay/etc. payment processing fees
    eBay/Discogs/etc listing/final value fees

    Original amount you paid for the item
    Shipping costs
    Returns/lost/damaged merchandise for which a return or allowance was required (unless reimbursed by the shipper or someone else)

    Unless you're claiming to be a business and the 1099k is business income, you can't deduct

    Depreciation/Inflation/etc.
    Storage fees
    Home office or retail facility fees

    For 99.9% of people here, you can deduct your best guess of

    (Original amount you paid for item) + (shipping costs) + (listing/final value costs)

    Yes, this means that if you bought it in 1970 for $4 and sold it for on eBay for $25, you would have to pay tax on $21 (minus fees), even though, actually, you lost money accounting for inflation. Thank your Congressperson.
     
    starfieldroad, gklainer and chazz101s like this.
  4. masterbucket

    masterbucket Senior Member

    Location:
    Georgia US
    Looks like they are pushing a 10k limit by eoy,..... looks like it is being amended
    Stay tuned
     
    markshan, aoxomoxoa, Spitfire and 2 others like this.
  5. WarEagleRK

    WarEagleRK Forum Resident

    Location:
    Chattanooga, TN
    Where are you seeing this?
     
  6. ETSEQ

    ETSEQ Forum Resident

    Location:
    Frederick, MD
    Here for example. The fact that AICPA is supporting this is a fairly good indication that everybody knows this will be a disaster if the threshold is not raised.
     
    markshan, GentleSenator, Dave and 3 others like this.
  7. WarEagleRK

    WarEagleRK Forum Resident

    Location:
    Chattanooga, TN
    Excellent. Thank you for sharing.
     
    markshan and ETSEQ like this.
  8. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    Great. Hope it passes so I can start selling again
     
    aoxomoxoa likes this.
  9. Swordsandchains

    Swordsandchains True metal never rusts

    Location:
    Chicago
    Thats good news, im in Illinois so the limit is $1000 and has been for 2 years, but thats way better than $600.
     
  10. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    This is just not true. You do NOT have to file a Sch C if you don't run a business. I you sell an old couch for $600 you do NOT have to file a Sch C.
    You report the 1099-K gross amount on form 8949, Part II with the F check box which is for "Long-term transactions not reported to you on Form 1099-B"
    You can list the description of property column (a) as something like "1099-K Ebay used media/furniture/electronics.."
    Date acquired (b) as "Various"
    Date sold (c): use the date of the last transaction.
    Proceeds (d): this is the amount on the 1099-K
    Cost or basis (e): this is the cost of all the items, plus expenses like Ebay fees and shipping.
    Column (h) is just the net gain that you pay taxes on.

    There your done.
    I would recommend a separate line for each 1099-K if you have more than one.
     
    ellingtonic likes this.
  11. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    Just follow what I posted above. It's a PITA but you do not have to pay taxes. One line on form 8949 takes care of it.
     
    SamS likes this.
  12. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    This is my objection to the whole thing. Folks are not going to get audited over this, no way, it's just not cost effective. But a lot of people will not know what to do and just pay tax on the gross amount.
    To me that is just really sneaky, low-life, government BS that screws little people.

    Anyway, as I've said many times you don't have to file a Sch C if you are NOT running a business.
    I did a lot of research on this last year (in VA we've been getting the 1099-K for a few years) and the IRS's definition of a business is a bit murky, but if you are selling records, furniture, electronics that you have used in your home you are NOT a business.
    If you buy stuff at garage sales and thrift stores, and then re-sell them, then technically it's a business.
     
  13. SamS

    SamS Forum Legend

    Location:
    Texas
    Thank you. Going to save your instructions with my tax stuff!
     
  14. Gabe Walters

    Gabe Walters Forum Resident

    I'm in VA too, been doing this for a couple years now as well. My CPA's interpretation differs from your own and we've been preparing Schedule C forms. I think the point—and the problem—is that IRS guidance on this has been effectively nil and even experienced CPAs can and do differ as to what taxpayers are supposed to do.
     
  15. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    It's also no harder to file a Schedule C with a few lines filled in than it is to file an 8949--especially if you use tax preparation software. Either way, you have to file an additional form to provide a cost basis.

    You are correct that the IRS has made this much harder than it should be by not providing a dedicated place to enter 1099k income and cost basis. Because they are more concerned with getting the money than they are with providing a reasonable way to declare it.
     
  16. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    That is correct, the definition of a business (which would require Sch C) is murky. But to consider everyone who sells items they've used in their house a business is ludicrous.
     
    Gabe Walters likes this.
  17. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    How is running a business legally defined? Serious question.
     
  18. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    This is from the IRS website:

    "A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. The facts and circumstances of each case determine whether an activity is a trade or business. Some of the important facts and circumstances used to make this determination include:
    1. regularity of the activities,
    2. regularity of the transactions,
    3. production of income, and
    4. ongoing efforts to further the interests of your business.
    You do not need to make a profit to be operating a trade or business but you do need to have a profit motive."

    So if you don't have profit motive you are not running a business. I think this applies to most of the folks that sell on this forum, certainly it does for me. The fact that some of the LPs I sell have appreciated in value does NOT mean there is profit motive behind selling it. There was something else I had read about hobbies that are specifically identified by the IRS.
     
  19. John Moschella

    John Moschella Senior Member

    Location:
    Christiansburg, VA
    I disagree. If you own stock or mutual funds you probably already file a 8949, and the 1099-K info can be handled in one line, not an entire form. Furthermore, if your Sch C shows a profit you have to pay self-employment tax.
     
  20. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    I file a 1099k, a schedule c to provide a cost basis for the 1099k, and I don't pay self employment on that money.

    And you won't already file an 8949 unless you're selling equities.
     
  21. darbelob

    darbelob Forum Resident

    Location:
    Orlando
    The first thing I did this morning was search to see if raising the $600 limit for 1099k made it into the omnibus bill. It appears that it did not. Feel free to back me up on this and correct me if I am wrong. I stopped selling on the forum earlier this year in hopes I still was under the $600 limit (boy will I be annoyed if I went over by a few dollars and have to fool with this in my return). It appears there is some chance of retroactive relief from this next year if Congress gets its act together. The issue seems to have bipartisan interest, but more Congressional dysfunction also seems to be on the horizon.
     
  22. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    Of course it didn't. They were more interested in stuffing it with pork for their crony friends than helping you.
     
  23. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    I don't think it made the Senate bill. House still needs to vote on it.
     
  24. darbelob

    darbelob Forum Resident

    Location:
    Orlando
    I doubt the House will make any changes. It was hard enough to get that bill though the Senate. I think there is little chance the House would risk going to the Senate again. Always hope, but a bill next year making a retroactive change seems the best chance. There seems to be bipartisan support for raising the limit. With so much going on with the current omnibus bill and the funding deadline, I can see why this fell by the wayside. Darn it!
     
  25. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA

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