Bad Paypal 1099

Triton

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Wow, sounds like I am only using check or money order in the very near future as payment types.
 

madcap_magician

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Yes, had to do the Schedule C

Hopefully Turbotax will understand this come filing season in 2023. :/

I've started documenting all hobby sales and purchases along with the associated Paypal and shipping fees and shipping supply costs. Just started generating invoices with transaction and tracking numbers for buyers as well. Hopefully that will help.

When you do a Schedule C, does it matter when the item sold was purchased?
 

jlauffer

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Hopefully Turbotax will understand this come filing season in 2023. :/

I've started documenting all hobby sales and purchases along with the associated Paypal and shipping fees and shipping supply costs. Just started generating invoices with transaction and tracking numbers for buyers as well. Hopefully that will help.

When you do a Schedule C, does it matter when the item sold was purchased?

No, date purchased or sold doesn't need to be entered on the form. Basically just have to enter the lump sum amount of the cost of the goods sold, and any other expenses like fees, shipping, packing materials, etc.

I use the H&R Block software and it's pretty straightforward.

What was weird this year is that the 1099K was a couple hundred dollars less than what I thought it would have been based on my records. So that also helped me get down to $200 profit, otherwise it would have been something like $450.
 
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I've been selling the same product using PayPal for 10 years. I document. I adapted to the 1099-K.

This year, even I was surprised: on their 1099-K, PayPal states the number of sales and the gross amount for 2020.

HOWEVER, they do not take into account any reversed sales or refunds even though the sale was cancelled and money refunded via PayPal. I'm not an accountant, and maybe this is the way things are done, but I was not expecting this. In this case, their inclusion of a cancelled sale put me over the $600 threshold. :thumbsdown:
 

Quiet

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It's crazy that this post is only two pages long. I think a lot of folks who are passing this thread by and missing this information, and who tend to buy and sell many knives are going to be in for quite a shock at tax time. There are guys selling single knives on the Exchange right now for far more than $600, hope they're ready for that bill. Man, this really does start to feel like the .Gov is out to bleed people dry.
 

Triton

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It's crazy that this post is only two pages long. I think a lot of folks who are passing this thread by and missing this information, and who tend to buy and sell many knives are going to be in for quite a shock at tax time. There are guys selling single knives on the Exchange right now for far more than $600, hope they're ready for that bill. Man, this really does start to feel like the .Gov is out to bleed people dry.

Of course they are, at some point when you give away a trillion dollars here and a trillion dollars there it starts to add up. Don't get me wrong I'm pretty grateful to not be living through the second Great Depression right now but at some point we have to pay for all that spending. That doesn't mean I won't avoid it if I can.
 

photoman12001

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It's crazy that this post is only two pages long. I think a lot of folks who are passing this thread by and missing this information, and who tend to buy and sell many knives are going to be in for quite a shock at tax time. There are guys selling single knives on the Exchange right now for far more than $600, hope they're ready for that bill. Man, this really does start to feel like the .Gov is out to bleed people dry.

I agree but our hobby is a tiny sliver of the affected pie. All those folks selling old clothes, household goods, etc. on eBay and such are going to be in for a big surprise too. I would not know about any of this now if I hadn’t moved from Colorado to Virginia last year. I’ve only sold 3 items since getting hit with the 1099 this year. I’ve got a pile of stuff to sell but don’t really know the best path forward.
 

Peter Hartwig

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At this point it will be a big surprise, but in the future (as far as knife forum sales) it likely will just be added paperwork. Very few make money, so you will just have to keep all the paperwork to show that and file correctly on tax forms (if needed). Certainly a hassle, but you may even land up with a tax reduction.
Not sure how far back you can find PP records, but if you have exclusively used PP (including for shipping) you may be able to find the needed info.
My 2 cents and since I am not an accountant there could be errors in my thinking
Good luck
 

ONeill

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There is an option and it is bill pay from your bank . If customers were to use their bill pay option and have there bank send you a check there should be no tracking of that . I have done that and my son does it often .
Also since it is a bank check it does not need to be held to clear but of course the customer must be willing .

Just a thought .
 

jlauffer

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At this point it will be a big surprise, but in the future (as far as knife forum sales) it likely will just be added paperwork. Very few make money, so you will just have to keep all the paperwork to show that and file correctly on tax forms (if needed). Certainly a hassle, but you may even land up with a tax reduction.
Not sure how far back you can find PP records, but if you have exclusively used PP (including for shipping) you may be able to find the needed info.
My 2 cents and since I am not an accountant there could be errors in my thinking
Good luck

That's pretty much it. Once you get over the shock, anger, etc, and actually get through it the first time, it's not that bad, as long as you keep good records moving forward.
 
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There is an option and it is bill pay from your bank . If customers were to use their bill pay option and have there bank send you a check there should be no tracking of that . I have done that and my son does it often .
Also since it is a bank check it does not need to be held to clear but of course the customer must be willing .

Just a thought .
Transactions can be direct deposit or transfer bank to bank (no check--no paper). I've dealt with buyers who prefer this method.
 

Heirphoto

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When you do a Schedule C, does it matter when the item sold was purchased?

As a business using Schedule C yes. Goods bought for resale are subtracted from sales as cost of goods sold. At year end however inventory is to be taken and that number goes on the form and is next years beginning inventory. For the best tax advantage you don't want left over inventory at years end.
 
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Heirphoto

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It's crazy that this post is only two pages long.

Yeah. Wait till January 2023 and this topic will be viral. Even January 2022 when those half dozen new States who started early get their cut and resident are caught by surprise.
 

madcap_magician

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The ones sell


As a business using Schedule C yes. Goos bought for resale are subtracted from sales as cost of goods sold. At year end however inventory is to be taken and that number goes on the form and is next years beginning inventory. For the best tax advantage you don't want left over inventory at years end.

I'm just real interested in what this is going to mean for all of us. I certainly do more than $600 a year in Paypal G&S transactions. But I'm obviously not a business, and my 'inventory' is my collection and sometimes sits for years.
 

stonesell

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PayPal still doesn't have my SS number, and I would hate to give it to them, but with the new $600 rule starting in 2022, I just may need to provide that info. Since I sell most of my knives at a 15% to 25% loss, I would just need to list them on the tax form, and show the loss. There would not be any tax liability. It's still very annoying to have to do this, especially when we are mostly losing money, by selling off old items.
 

jlauffer

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I'm just real interested in what this is going to mean for all of us. I certainly do more than $600 a year in Paypal G&S transactions. But I'm obviously not a business, and my 'inventory' is my collection and sometimes sits for years.

Wouldn't worry about it too much...I think they realize when it's a real business and when it's not. This is the 2nd time I've done it and haven't been audited, or refunds delayed, etc. I forget the inventory questions that the tax software asked when I did the Schedule C, but when I print out my MA return it always provides a list of things to be sure to include, and this time one of them was something like "an explanation of why your starting inventory is different than last year's ending inventory". I didn't have to do a Schedule C last year so I just ignored that and sent in my return, and got my refund in about 3 weeks.
 
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