Bad Paypal 1099

r8shell said:
So...are we also supposed to collect state sales tax
Click to expand...

I don’t think a lot of people will abandon the PayPal style method of payment for knife sales here but due to the continued convenience for the buyers and newly added headache for the sellers, it will make me think twice about most of the lower offers I usually accept in a sale.
 
Jsega51 said:
I don’t think a lot of people will abandon the PayPal style method of payment for knife sales here but due to the continued convenience for the buyers and newly added headache for the sellers, it will make me think twice about most of the lower offers I usually accept in a sale.
Click to expand...
Ultimately, this is just another transaction tax. If you have too pay 20-40% in income and sales tax on an item, the amount gets added to the price of the item. But, it will certainly put a damper on internet sales.

n2s
 
If it simplifies things, I'll pay extra fees to use money orders or travellers cheques or whatever. I don't even mind paying taxes (I mean I don't enjoy it, but I accept it) but I really, really don't want to spend any of my hobby time doing complicated accounting. I don't want to have to register a state sales tax number and file quarterly sales tax statements, or declare my collection as inventory, etc.

It helps that I've rarely made any individual transactions over $100, which is an amount I can afford to risk if things go badly. Rather than using F&F, I'd rather mail cash. Seriously, properly packaged cash is no more likely to be stolen in transit than a knife.
 
sixplymaple said:
I wish we had some form of reliable Bitcoin exchange system for transactions. Like Paypal, but with Bitcoin.
Click to expand...
I believe anyone here is free to accept crypto as payment, the question is how you provide any sort of buyer security and potential for refund with a blockchain transaction. I assume it will happen, but takes some good multi key transaction system to secure things. Not sure if anything like that is mainstream yet, and government will do its best to get its hands on this market soon enough.
 
r8shell said:
If it simplifies things, I'll pay extra fees to use money orders or travellers cheques or whatever. I don't even mind paying taxes (I mean I don't enjoy it, but I accept it) but I really, really don't want to spend any of my hobby time doing complicated accounting. I don't want to have to register a state sales tax number and file quarterly sales tax statements, or declare my collection as inventory, etc.

It helps that I've rarely made any individual transactions over $100, which is an amount I can afford to risk if things go badly. Rather than using F&F, I'd rather mail cash. Seriously, properly packaged cash is no more likely to be stolen in transit than a knife.
Click to expand...
Don't know what the future holds, but I haven't done any of that (bold). The 2 times I received a 1099K (2017 and 2020), I simply filled out the Schedule C, and knock on wood, no issues.

Will have to do it again for 2021, and looks like my "profit" will be around $800, but only because I sold several things that I bought many years ago and had no record of purchase price.
 
Docscoot said:
I believe anyone here is free to accept crypto as payment, the question is how you provide any sort of buyer security and potential for refund with a blockchain transaction. I assume it will happen, but takes some good multi key transaction system to secure things. Not sure if anything like that is mainstream yet, and government will do its best to get its hands on this market soon enough.
Click to expand...
This is exactly what I’m saying. I’m not aware of any company like that. It would be great to use until the government stops that too, but it could be done until then, which could be many years.
 
I’m not a tax expert and don’t plan on doing this… What happens if you just pretend that you never got a 1099 and just don’t do anything about it?
 
sixplymaple said:
This is exactly what I’m saying. I’m not aware of any company like that. It would be great to use until the government stops that too, but it could be done until then, which could be many years.
Click to expand...
Well therein is the problem, once a company is involved as a third party in a crypto transaction then the adage "not your keys, not your coins" kicks in, kinda defeats the purpose of defi. Then we'll be right back to the problems we're having with PayPal etc.
 
sixplymaple said:
I’m not a tax expert and don’t plan on doing this… What happens if you just pretend that you never got a 1099 and just don’t do anything about it?
Click to expand...
That's an important question. My guess a whole lot will take this route. There's probably an increased chance of an audit now that there's a 1099 out there on the books for the IRS to see. However I highly doubt they've got the staff at the IRS to really monitor this market, just my opinion. I think a lot of folks are really giving the government a lot more credit than it deserves in terms of its ability to actually put eyes on even a tiny fraction of our tax returns. I'm not saying to do anything shady, but I think an honest and sincere reporting of what is actual "profit" should be enough to then be able to survive an audit with receipts. It's stressful for sure and annoying to even have to be worrying about this at all.
 
rje58 said:
The 1099 is also provided to the IRS, so they will flag your return because it doesn't match THEIR records. Really BAD idea.
Click to expand...
Sure it's possible it increases the chance of it being flagged. But I still think it's highly unlikely for a low dollar 1099 to attract this scrutiny. This is the federal government we're talking about. You really think they have a system in place capable of cross-checking every 1099 against every tax return filed? Maybe. But I doubt it.
 
Docscoot said:
Sure it's possible it increases the chance of it being flagged. But I still think it's highly unlikely for a low dollar 1099 to attract this scrutiny. This is the federal government we're talking about. You really think they have a system in place capable of cross-checking every 1099 against every tax return filed? Maybe. But I doubt it.
Click to expand...

In my experience what they flag is not a 1099 per se, but the total reported income via W2s+1099s. The W2 and 1099 amounts and your tax return are all processed by computer, nobody has to check to see that the income you report on your tax return doesn't match the income reported to the IRS by other sources (ie. employers, PayPal, etc). The computer flags it and spits out "John Q. Public - return (1040x) income $61,234 - reported income $63,456" on a report - and probably automatically triggers a form letter to you requesting that you explain or correct the discrepancy.

Yes, there is almost certainly a dollar threshold for this, they aren't going to chase after a few dollars. Maybe $600 is that threshold? Maybe that's why the number was chosen? I seem to remember getting a form letter for a smaller discrepancy than $600 though. We overlooked some interest/dividend income one year, and got a form letter about the discrepancy that I'm pretty sure was considerably less than $600.
 
rje58 said:
In my experience what they flag is not a 1099 per se, but the total reported income via W2s+1099s. The W2 and 1099 amounts and your tax return are all processed by computer, nobody has to check to see that the income you report on your tax return doesn't match the income reported to the IRS by other sources (ie. employers, PayPal, etc). The computer flags it and spits out "John Q. Public - return income $61,234 - reported income $63,456" on a report - and probably automatically triggers a form letter to you requesting that you explain or correct the discrepancy.

Yes, there is almost certainly a dollar threshold for this, they aren't going to chase after a few dollars. Maybe $600 is that threshold? Maybe that's why the number was chosen?
Click to expand...
It's just pretty hard to know when we're talking about federal agencies I guess. I always thought this was all about total income whether you get the extra scrutiny, but then I had an old tax return flagged as problematic like 5 years after the fact, from a year when I was a college student making well below the poverty line (there was some confusion about whether something was a scholarship or a stipend if I recall correctly and I owed like $50 more in taxes, something petty like that). In any case I'll be going to an actual tax person this year to make sure I do this the right way :) I was leaning towards just doing a Schedule C until I read one of the other posts here that suggested that might be problematic if this hobby isn't actually run like a proper business and is always run at a loss.
 
rje58 said:
In my experience what they flag is not a 1099 per se, but the total reported income via W2s+1099s. The W2 and 1099 amounts and your tax return are all processed by computer, nobody has to check to see that the income you report on your tax return doesn't match the income reported to the IRS by other sources (ie. employers, PayPal, etc). The computer flags it and spits out "John Q. Public - return (1040x) income $61,234 - reported income $63,456" on a report - and probably automatically triggers a form letter to you requesting that you explain or correct the discrepancy.

Yes, there is almost certainly a dollar threshold for this, they aren't going to chase after a few dollars. Maybe $600 is that threshold? Maybe that's why the number was chosen? I seem to remember getting a form letter for a smaller discrepancy than $600 though. We overlooked some interest/dividend income one year, and got a form letter about the discrepancy that I'm pretty sure was considerably less than $600.
Click to expand...
I really do think this $600 thing is really more of a psychological game they're playing to try to get more folks to file properly. They're trying to close that reporting gap which is pretty huge. The system is still largely an honor system in reality, IRS really just doesn't have the numbers to do much better, so they need to play these psychological games.
 
sixplymaple said:
I’m not a tax expert and don’t plan on doing this… What happens if you just pretend that you never got a 1099 and just don’t do anything about it?
Click to expand...

That would likely generate a letter from the IRS. Maybe 3 years down the road with penalties and interest. I wouldn't chance it, but that is up to you.
I am sure I have already mentioned it, but we are just collateral damage. People have been using PP to get their wages and rental income (unreported), as well as the many online shops that have cropped up. These people actually owe taxes. They wanted to close that loophole, and unfortunately to do so caught us up in this. It sucks, but without filing it would be hard to determine the reason for those payments. I don't like it any more than any of you, but it wasn't to squeeze a couple $'s out of us
I believe the figure they are looking for is $8 billion
 
Peter Hartwig said:
That would likely generate a letter from the IRS. Maybe 3 years down the road with penalties and interest. I wouldn't chance it, but that is up to you.
I am sure I have already mentioned it, but we are just collateral damage. People have been using PP to get their wages and rental income (unreported), as well as the many online shops that have cropped up. These people actually owe taxes. They wanted to close that loophole, and unfortunately to do so caught us up in this. It sucks, but without filing it would be hard to determine the reason for those payments. I don't like it any more than any of you, but it wasn't to squeeze a couple $'s out of us
I believe the figure they are looking for is $8 billion
Click to expand...
Exactly, well said.
 
Peter Hartwig said:
That would likely generate a letter from the IRS. Maybe 3 years down the road with penalties and interest. I wouldn't chance it, but that is up to you.
I am sure I have already mentioned it, but we are just collateral damage. People have been using PP to get their wages and rental income (unreported), as well as the many online shops that have cropped up. These people actually owe taxes. They wanted to close that loophole, and unfortunately to do so caught us up in this. It sucks, but without filing it would be hard to determine the reason for those payments. I don't like it any more than any of you, but it wasn't to squeeze a couple $'s out of us
I believe the figure they are looking for is $8 billion
Click to expand...
Yeah when MA started this in 2017 they estimated they were missing out on $20 million.
 
jlauffer said:
Yeah when MA started this in 2017 they estimated they were missing out on $20 million.
Click to expand...
20 million bucks that they wish they had pissed away. That’s the shame of this all to me. I never see taxes benefit anybody except for politicians and their friend’s businesses. No accountability and no tracking of their own spending. But they want us to keep track of every cent. lol
 
You must log in or register to reply here.
Back
Top