Pay pal and the 1099 k form

Jack O'Neill

Jack O'Neill

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I know a lot of this has been already discussed . I have read here that all you need to do really is keep all your receipts and file a schedule ' C ' profit and loss . I talked to an accountant yesterday and she brought it to my attention that you are then filling out a business form making you a small business . She pointed out then it would be necessary for you to pay social security taxes as being self-employed .

I am asking those here that know this stuff if I heard her correctly .

Jack
 
I would look for a new accountant...

When I ran my plumbing business I had an accountant that was fearless. His philosophy was "make the IRS prove it." There is no way I would pay SS for a hobby business. (assuming of course that yours is a hobby business) I am about to start the process of selling off a lifetime gun collection and I certainly will not consider it as a business and will not report any gains to the state or the Feds.
 
Can only relay my experience so far. Have done the Schedule C three times, for tax years 2017, 2020, and 2021, and use the H&R Block home software. Nothing comes up in the software about SS, and so far there's been no "reaction" from the IRS. Now that this has become a federal thing starting in 2022 (was a state thing for me prior), things could certainly change...will see what the software says when it comes time.
 
ONeill said:
I know a lot of this has been already discussed . I have read here that all you need to do really is keep all your receipts and file a schedule ' C ' profit and loss . I talked to an accountant yesterday and she brought it to my attention that you are then filling out a business form making you a small business . She pointed out then it would be necessary for you to pay social security taxes as being self-employed .

I am asking those here that know this stuff if I heard her correctly .

Jack
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What did your accountant advise?
 
annr said:
What did your accountant advise?
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She said hire her for the 1st year then I would have copies of all the forms necessary and I could just follow them the following years . Not sure I will do that as she would be about $400.00 , I will see what my liability will be to the IRS when I get the 1099 k from PP . She also said that the SS taxes would be about 30% of the profit I made if I heard her correctly .

She said since my income is low that the extra tax from my knife sales may not be very much , the standard deduction may cancel it out . Guess it depends on what tax bracket I end up in .
 
ONeill said:
She said hire her for the 1st year then I would have copies of all the forms necessary and I could just follow them the following years . Not sure I will do that as she would be about $400.00 , I will see what my liability will be to the IRS when I get the 1099 k from PP . She also said that the SS taxes would be about 30% of the profit I made if I heard her correctly .

She said since my income is low that the extra tax from my knife sales may not be very much , the standard deduction may cancel it out . Guess it depends on what tax bracket I end up in .
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I use an expert CPA who does 2 bonified home businesses plus w-2 income on same return, and the bill is under $400, closer to $300. FYI.

Also, if one goes the route suggested to you, what about home office deductions, depreciation, etc. Also, if your overhead exceeds your profits you could deduct off total income and lower tax burden?

I might ask someone else. These laws change every year and I don’t trust myself to keep up with the laws. With more agents maybe they will be scrutinizing this kind of thing more?

Used to be exceptions on hobby income too, but this is not my field of expertise.
 
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annr said:
I use an expert CPA who does 2 bonified home businesses plus w-2 income on same return, and the bill is under $400, closer to $300. FYI.

Also, if one goes the route suggested to you, what about home office deductions, depreciation, etc. Also, if your overhead exceeds your profits you could deduct off total income and lower tax burden?

I might ask someone else. These laws change every year and I don’t trust myself to keep up with the laws. With more agents maybe they will be scrutinizing this kind of thing more?

Used to be exceptions on hobby income too, but this is not my field of expertise.
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You cannot deduct expenses on hobby income until 2025 , you use to be able to but that was put on hold for Trumps tax package to pass . Yes all that other stuff you mentioned can be deducted and it was mentioned but I am trying to avoid that mess and keep things simple .
 
So point one; aren't you already a business to at least some degree?

Point two if my account told me something about my tax return I didn't understand I would ask them for clarification. I would not go to a bunch of random strangers at the bus stop and ask them if the account was pulling my lariat.
 
Gastonknife said:
80 billion in new funding for the IRS. Tens of thousands of new agents. Ah yeah get ready folks.
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I am very doubtful they can find qualified people in the numbers they are talking. They can't just wish them into existence. If Iwere them I would simplify the average payers returns down to that mythical postcard, and free up the employees they have. They already have all the info on the vast majority of tax payers.
 
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Cattaraugus225 said:
I would look for a new accountant...

When I ran my plumbing business I had an accountant that was fearless. His philosophy was "make the IRS prove it." There is no way I would pay SS for a hobby business. (assuming of course that yours is a hobby business) I am about to start the process of selling off a lifetime gun collection and I certainly will not consider it as a business and will not report any gains to the state or the Feds.
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I knew an old man that loved messing with the IRS. He was a master plumber and helped design oil refineries and stuff. His last dagger was writing his cigarettes off of his taxes as tools. The IRS agent was so mad after my friend proved it to him that he stormed out and never spoke to him again. LOL!
 
Peter Hartwig said:
I am very doubtful they can find qualified people in the numbers they are talking. They can't just wish them into existence. If Iwere them I would simplify the average payers returns down to that mythical postcard, and free up the employees they have. They already have all the info on the vast majority of tax payers.
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People like them care nothing about you and me. I call them, little Hi^lers. If they ever rise to power, we would believe that they are the reincarnation of Adolf...
 
ONeill said:
I know a lot of this has been already discussed . I have read here that all you need to do really is keep all your receipts and file a schedule ' C ' profit and loss . I talked to an accountant yesterday and she brought it to my attention that you are then filling out a business form making you a small business . She pointed out then it would be necessary for you to pay social security taxes as being self-employed .

I am asking those here that know this stuff if I heard her correctly .

Jack
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I am certainly not an accountant, but after looking at my normal tax return, I would agree with your accountant. If you go with schedule C there could be self employment taxes. I personally would think schedule D(capital gains and losses) is the way to go for all that are not running a business, just like other investments.
I don't plan on this coming up, but if it does I will just let the accountant figure it out.
Since you already have an accountant maybe you could find the answer for us. I don't plan on this coming up for me.
The problem I see with the schedule D is that these forms are being sent out under the mistaken assumption that you are running a business, and these are the appropriate reporting forms for that. Do you have to follow this mistaken assumption not to get red flagged? If so you are stuck with the schedule C.
Leave it to the government to make something as simple as knife collecting difficult.
 
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NDGuy said:
Just do venmo/paypal F&F or Zelle?
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Only F&F(as long as it lasts) will not result in a 1099k for transaction totaling more than $600. The others will be reporting and issuing the same as PP G&S.
Other options would be cash and money orders.
 
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NDGuy said:
Just do venmo/paypal F&F or Zelle?
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This is at best a stopgap measure of unknown risk. I am pretty sure this workaround is going to be on the radar of both payment processors and the federal government. The IRS is about to get a lot more muscular, and even if, as it is likely, hiring up will take a while (especially since they'll be competing with a lot of private businesses and tax firms for the same talent), a lot of 'auditing' is simply done by computer algorithm, and I would bet that PayPal or the feds or someone else is figuring out an algorithm to analyze personal payments that are probably commercial in nature rather than personal.

Peter Hartwig said:
I am certainly not an accountant, but after looking at my normal tax return, I would agree with your accountant. If you go with schedule C there could be self employment taxes. I personally would think schedule D(capital gains and losses) is the way to go for all that are not running a business, just like other investments.
I don't plan on this coming up, but if it does I will just let the accountant figure it out.
Since you already have an accountant maybe you could find the answer for us. I don't plan on this coming up for me.
The problem I see with the schedule D is that these forms are being sent out under the mistaken assumption that you are running a business, and these are the appropriate reporting forms for that. Do you have to follow this mistaken assumption not to get red flagged? If so you are stuck with the schedule C.
Leave it to the government to make something as simple as knife collecting difficult.
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I am thinking Schedule D, but we'll see when more guidance is released this year, hopefully.
 
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