PayPal 1099-K changes

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

  1. Gabe Walters

    Gabe Walters Forum Resident

    As others have pointed out, we should've been doing it all along–the income was always taxable. What's changed is that the gov is requiring PayPal and other payment processors to report the income on 1099s, so now the gov knows about the money.
     
  2. quicksrt

    quicksrt Senior Member

    Location:
    City of Angels
    I'm not happy at all. I am really po'd at the whole thing as well. But I have reached acceptance about it. And my books will be tight enough that I won't be paying much in tax. It's just the work involved. I might stop all international orders unless they contact me and we deal without a venue where I pay fees. Like a PayPal invoice that they pay and no eBay or Discogs. So that would mean very little international. I'm tired of the hassle of international shipping. And now with the bookkeeping, something has to give. But I don't want to feel anger and let it get me emotionally. I'm trying to take a stoic stance about things.
     
  3. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    I'm the kind of person who likes to vent and then get on with it as there’s nothing much I can do about it except figure out the best way to deal with it. At least I’m aware of the issue. I’m guessing a lot lot of people are going to be bit by it in 2023 when they get their 1099-K when they never used to get one and realize they have to pay taxes on it. Maybe then there will be lots of complaints and they’ll do something about it.
     
  4. Gabe Walters

    Gabe Walters Forum Resident

    That was me last year. Virginia required it before the feds, so I've been through this once already. I need to start my second spreadsheet, this one for tax year 2021.
     
  5. Quakerism

    Quakerism Monk

    Location:
    Rural Pennsylvania
    I’m not a big fan of spreadsheet record keeping or the IRS form fiesta even if it is just mildly annoying. This will probably cause me to scale back my classified activity to under the $600 threshold or opt out altogether.

    I suppose this will result in a net gain for tax collections but will result also in increased “cash only” demands from sellers of goods and services locally.
     
    Spitfire and aoxomoxoa like this.
  6. Gabe Walters

    Gabe Walters Forum Resident

    I know a guy who sells $20-40k in records online per year. He insists on being paid through PayPal's "friends and family" function, even though he's selling goods. He avoids the tax man, and PayPal doesn't take its fee. It violates the law and PayPal's terms of service, and it's not allowed on the classifieds section of this board (he's not a member here), but he does it anyway and makes out like a bandit. It's pretty gross, imo, and I'm not willing to risk it, but so far he's faced no consequences.
     
  7. joachim.ritter

    joachim.ritter Senior Member

    Can't you just say that you bought all your CDs and LPs used for an average price of 5 dollars or something like that?
     
    uzn007 likes this.
  8. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    You could. Not sure how that would go over if the IRS audits you.
     
  9. uzn007

    uzn007 Pack Rat

    Location:
    Raleigh, N.C.
    I think that's the best idea. I've never been audited, but I don't think they're going to quibble with you about whether you paid $7 or $8 for that Van Halen album in 1985. If you estimate on the low side, you should be safe, and you could still show a loss on many items (e.g. CDs bought new).

    I agree that the whole thing is a big pain in the neck.
     
  10. masterbucket

    masterbucket Senior Member

    Location:
    Georgia US
    One question.........Do you take standard deduction and 1099k deductions or just one or the other?
    Thanks to all
     
  11. R. Totale

    R. Totale The Voice of Reason

    Schedule C net income becomes part (or all) of your income for the year, which then comes under the standard deduction. Schedule C net income is in most cases additionally subject to self-employment tax.
     
    uzn007 likes this.
  12. masterbucket

    masterbucket Senior Member

    Location:
    Georgia US
    So better to bite the bullet and go with standard deduction I suppose and skip self employment tax........
     
  13. R. Totale

    R. Totale The Voice of Reason

    You need to talk to an accountant or other paid advisor who can explain to you how this all works. The amount of 1099 income involved is very important to all of this.
     
  14. jvc444

    jvc444 Are you a 1099er?

    Location:
    CA, U.S.A.
    I find that hard to believe. Unless Paypal and IRS and completely oblivious to "friends and family" payments.
     
  15. quicksrt

    quicksrt Senior Member

    Location:
    City of Angels
    Yes indeed. I plan on continuing my Amazon sales up to the point of about $580 in deposits to my checking account and then freeze all sales for the year there.

    Local sales for goods and services have always been cash in hand. And if someone hands you a check for payment, at least it is not more paypal coming in.

    With ebay now discontinuing paypal as a required payment avenue, one could work it good to the tune of $590 there as well.

    Spread out sales over several platforms, never reaching $600 on any of them. This is one way to deal with it if you have very low sales anyway.

    I think I'm shutting down Discogs for three months (Jan. - Mar.) while I adjust shipping fees, decide if I want to deal with any international packages, etc. I am considering international for CDs, but no LPs sent international. It's a hassle, and expensive, and I want an easier way to do this in the coming year.

    I want this to be a side hustle that brings in money with little effort at all. Maybe no new listings and just coast for a year with the stock already listed?

    I need to rethink all this in light of new tax and bookkeeping.
     
  16. CraigC

    CraigC Live It Up

    Location:
    LI, NY
    My buddy says we can sell <$600 per site with no 1099 being triggered. For example $590 sold on Discogs and $590 on here received via PayPal, is this correct? Sorry if I missed this being covered earlier.
     
    uzn007 likes this.
  17. quicksrt

    quicksrt Senior Member

    Location:
    City of Angels
    No it must UNDER $600, and it must be with the payment processor under the $600. So since Amazon does it's own payment processing, then $599 there, and ebay is now doing their own thing, so $599 there, and then paypal for a total of $599, and you would be free to claim your sales on taxes without a 1099k issued.

    But Discogs uses paypal, and then the forums here does as well, that total cannot exceed $599.
     
    uzn007 and MerseyBeatle like this.
  18. Gabe Walters

    Gabe Walters Forum Resident

    Ok. But I can confirm that PayPal doesn’t include friends and family payments on the 1099.
     
    uzn007 likes this.
  19. aoxomoxoa

    aoxomoxoa Play that fast thing one more time

    Location:
    USA
    Can we just go back to allowing friends and family payments on the forum ? At least for established sellers? I thought about starting a thread but wasn't sure if it would fly.
     
  20. Quakerism

    Quakerism Monk

    Location:
    Rural Pennsylvania
    My understanding of the situation as it is now in 2022, is that the taxing authority has made a statement that they are going to “assist taxpayers in reporting their income correctly.”

    They have also acted through legislation to enlist the assistance of payment processing platforms. That they dropped the level of reporting from 20K and 200 transactions to a mere $600 regardless of the number of transactions shows how serious they are. Certainly, they do expect a great amount of voluntary compliance to result in increased tax payments.

    The “friends and family” exemption isn’t a safe haven for business transactions. Seeing the intent is clearly defined.

    The only thing that matters here is what the taxing authority thinks your activity falls under and they have two categories. Business or hobbyist. A hobbyist has no need to keep records because he can’t claim any exemptions. Any transactions for the year totaling $600 or more will be reported as income. Period.

    I have always clearly been a hobbyist and as I analyze my own situation doubt I profited a dime through my activities. I have only shared desirable vinyl with the other members here. I’m not going to call myself a business when I’m not…. just so I can avoid paying tax on my hobbyist activities.

    So the question for me was, do I want to continue my hobbyist activity given the new rule regarding payment platforms and my expanded understanding of how taxing authorities view my activities. Answer is that it’s not worth the hassle for me.

    I have too many other varied interests and I can still enjoy my vinyl collection in other ways not attracting the attention of the taxman.
     
    uzn007 likes this.
  21. quicksrt

    quicksrt Senior Member

    Location:
    City of Angels
    Yes, you can enjoy your sharing of desirable vinyl - right up to $599 which actually is a lot of sharing for a hobbyist.
     
    Quakerism likes this.
  22. As far as skirting PayPal's processing fees?

    As a Seller, I would just include that in the final price of whatever product you're selling and go through the proper channel. That's just me, though.

    What's the current percentage for processing transactions? Maybe 3% or so? It's not much.
    ___

    I've even taken upon myself, in a couple instances where the transaction is over $XXX, to pay for the processing fees myself ... just to show my appreciation to the Seller of what they were selling.

    If this is what you are referring to. - Or am I misunderstanding your question?
     
    Last edited: Jan 1, 2022
    Quakerism likes this.
  23. aoxomoxoa

    aoxomoxoa Play that fast thing one more time

    Location:
    USA
    The forum rules should be changed to that a seller may request friends and family payment. At the time that is not the case.
     
    Jerry Horne likes this.
  24. eddiel

    eddiel Forum Resident

    Location:
    Toronto, Canada
    I'm surprised that PayPal hasn't worked it out yet. Also surprised he's able to sell that much using without buyer protection. Most buyers would balk. But some do well via Facebook groups.
     
  25. eddiel

    eddiel Forum Resident

    Location:
    Toronto, Canada
    That will never happen IMO. I'm sure you remember when it was allowed and when and why the change came in. I can't see them going back to allowing payments without buyer protection. Unfortunately, even the classified section here isn't immune to issues that need to be dealt with via PayPal claims.
     
    quicksrt and joachim.ritter like this.

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