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F&F and IRS income limits
- Thread starter badcow47
- Start date
If you sell something for same as purchased, you pay NO income tax (as long as you document paid vs sold amount on your taxes). If you sell for less than paid, you could claim the loss or the opposite if a profit was made.
Nothing has really changed tax wise, except this administration is choosing to have banks now report your incoming bank transactions that are less than the previous $10k threshold amount individual transactions to $600 for all yearly transactions. Government intervention into personal lives at the cost of the individual tax payer (bank expenses related to this reporting providing additional financial burden on the working man).
RE: "I won't do F&F! So now what?"
Plan on saving purchase and sales records to itemize on your tax docents (or expect to pay income tax on ALL sales). Remember situation when selecting what you vote for in future.
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If this is your business (full or part-time), I’d consult a proper tax accountant that could advise you on potential tax liabilities and how to mitigate them legally. Vendors selling goods thru PP’s F&F are skirting the law at their own peril. I’d be surprised if PP doesn’t already smell the fraud when one guy collects “funds” from friends all over the country (or internationally). I don’t see the fraud (likely alleged mail fraud) as worth the potential audit of your entire income and expenses. But that’s me. Good luck!
killgar
Knifemaker / Craftsman / Service Provider
- Joined
- Sep 24, 2002
- Messages
- 7,461
I was thinking this^. It's called "capital gains tax", and it's worth reading up on. I know about it only in terms of buying and selling houses.
With houses anyways (and various other valuables), it works like this- say you buy a house for $100K, and you sell it for $200K, you don't have to pay taxes on the full $200K, you only have to pay taxes on the profit ($100K). And Spey is correct about not having to pay if you break even on the sales or if you lose money. However, there are other important details, like for example, you have to own the item for a certain amount of time before you sell it. But this is why people hire accountants and tax experts, to figure out all the details of the tax laws.
In regards to avoiding PayPal and similar invasive options, there's always USPS money orders. I see a lot of people selling knives online who only accept money orders. If I were going to sell knives online that's what I would use. It's not as convenient, but you don't have to let anyone (PayPal, etc) get up in your business.
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Chuck_Nunface
Gold Member
- Joined
- Oct 26, 2020
- Messages
- 3,832
If you're an individual selling you're own personal property, regardless of whether you're making or losing money on the item, only do F&F. If the buyer doesn't want to, then move on. If, however, you're a business, it's never been a good idea to accept F&F payments for other reasons.
With all the nonsense I’ve seen on BF about this, I don’t think anyone has actually read what it says on PayPal’s website. So here it is:
“Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.
PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year. In order to help you understand these information reporting obligations, we have prepared the following FAQs. After reviewing the following FAQs, we recommend you consult your tax advisor to assess tax implications of Form 1099-K reporting.”
Just click ‘agree’ or whatever PayPal wants you to do and move on. They sent me 1099-K for last year and I had maybe $4k in ‘sales’ for maybe 20 or so transactions. I just ignored the form because I’m not required to file it and they aren’t required to report it.
“Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.
PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year. In order to help you understand these information reporting obligations, we have prepared the following FAQs. After reviewing the following FAQs, we recommend you consult your tax advisor to assess tax implications of Form 1099-K reporting.”
Just click ‘agree’ or whatever PayPal wants you to do and move on. They sent me 1099-K for last year and I had maybe $4k in ‘sales’ for maybe 20 or so transactions. I just ignored the form because I’m not required to file it and they aren’t required to report it.
- Joined
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- 28,918
I don't know what you are talking about, everything I've seen states 600.00
- Joined
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- 7,184
I'm working on thinning out my collection, I'm not worried about having to pay income tax (which I wont because I dont make profit) I am just really concerned trying to PROVE what I paid for things. The majority of knives I own were bought second hand through paypal with no notes, and I've got hundreds of transactions in paypal. I have no idea where to start if I get a 1099-K.
- Joined
- Jun 5, 2012
- Messages
- 28,918
The issue is PROVING you aren't making money on the knives. Because once you have received more than 600.00 in g&s, they'll report that to the irs. Then you have to prove you didn't make any money on that sale. Which can be a problem for guys who's been collecting knives for years and never hung on to a receipt.
I understand. I just don’t see it playing out where the IRS is going to try and conduct an extra 4 million audits based on this. Lots of nonsense IMO. I’m going to keep using G&S for the rest of the year and if I get hemmed up during tax time next year I’ll be sure to post about it.
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Even if they don't get you this year, they can get you for years past, some time down the road. I'd fall into the camp of "no thanks" and use alternative payment methods.
Definitely post up your experience, we'd appreciate it. No one really knows how this will all shake out in the years to come. My take is to just not potentially deal with the irs over my hobby.
FWIW, for me, there are a couple of "issues" that remain to be clarified regarding the new 1099 reporting requirement;
1) the Code refers to "business" transactions. So, if you are NOT engaged in a business but selling your personal property, does the statute still apply?
2) if you do NOT have a resale license, can your transactions be consisder "business" transactions for the purposes of the statute?
If so, how do you go about filing a resale license w/PayPal to avoid sales taxes imposed them on all of my purchases? -- because NO ONE actually engaged in business would pay sales tax on anything they buy for inventory and intend to resell.
As far as "proving" whether I made a profit or suffered a loss on a particular transaction, I've got no problem because I keep ALL of my receipts. It's a PITA to have to reconcile the 1099 transactions on a Schedule C but I can do it if I need to do so.
BTW, even if you only lost $, you'll still have to prove that by reconciling your transactions on a Schedule C. Failing to do so is asking for an audit, regardless of how small the amount in question.
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As for sellers who say they can't or won't do PP G&S transactions BECAUSE of the new 1099 reporting requirements, I say BS because it's NOT that hard to verify what you made or lost on a specific transaction.
The REAL reasons for only wanting to accept CASH for payment (via PP FF, Zelle, Venmo or whtaever) is either LAZINESS and/or the desire to avoid the additional processing fees.
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As a general rule, I will NOT buy from ANY seller on BF who says they will ONLY take a CASH payment. However, I will make an "exception" if it's a knife that I really want (ie., MUST HAVE) and the seller is a member of long standing with at least "some" transaction feedback and absolutely NO neg feedback.
1) the Code refers to "business" transactions. So, if you are NOT engaged in a business but selling your personal property, does the statute still apply?
2) if you do NOT have a resale license, can your transactions be consisder "business" transactions for the purposes of the statute?
If so, how do you go about filing a resale license w/PayPal to avoid sales taxes imposed them on all of my purchases? -- because NO ONE actually engaged in business would pay sales tax on anything they buy for inventory and intend to resell.
As far as "proving" whether I made a profit or suffered a loss on a particular transaction, I've got no problem because I keep ALL of my receipts. It's a PITA to have to reconcile the 1099 transactions on a Schedule C but I can do it if I need to do so.
BTW, even if you only lost $, you'll still have to prove that by reconciling your transactions on a Schedule C. Failing to do so is asking for an audit, regardless of how small the amount in question.
---------------------------------
As for sellers who say they can't or won't do PP G&S transactions BECAUSE of the new 1099 reporting requirements, I say BS because it's NOT that hard to verify what you made or lost on a specific transaction.
The REAL reasons for only wanting to accept CASH for payment (via PP FF, Zelle, Venmo or whtaever) is either LAZINESS and/or the desire to avoid the additional processing fees.
---------------------------------
As a general rule, I will NOT buy from ANY seller on BF who says they will ONLY take a CASH payment. However, I will make an "exception" if it's a knife that I really want (ie., MUST HAVE) and the seller is a member of long standing with at least "some" transaction feedback and absolutely NO neg feedback.
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Doctorlock
Platinum Member
- Joined
- Jan 1, 2015
- Messages
- 186
Is that $600.00 plus per each transaction? Or total of all transactions? If I sell (5) knives to (5) different people over the course of 2 months and all of the individual sales are for $250.00 each does that get reported?