Bad Paypal 1099

stonesell said:
I copied this from an internet discussion. It sounds easy, but I am no tax expert, as I always pay to have them filed properly:

“If you are "only" selling your own used personal items, you won't owe any taxes, and you don't have to fill out Schedule C (actually for personal items it would be Schedule D), you can just include them as "Other Income" on form 1040, to satisfy the reporting requirements, regardless of whether you get a 1099K or not.



Note that while you won't show any profit and not owe any taxes, you also can not claim a loss against other income.



Just the basic personal home version of Turbo Tax will handle this, and there is even information on their website of how to do this for ebay sales of used items.”
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Bingo this is exactly how I’ve done it!
 
Mossyhorn said:
Yup. USPS money orders are the way to go. I've been using them without any problems. If you are still using PayPal, you're just blowing snot all over your hands.
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As much as it sucks, I agree. I'll miss the peace of mind the buyer protection gives initially. I will be more selective in who I buy from, people who have been around and post in other areas than just the exchange. Usps money order it is.
 
The tax filing part seems easy, but I still don’t like having to give PayPal my SS number, and they do not have it as of yet.
I do think that those sellers accepting G&S as payment will by far, sell more and faster than those who do not provide this secure method.
The big problem with taking F&F from an unknown unscrupulous buyer, is that they can use a credit card company to reverse the payment, and that can be a big loss when selling a costly knife. Accepting money orders and F&F from known members is likely quite safe, but it does however narrow the playing field, especially if your knife is not very popular amongst our more knowledgeable forum members.
 
stonesell said:
I copied this from an internet discussion. It sounds easy, but I am no tax expert, as I always pay to have them filed properly:

“If you are "only" selling your own used personal items, you won't owe any taxes, and you don't have to fill out Schedule C (actually for personal items it would be Schedule D), you can just include them as "Other Income" on form 1040, to satisfy the reporting requirements, regardless of whether you get a 1099K or not.
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If you do it this way, would you have to fill out an itemized 1040, rather than take the standard deduction, in order to deduct the cost of items sold? I don't think I'd come out ahead on that.

I'm not too worried personally, because I doubt I'll have $600 in transactions, but the idea of having to treat a hobby like a business sucks a lot of the fun out of it.
 
r8shell said:
If you do it this way, would you have to fill out an itemized 1040, rather than take the standard deduction, in order to deduct the cost of items sold? I don't think I'd come out ahead on that.

I'm not too worried personally, because I doubt I'll have $600 in transactions, but the idea of having to treat a hobby like a business sucks a lot of the fun out of it.
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An account would know for sure, but I think that you could still take the standard deduction. We sell some coins, and that gets reported on the form for long and short term capital gains or losses, but still get to take the standard deduction for a married couple, which is quite a lot.
 
We will have to wait and see whether PayPal and eBay survive. The new tax scheme will likely drive the population further into the black market. If you sell for cash at the local collectors club, gun show or flea market, who is the wiser? Ebay has been evolving over the last decade; it is much less a trade site for hobbyist and now resembles a second rate Amazon marketplace. I expect the remaining collectors to abandon the site, because it is no longer worth it, it has become too expensive for what it delivers. As for PayPal, their new market would be to compete directly against the major credit cards to capture a % of commercial POS transactions.


n2s
 
Interestingly, both Ebay and TurboTax now have current pages addressing this topic:

Do I have to report personal items that I sold at a yard sale?

You only need to report personal items that you sold if they were sold for more than what you originally paid. Let's say you purchased a vintage nut grinder for
ttlc.intuit.com ttlc.intuit.com
pages.ebay.com

1099-K and Tax Withholding FAQs | Seller Center

Starting on Jan 1, 2022, IRS regulations require all businesses that process payments, including online marketplaces like eBay, to issue a Form 1099-K for all sellers who receive $600 or more in sales
pages.ebay.com pages.ebay.com
I'm not an accountant (etc.), but "selling personal items at a loss" sounds like most knife sales here. In that case, this would seem to be a minor filing chore with limited, if any, financial impact.

Folks capitalizing on hype to sell at a profit, and flippers, would have income to report (which was already the case).
 
Dadpool said:
Interestingly, both Ebay and TurboTax now have current pages addressing this topic:

Do I have to report personal items that I sold at a yard sale?

You only need to report personal items that you sold if they were sold for more than what you originally paid. Let's say you purchased a vintage nut grinder for
ttlc.intuit.com ttlc.intuit.com
pages.ebay.com

1099-K and Tax Withholding FAQs | Seller Center

Starting on Jan 1, 2022, IRS regulations require all businesses that process payments, including online marketplaces like eBay, to issue a Form 1099-K for all sellers who receive $600 or more in sales
pages.ebay.com pages.ebay.com
I'm not an accountant (etc.), but "selling personal items at a loss" sounds like most knife sales here. In that case, this would seem to be a minor filing chore with limited, if any, financial impact.

Folks capitalizing on hype to sell at a profit, and flippers, would have income to report (which was already the case).
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But if you get a 1099K, you can't just ignore it because you know the sales were all at a loss. You need to show that you didn't make a profit, otherwise you will get taxed on the entire 1099 amount. So far, I have done this by using Schedule C, where you can account for the original cost of the items, and expenses such as PP fees, shipping costs, etc. Would love to find a simpler way to handle it, but for all the talk, no one has offered another concrete way to do it.
 
jlauffer said:
But if you get a 1099K, you can't just ignore it because you know the sales were all at a loss. You need to show that you didn't make a profit, otherwise you will get taxed on the entire 1099 amount. So far, I have done this by using Schedule C, where you can account for the original cost of the items, and expenses such as PP fees, shipping costs, etc. Would love to find a simpler way to handle it, but for all the talk, no one has offered another concrete way to do it.
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Several other concrete ways have been discussed above, along with some concerns over whether schedule C really is appropriate for something that may or may not actually meet the IRS def of small business. I think this discussion has some good info now if you want to take the time to scroll through. My main concern with schedule C is that if you’re never making a profit and honestly are doing this more as a hobby than to make money, does it seem fair to get to use losses and expenses to actually reduce your taxable income? I’m not sure that would survive real IRS scrutiny, however unlikely that scrutiny might be.
 
Docscoot said:
Several other concrete ways have been discussed above, along with some concerns over whether schedule C really is appropriate for something that may or may not actually meet the IRS def of small business. I think this discussion has some good info now if you want to take the time to scroll through. My main concern with schedule C is that if you’re never making a profit and honestly are doing this more as a hobby than to make money, does it seem fair to get to use losses and expenses to actually reduce your taxable income? I’m not sure that would survive real IRS scrutiny, however unlikely that scrutiny might be.
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Yes, but they seem to involve either ignoring the 1099, or getting taxed on the whole amount, which is BS if it represents a loss. As I've stated before, I've done it the Schedule C way twice so far with no issues (knock on wood) and will do it again for 2021. Will keep doing it that way until either the IRS lets me know it's not right, or some other way is explained that will work within the software I use. YMMV

Have been following/posting in this thread since page 1...so far this has been the clearest explanation, and IMO supports the way I've been doing it:

Bad - Paypal 1099

Edit: Original costs are allowed to be taken off, just not expenses. My mistake. See @Docscoot's post below
www.bladeforums.com www.bladeforums.com

It doesn't specifically mention Schedule C, but how else would you account for the original cost and fee?
 
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jlauffer said:
Yes, but they seem to involve either ignoring the 1099, or getting taxed on the whole amount, which is BS if it represents a loss. As I've stated before, I've done it the Schedule C way twice so far with no issues (knock on wood) and will do it again for 2021. Will keep doing it that way until either the IRS lets me know it's not right, or some other way is explained that will work within the software I use. YMMV

Have been following/posting in this thread since page 1...so far this has been the clearest explanation, and IMO supports the way I've been doing it:

Bad - Paypal 1099

Edit: Original costs are allowed to be taken off, just not expenses. My mistake. See @Docscoot's post below
www.bladeforums.com www.bladeforums.com
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Not at all, several other ways to include the 1099 and then include initial costs. Can always do “other income” route and include a negative line so the total taxed is zero, but you’re still including the 1099. Can also do it as sale of investment property where you include the 1099 but offset by purchase price. I think there’s lots of pretty simple ways to go about this depending on what makes the most sense for you.

I agree you’ll likely be fine with schedule C, audits are rare, but what happens in a few years when they realize your business only runs a loss for many years in a row. Just a hypothetical to consider, still an unlikely one. Do you really consider this a business or is it a hobby for you?
 
Docscoot said:
Not at all, several other ways to include the 1099 and then include initial costs. Can always do “other income” route and include a negative line so the total taxed is zero, but you’re still including the 1099. Can also do it as sale of investment property where you include the 1099 but offset by purchase price. I think there’s lots of pretty simple ways to go about this depending on what makes the most sense for you.

I agree you’ll likely be fine with schedule C, audits are rare, but what happens in a few years when they realize your business only runs a loss for many years in a row. Just a hypothetical to consider, still an unlikely one. Do you really consider this a business or is it a hobby for you?
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I consider it a hobby, but as I've mentioned before, I use the H&R Block software, and when I tell it I have a 1099K, it triggers the Schedule C. In my case, the 2 previous times I've done this, I had a small profit, so shouldn't raise any red flags. For 2021 I think I'll be able to show a loss.
 
jlauffer said:
I consider it a hobby, but as I've mentioned before, I use the H&R Block software, and when I tell it I have a 1099K, it triggers the Schedule C. In my case, the 2 previous times I've done this, I had a small profit, so shouldn't raise any red flags. For 2021 I think I'll be able to show a loss.
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Yeah H&R is screwy with 1099K unfortunately. But can still force a manual “other income” entry if you click the right boxes. I think you’ll be fine as long as you get the 1099K amount in there somehow, just imagine how inundated IRS will be with these, no way they can keep track is my guess!
 
Ladies and Gents, it isn't so hard to just prove how much a knife you bought 10 years ago was worth or pay full taxes on it if you sell! Takes seconds! Lol!

Nope, no, and no. This will slow hobby selling down to a trickle and there will be a flood of generous giving of funds to friends and family! Won't take long until uncle sam figures that out and makes paypal adjust accordingly. In the unlikely event there is ever a return to common sense reason in this mess, I'll gladly return to paypal. Until then, MO, Check, or cash all the way.
 
Just a quick note: my no-1099 cap has gone up to $1200! I have successfully encouraged my wife to get into knives. She loves it and loves having her own PayPal account that she totally uses!
 
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craytab said:
Ladies and Gents, it isn't so hard to just prove how much a knife you bought 10 years ago was worth or pay full taxes on it if you sell! Takes seconds! Lol!

Nope, no, and no. This will slow hobby selling down to a trickle and there will be a flood of generous giving of funds to friends and family! Won't take long until uncle sam figures that out and makes paypal adjust accordingly. In the unlikely event there is ever a return to common sense reason in this mess, I'll gladly return to paypal. Until then, MO, Check, or cash all the way.
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Agreed.

We both have been pushing paypal goods and services for years here. It isn't like we are paypal haters. What they are being forced to do, sucks.

People are acting like this is adding a 1 question survey on to a paypal transaction. I'm not seeing this quite nonchalantly. Who the hell kept knife reciepts from years ago? Lol I mean I am sure someone did, but I sure didn't.

Aside from the multiple taxes now involved, the potential audits over a knife hobby makes me make my face into the "wtf face".
 
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Let's say you sell over $600 in knives a year here on the forum, and you would normally take payment via PP G&S, thereby generating the 1099-K.

Let's say you also contribute at least that amount each year to charities.

Instead of having your buyers pay via PP, you ask that they make a contribution (in the amount of the knife selling price) to a charity that you specify. Almost all charities now accept online donations via credit card, and immediately email a receipt, so it's easy to do. The buyer then emails you a copy of the receipt and you send them the knife.

I guess there are scammers who could try to put together a fake charitable receipt, but I think that would be rare here. And if you had doubts, you might be able to confirm the authenticity of the receipt with the charity.

No money would go to PayPal and so no 1099-K. Am I missing anything?

Andrew
 
"Existence of "Income, from whatever source derived" is not dependent on receipt of payment by PayPal. You have just described "income" to the person described as "you." Under federal tax law, a "gift" is the voluntary transfer of cash or property without consideration. Here, the contribution by the knife recipient ("your buyer") was in consideration of his payment to the charity. You have income of $600 and the "buyer" has no deduction. His "charitable contribuition was" a "sham." If you both get caught, both will suffer negative consequences. And there is no statute of limitatuions for tax fraud. IRS may miss it. They're pretty messed up.
 
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