Maybe you’re a bit behind on the news. This changed to $600 this year. You can certainly ignore the 1099k but PayPal sent that same form to the IRS. I dont know your income nor do I want to but if IRS algorithms detect a large income discrepancy you will have to explain the $4k as the IRS considers the amount on the 1099k as income.
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F&F and IRS income limits
- Thread starter badcow47
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Realistically though, the Taxman is not looking up the price of a Spyderco Shaman and going "This was $250 originally, you sold it for $275, I'm mad, see?", are they? How far is somebody going to go to track a few knife sales, not a storefront, but say, selling two knives a month or so?
Locutus D'Borg
Platinum Member
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The requirement is that we report all BUSINESS transactions. My buying/selling knives are NOT business transactions. Why all the drama?
Wrong. (Sorry). Money received after $600 for the year from PayPal (goods), Venmo, cash app and some others are reported to the IRS as INCOME. The IRS will ask you pay income tax on this INCOME at your marginal tax rate. It is up to YOU to explain to the IRS what this $ is and why it shouldn’t be taxed. A lot of work. Keep records. Be able to show that you sold at a loss or pay income tax on the profit. This is why folks want to use friends and family or zelle now as it is not reported.
lambertiana
Gold Member
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I have been selling knives in recent years because I have needed the money. This year I had to limit it to $600. I never used to think I needed to keep the receipts so there is no way I can prove that I lost money on the deal.
Remember this the next time you go to the ballot box.
Remember this the next time you go to the ballot box.
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- 3,033
I'm no expert on this, but when it was being discussed on the watch forums many were noting that hobbies are taxed differently. They were saying that income from the sale of an item can be taxed, and how much you paid for it was irrelevant. In other words, if you sell a knife for $700 and you paid $600, you're on the hook for $700 worth of income because expenses from hobbies cannot be deducted. That seems backwards to me, and I haven't researched it myself, but that's what many were saying.
killgar
Knifemaker / Craftsman / Service Provider
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When it comes to taxes, consult a professional. Don't make decisions based on what a bunch of guys on the internet tell you. Because even if some of them are right, how will you know. Better safe than sorry.
Locutus D'Borg
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Notice the word Businesses AND the over 200 transactions a year totaling over 20K. I don't know about you guys, but this does not apply to me.
"How much do you have to sell to get a 1099 from PayPal?
Payment processing services, such as PayPal, are required to issue a 1099-K form to the IRS for reporting the sales of their customers (businesses) who receive more than $20,000 in a single year AND who conduct more than 200 transactions."
"How much do you have to sell to get a 1099 from PayPal?
Payment processing services, such as PayPal, are required to issue a 1099-K form to the IRS for reporting the sales of their customers (businesses) who receive more than $20,000 in a single year AND who conduct more than 200 transactions."
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- 2,235
That is how it used to be, but NOT anymore. Starting in a few states last year, and federally this year, they will issue a 1099K to anyone with total sales over $600.
Will PayPal report my sales to the IRS?
Learn how PayPal is required to report sales above a threshold and also know the 1099-K requirements.
www.paypal.com
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- May 9, 2002
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- 12,685
I avoid Imperial credits, but im fine taking Beskar.
I have a family with more than a few tax people and have talked to them about this.
The 1099-K is an info document. The IRS gets a copy so it should be accounted for. All monies reported on a 1099-K isn't income. Sometimes it is, or isn't, or just a portion of it is. It's the responsibility of the tax payer to make that determination and report it properly.
They told me that for a nonbusiness, selling personal items, the money reported on a 1099-K of this nature does not represent income and there are two choices:
1) don't report it on your tax return as it's not really income, if you're sure it's really not,
2) report it as two miscellaneous line items, one showing the income amount and a second as a negative, or loss, to show net zero income. They also pointed out that any actual loss from selling an item for less than you purchased it for in this case cannot be claimed as a loss that reduces your liability. This type of income can or cannot add to that liability only.
In either case, they suggested I should keep documentation sufficient to prove that the reported amounts are not income, that is, were sold it a loss, in case the IRS demands proof later on.
They believe that the purpose of this is to increase compliance but that people will find a way around it or that thethe mass liability has been grossly miscalculated by the government. This will cause them to "overcorrect" or step up compliance efforts as the expected increase in tax revenue is not experienced. This may include audits or further rule and policy changes.
It's really PayPal policy that seems to exempt F&F transactions. The IRS and the 1099-K doesn't care. It reports all transactions above the threshold and the taxpayer accounts for it appropriately. With a quick change in policy, PayPal could report all positive transactions on a 1099-K and let the taxpayer claim and properly characterize the income as required. That would mean F&F would suddenly be reported and you'd likely be wise to go with option 2) above.
PayPal doesn't care one way or another. It's a bit of code in a computerized system and the fact is, these rule changes might scare some people into opening business accounts or getting people to use F&F and G&S properly. This makes PayPal more money.
Just wait until your bank accounts are similarly monitored and that will catch Zelle, cash transactions, money orders, etc.
Anyway, my discussions with my family don't have me feeling very good about things. Part of me wants to just do it and be done with it. I could have sold three of my watches a few times over if I'd use PayPal. But the other part of me says I'd be the one they'd catch and give a hard time.
All I can say is be careful and be prepared. Protect yourself.
The 1099-K is an info document. The IRS gets a copy so it should be accounted for. All monies reported on a 1099-K isn't income. Sometimes it is, or isn't, or just a portion of it is. It's the responsibility of the tax payer to make that determination and report it properly.
They told me that for a nonbusiness, selling personal items, the money reported on a 1099-K of this nature does not represent income and there are two choices:
1) don't report it on your tax return as it's not really income, if you're sure it's really not,
2) report it as two miscellaneous line items, one showing the income amount and a second as a negative, or loss, to show net zero income. They also pointed out that any actual loss from selling an item for less than you purchased it for in this case cannot be claimed as a loss that reduces your liability. This type of income can or cannot add to that liability only.
In either case, they suggested I should keep documentation sufficient to prove that the reported amounts are not income, that is, were sold it a loss, in case the IRS demands proof later on.
They believe that the purpose of this is to increase compliance but that people will find a way around it or that thethe mass liability has been grossly miscalculated by the government. This will cause them to "overcorrect" or step up compliance efforts as the expected increase in tax revenue is not experienced. This may include audits or further rule and policy changes.
It's really PayPal policy that seems to exempt F&F transactions. The IRS and the 1099-K doesn't care. It reports all transactions above the threshold and the taxpayer accounts for it appropriately. With a quick change in policy, PayPal could report all positive transactions on a 1099-K and let the taxpayer claim and properly characterize the income as required. That would mean F&F would suddenly be reported and you'd likely be wise to go with option 2) above.
PayPal doesn't care one way or another. It's a bit of code in a computerized system and the fact is, these rule changes might scare some people into opening business accounts or getting people to use F&F and G&S properly. This makes PayPal more money.
Just wait until your bank accounts are similarly monitored and that will catch Zelle, cash transactions, money orders, etc.
Anyway, my discussions with my family don't have me feeling very good about things. Part of me wants to just do it and be done with it. I could have sold three of my watches a few times over if I'd use PayPal. But the other part of me says I'd be the one they'd catch and give a hard time.
All I can say is be careful and be prepared. Protect yourself.
Before knives I sold musical gear such as guitars, amps, vintage parts, etc.. I sold on eBay starting in 2004 and eventually on another non-auction type platform called Reverb. It was never to legit business levels so I never came close to the old threshold on reporting requirements. It was more of a small side hussle freeing up funds to purchase more gear to try. Then eventually selling the newly acquired gear, so on and so on.. It was nice and even though it didn’t make me money; it helped me save money while still enjoying my hobby.
However this new automatic reporting/1099- K has put the breaks on ALL online selling for me. This is due to the fact I’m not a business and I don’t want to be bothered. Plus I’m not keen on giving my SS# to PayPal, etc.. My plan is to follow the yearly $600 guideline and slowly sell off some items over the next several years or until it’s all gone. This has also curbed my purchases as I don’t want to get stuck with stuff unless I’m 100% sure I want it hanging around to be part of my estate.
Over time I think this will eventually hurt the secondary market. If the sellers don’t bow out like I did they’ll have to charge more to cover the taxes. I knew small businesses were on the hit list. But now it’s also the small time hobbyists. The good ole days of care free “flipping” are gone.
However this new automatic reporting/1099- K has put the breaks on ALL online selling for me. This is due to the fact I’m not a business and I don’t want to be bothered. Plus I’m not keen on giving my SS# to PayPal, etc.. My plan is to follow the yearly $600 guideline and slowly sell off some items over the next several years or until it’s all gone. This has also curbed my purchases as I don’t want to get stuck with stuff unless I’m 100% sure I want it hanging around to be part of my estate.
Over time I think this will eventually hurt the secondary market. If the sellers don’t bow out like I did they’ll have to charge more to cover the taxes. I knew small businesses were on the hit list. But now it’s also the small time hobbyists. The good ole days of care free “flipping” are gone.
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Does anyone know the rules that apply if you consign your knives with an online dealer? Do the businesses have to report your payments?
I’d rather give 25% to an American business than 40% to the government
I’d rather give 25% to an American business than 40% to the government
sharp_edge
Gold Member
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- Jul 30, 2015
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- 5,937
So PayPal is not required to report your case (as you are way below the two thresholds as you quoted) to IRS but somehow it chose to report? Am I reading this correctly?
If you don't have the receipts or proof of a transaction either in your email box or physical form, that's where you may run into issues. If you have proof of what you purchased the item for, then you won't have anything to worry about unless you get audited for some reason. The IRS isn't going to send someone to audit you if you sold $600 worth of goods and report $0 as income. It's not worth their time. If you're selling $10K worth of knives, maybe they'll give you the once over, but even then, how much income would you have made? Probably still not enough to send someone over to audit you.
You can take this information for what you paid for it, but my mother was an IRS agent for 30 years before retiring in 2020. I asked her these very same question since I've been selling a lot of my things (video games, etc.) that I found while cleaning up my basement.
You can take this information for what you paid for it, but my mother was an IRS agent for 30 years before retiring in 2020. I asked her these very same question since I've been selling a lot of my things (video games, etc.) that I found while cleaning up my basement.