PayPal 1099-K changes

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

  1. giantleech

    giantleech Lord of all fevers and plagues

    I'm less interested in battling over whether your initial post comprises a complaint or not and more interested in just informing you (as I am sure you must know by now) that ALL income is required to be reported on your Federal income tax form. You don't have to claim losses on sales - you could just report the gross income and take whatever the hit will be on that specific income total in full, which should be relatively extracurricular peanuts in comparison to your main sources of income (you may reasonably feel that holding on to and/or tracking down receipts from prior purchases to be more hassle than it's worth in dealing with such relatively minimal lever of sales.)
     
  2. giantleech

    giantleech Lord of all fevers and plagues

    I still don't understand why the reporting threshold (that PayPal provides the IRS) hasn't literally gone down to $0.01, as all earned income is required to be reported by the person using PayPal for such transactions anyway. The $600.00 number is arbitrary and makes no sense in any practical reality as, again, it is required by the taxpayer to report ALL income to the IRS.

    One also doesn't need to bother reporting expenses/losses if that is too much trouble to keep track of such records - you can just report the gross income and take the full taxable income hit on the gross income reported (note: If I happen to be wrong about not having to report expenses/losses, someone who is an accountant or tax preparer can set me straight on that matter - out of curiosity I'll call my tax preparer tomorrow and put that question to him.)
     
  3. captouch

    captouch Forum Resident

    Location:
    Bay Area, CA
    IMO, the practical reality of this is unless you sell many $1000’s of $ and report little to no profit resulting from those sales, you’re very unlikely to get audited purely as a result of this newly reported income. The IRS has bigger fish to fry.

    I use TurboTax and at the end of the process, it gives you a rough idea of how likely you are to get audited. If you’re in the very unlikely (green) area, I wouldn’t worry about it. I’d start keeping a notebook with your sales and best-guess cost basis for each item. I personally wouldn’t spend time going back and researching it for exact costs.

    Should you get a notice that you’re going to be audited, then you will probably want to research your costs at that point, though if you’re going to want to get your other records (for other income/deductions unrelated to online sales) in order as well, so prioritize accordingly.

    If your initial best guess cost guesses are honest, chances are you’ll find some costs are higher than you thought, some are lower, and some you just can’t find, which I would think would be understandable to an auditor. Most likely you’re not too far off on profit.

    What I think you don’t want to do is falsely claim high cost basis (that can’t be substantiated) for most items in an attempt to pay little to no taxes on real profit. Then it becomes pretty transparent that you’re trying to cheat the IRS, which wouldn’t be good.

    If this is really a hobby, then likely the sales $ won’t be huge and you don’t need to worry about it, though again, best to keep records with best guess costs so you don’t have to start from scratch should you need to show proof. If this is more a business than a hobby, then likely you’re already set up as a business and know what records to keep to justify your taxes.
     
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  4. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Again, buying a record new and selling it at a loss doesn't constitute income but will be reported on the 1099-K. That's kind of the point of the thread.
     
    Dan and uzn007 like this.
  5. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Because the IRS doesn't want that volume of inconsequential paperwork when it will literally cost them money. It doesn't matter what we think anyway. They set the rules, we play by them.
     
  6. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Yes, I'm not an accountant or lawyer, but I'm pretty sure that lying to the IRS is a bad idea.
     
  7. kwadguy

    kwadguy Senior Member

    Location:
    Cambridge, MA
    If you're selling CDs for $0.05 each, you can probably do a lot better selling them in bulk to almost anyone else...including on SH.tv.
     
  8. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    I know a couple members on here who buy records to needledrop them and then sell them at a loss as a matter of practice. I mean hundreds of records a year. Those records literally constitute nothing but financial loss but the only thing the IRS will see is what's reported on that 1099-K. That's why they have to be aware.
     
    uzn007 and Spitfire like this.
  9. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    There's always some I have that just aren't worth the effort. The ones you see in used CD stores that they have a bunch of. I wait until I have a bunch of them and ship them to Declutter. Quick and easy as I'd rather spend my efforts on the items that are worth more. Unfortunately I paid full price for a lot of them when they were new. Don't care about the money at this point for CDs like that. Just want to get rid of them. Sounds like the IRS wants me to start a business to keep track of everything I've ever bought.
     
    Last edited: Aug 29, 2021
    Archguy and Quakerism like this.
  10. giantleech

    giantleech Lord of all fevers and plagues

    The IRS is allegedly hiring a football stadium's amount of seats worth of new employees to increase their ranks to go after and squeeze out more and more $$$ from those placed upon the meat hook. Government bureaucracy is a blizzard of paperwork and it should be quite apparent that the cost of such spending/expenditures at the federal level is a price to be paid that is being staved off for as long as possible for others in the future to be seriously (even more so than is already) kicked in the grapes over.
     
  11. Joseph.McClure

    Joseph.McClure Forum Resident

    Location:
    Memphis, TN
    How do I get a receipt for a record I bought in ‘78?
     
    Archguy and Quakerism like this.
  12. giantleech

    giantleech Lord of all fevers and plagues

    Honestly, if you're income on such sales is super minimal then the tax debt you'll pay on that income should be relatively inconsequential. You may even be better off donating them to charitable organizations and claiming as much value as a deductible on such donations on your taxes that your tax preparer will advise.
     
  13. giantleech

    giantleech Lord of all fevers and plagues

    [​IMG]
     
  14. Spitfire

    Spitfire Senior Member

    Location:
    Pacific Northwest
    I've been well over $600 for the past few years for my sales. This new change will definitely impact me. I don't think I'll be the only one.
     
    Quakerism likes this.
  15. giantleech

    giantleech Lord of all fevers and plagues

    On the bright side you and I can take solace in knowing that we're helping contribute (through paying our "fair share") to the salaries and benefits and pensions of federal employees to the tune of three times the comparative rate of private sector employment.
     
  16. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    I don't think that's exactly true, but it's also off topic and political. Again, I want this thread to remain open.
     
  17. giantleech

    giantleech Lord of all fevers and plagues

    Agreed. I think the main lessons to be learned here is 1) hold on to your receipts (be they physical or digital), 2) report all of your income to the IRS, 3) learn how and where to apply deductions of expenses on your tax forms and 4) just report and pay taxes on your gross hobbyist sales if #3 is too much of a hassle for one to bother with.
     
    markshan likes this.
  18. blackhawkskid6

    blackhawkskid6 Forum Resident

    Location:
    boston
    Massachusetts adopted the new rule three years ago.
     
  19. 4-2-7

    4-2-7 Forum Resident

    Location:
    SF Peninsula
    You know I mention to Dan aka Snow @ AK that he would probably do better if he opened a business. I'm self employed it's not hard to start paying taxes through a business name and getting 1099s. I get so many write offs doing my taxes like this I end up clearing more than if I worked for someone and pulled in the same amount. You could do it too, it would just be added to your current personal taxes and this is where you can process the 1099. With turbotax they walk you through everything trying to save you money, the one you'd want is Home and Business. In the long run it could in fact reduce your overall taxes and your overhead cost. You can deduct things like materials, Internet, phone, computers, printers, shipping, car milage and on and on.

    Just a thought, Mark's Records:shh::D
     
  20. 4-2-7

    4-2-7 Forum Resident

    Location:
    SF Peninsula
    I'm usually small fish for the IRS and State, they don't have time to mess with anyone who doesn't have much money coming in, as even if they found something it's still not worth the effort. They spend their time looking at bigger fish with something in their pocket to pay them.

    In fact this year I could't help but think with covid in 2020, nobodies taxes looked right from prior years. Their heads were probably spinning and algorithms off the hook LOL
     
    captouch likes this.
  21. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Food for thought. Galemark Records (see my avatar).
     
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  22. Quakerism

    Quakerism Monk

    Location:
    Rural Pennsylvania
    I’m retired, and make so little that I file my federal taxes on literally two sheets of paper figured in less than ten minutes. I created so much paperwork during my career that I can’t stand to write a simple personal check and sign it let alone treat a simple vinyl hobby like a Fortune 500 business.

    I do know enough about the costs of my little hobby to know that profit is extremely minimal if not actually at a loss. So I would be quite disappointed to pay out taxes on a sum that I never got to enjoy in buying power.

    I enjoy seeking hard to find quality vintage vinyl for my collection and to forward to other collectors at better than the going rate. If I had to track every jot and tittle of my hobbyist activities just to defend from being fleeced by the IRS….well I suppose there are other ways to distribute vinyl that doesn’t involve PayPal.

    Seems like this might just drive many folks further underground. The rest of this year and up to $599 of transactions in the next year would be my last measure of participation on the classifieds. If I’m not enjoying it anymore, I’m not going to do it.
     
    Dan and markshan like this.
  23. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Yep, that's the choice. Keep books or go underground. I think that my more valuable items may end up in the Wanted to Trade section. I've enjoyed using that in the past and it won't show up on a 1099-K. At least for now. I wonder if we could incorporate a trade list on our profiles like we do our equipment lists. That could be fun.
     
    SimonSaysCake likes this.
  24. markshan

    markshan Forum Resident Thread Starter

    Location:
    Pittsburgh, PA
    Just think of the Wanted to Trade section as our own little off shore tax haven, lol.
     
  25. 4-2-7

    4-2-7 Forum Resident

    Location:
    SF Peninsula
    Maybe in your signature, post a list, that way it's in every post you make.
     
    markshan likes this.

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