Yes, there will be a ton more 1099-k forms next year. I'm not saying all those people will get audited, that's just not possible. But the concern is more targeted audits will occur.
Just some info I received from my Tax and accounting person. She said that the $600 rule is for Venmo, cash app. and money transferring services. A few of the articles available to her said ZELLE isn't considered a transfer service since it goes directly to your bank account. This same idea should pertain to Ebay payments since they transfer the money direct to your bank account and don't hold it until you transfer it. If you are selling personal property, it is not considered taxable income and you can zero it out on your tax forms...... but, if you are audited you need to provide proof of cost. Collectibles are taxed at 25% capital gains rate. She then said that all the explanations from the IRS are as clear as mud because they have no clue. The $600 limit right now has been shelved by Congress as nothing has been agreed on. So, bottom line is... it's a mess.
I suppose that might be a concern if you have a 1099 for $19,500 this year. Is it worth the IRS's time to go after taxes on that small amount? I have no idea. If your 1099 is for a couple of thousand this year, you're probably safe.
This is absolutely wrong. Whether or not something is "personal property", you owe taxes on it if you sell it for more than you paid. Yes, you can zero it out. But then you increase your chances of being audited. If you only sold stuff for less than you paid for it, and you can document that if called to do so, then it's fine to zero it all out. But whether you call it "personal property" or not has no bearing.
Maybe your advisor thinks that's how it should work, but eBay themselves don't see it that way. I have a couple of accounts there, and one just went over $600 received in 2022 last week. They asked for a full SSN because in their words: "As of Jan 1, 2022, the IRS now requires us to file and send a Form 1099-K to everyone who sells $600 or more. Since you’ve made $600 or more in sales this year, we’ll need your full 9-digit Social Security number (SSN) or Individual Tax Identification Number (ITIN) to send you your 1099-K."
So wait. If my roommate and I transfer money back and forth through Zelle. We might have to file a 1099-K?
Apparently, Zelle somehow weaseled out of the reporting requirements that apply to PayPal, Venmo, eBay, etc. I imagine that will change next year. Definitely yes for PayPal and Venmo. If you pay each other > $600, even if it's pay back for who paid for dinners over the year, you'll get a 1099-K. And if you choose not to file a Schedule C, then the IRS will take 30%. Because it's good to be king.
NO. If you and your roommate transfer money back and forth for bar tabs, strip club tips, rent, dinner, etc., you wouldn't be doing that as a goods transaction. Right?
That's what I'm trying to understand. Will there be paperwork involved if I do this? Regardless of if one has to pay taxes.
Friends/family transactions will not generate any kind of reporting. Sales of goods will, once they reach $600.
No, PayPal does not generate 1099s for friends and family transactions. Remember, I went through this last year because my state required payment processors to issue 1099s before the feds did. I even sold some records where my buyers sent payments via friends and family, even though I didn't ask them to. PayPal did not include those payments on the 1099 it sent me.
It's true that CURRENTLY you can circumvent generating a 1099-K by clicking the "friends and family transfer" button. I imagine that under the new reporting rules, everything in the gig economy is going to be pushed to "friends and family". Pretty soon, the hammer will come down.
Going by the information we have, PayPal does not issue 1099s for friends and family payments. No one has a crystal ball.
So I have been thinking about this new threshold quite a bit. It's just another super sneaky way of the government to raise revenue. Instead of doing it in a transparent way they resort to these sneaky methods. Let me explain. Chances are that most folks in the 600-20k range don't really owe anything, or only a little, in terms of taxes they should pay according to the law. You only owe taxes on gains, not on gross revenue. Everyone with an accountant is going to do this properly. But what about the people who don't have accountants, don't you think a certain percentage will just report the 1099-K as straight income and pay taxes on it? It's going to happen and a lot of people are going to do it, particularly those just above the threshold. These folks will be overpaying because of the absurdly low $600 dollar level. They are going to get these 1099-k's, be confused and just report it as straight income. This will effect the less affluent to a much greater degree. The other thing is there no way a 1099-k with say $6000 in gross is going to trigger an audit. That is just silly. You must think about what a small amount of money this is in the big scheme of things.
I agree with you, and I hope it's not true about 1099-k's triggering audits. That's just the concern some people have, and the self-righteous who "always report their income" are trying to scare people with these ideas. They also claim that since you sold stuff on eBay, and sales tax was collected on your sale, the IRS can tell who's reporting income, based on the sales tax received. I know it's far fetched, but this is the kind of paranoia and mass hysteria the self-righteous are trying to spread.
In my experience ... I don't make much per year. It's much, much less than $20,000. The online sales vary from year to year. I still report my sales via eBay or whatever other avenue, on a schedule C form. I can pay an accountant a bit less than $200 to make sense of it all. That's a small price to pay to supposedly/hopefully be "correct"/"in the clear". I damn sure wouldn't fill out the forms myself. This is just my experience / way of doing things.
Instead of being “confused”, or getting an “accountant”, take 15 minutes and look up the rules on IRS.gov. Pretty simple. Revenue less cost equals profit. Add profit to income.
Your equation seems fairly straight-forward. However, there are those participating in this thread who are unsure (myself included) as far as selling items in which they have no receipts from years gone by and proving the cost-to-profit ratio will be difficult - if not impossible - to prove in case the IRS comes knocking at your door. There are some who might find that aspect of a "0ne-in-a-million" chance of being audited to be cause for concern. That shouldn't be difficult to understand.
It’s quite easy to find backup for what an LP, or any piece of equipment would have cost when new, or used. Plenty of online data to use if you don’t have your original receipts. I see the bigger issue in having to give PayPal your SSN and them protecting it. That concerns me more than backing up costs.
I'm not wishing to argue about surmising past costs so much as being able to provide proof. Of course, one could point to a few avenues where you might be able to gauge original costs. My main concern is : the IRS is beefing up their employment to handle the influx of paperwork of the coming year's end. Who knows what criteria they will use as far as future auditing. I can almost guarantee there will be a host of newbie auditors just waiting to make a name for themselves and, in doing so, will make the process as difficult as possible. I hope this just an undue fear of mine. Time will tell, of course, how all this pans out. That's why I am going through an accountant to help guide me through the proceedings. I can deal with a couple hundred bucks for some peace of mind.
I looked at a gang of articles and almost every one I read said the same thing....... the $600 rule pertains to business and/or commercial accounts. These rules were included in the articles written by CPA's, tax preparers and the IRS. There is nothing for the "casual seller" that uses Paypal or any of the transfers services for convenience. I have to believe this will cause issues at tax time....
