Bad Paypal 1099

ArchVV said:
As a side note, our Texas based credit union sent out letters warning about the requirement to report all transaction over $600 to the IRS, as part of biden's bill. The letter encouraged us to contact state and federal legislatures to voice disapproval of the bill.
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I think the actual wording is that the transactional based reporting will be required on accounts greater than $600 - not transactions greater than $600. Brokerage, bank, transfers, etc.
 
r8shell said:
They are due a cut every time money changes hands,
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Are they though? Even if you sell at a loss?

Seems to me that is the whole problem many of us have here. Paypal is willingly selling out its customers to the gov who is now requiring us to prove that we aren't making money in our hobby, or we have to pay taxes on that profit. Am I missing something?
 
It's getting ridiculous. You will see people looking to barter instead of getting paid in currency. Precious metals would work.
 
craytab said:
Are they though? Even if you sell at a loss?

Seems to me that is the whole problem many of us have here. Paypal is willingly selling out its customers to the gov who is now requiring us to prove that we aren't making money in our hobby, or we have to pay taxes on that profit. Am I missing something?
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I don't really know. I've heard people say that if you operate at a loss, after some number of years it's classified as a hobby, rather than a business. I don't understand how that would work. Is there a Schedule C / hobby form?

I'm at the point where I wouldn't even care if extra fees were taken out to pay taxes, if it meant my hobby weren't ruined by having to do extra bookkeeping and fill out more damned forms.
 
r8shell said:
I'm at the point where I wouldn't even care if extra fees were taken out to pay taxes, if it meant my hobby weren't ruined by having to do extra bookkeeping and fill out more damned forms.
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That's where I'm at. Sold a knife to a buddy face to face yesterday. Sold it for less than what they cost new. Should I claim the loss? Too much work and I'd never even considered it before being hassled by paypal to give them a tax ID.

If my financial institutions aren't going to represent what I am doing accurately to the gov (IE, I'm not running a business), they can get F-ed and I'll enjoy the hobby by other means.
 
The way the new requirement will effect hobbyists is a shame. The can sell at at loss and still have to pay taxes on the price it sold for, and have no way to write it off.
 
I'm sure Paypal monitors all their customers transactions regardless if it is G&S or F&F. If their system see's a pattern with your account and it raises a red flag that you may be using F&F to evade taxes, they can send you a 1099. Then it's you and the IRS to figure out.

From ZenLedger:
"You shouldn't have to report to the IRS on PayPal Friends And Family transactions; it is only applicable for commercial transactions. But in order to comply with the financial regulations of the government and keep tax evasion at bay, PayPal monitors all of its transactions."
 
Have been watching this for a while and, even being a numbers guy, it's giving me a headache! I try to be fair when I sell a knife from my collection and rarely do I actually profit. For me, this truly IS a HOBBY. I have decided that I will steer way clear of schedule C. Since I keep excellent records (purchase receipts and a detailed spread sheet on collection purchases and sales, to include pictures), I will report any 1099-K reported "income" (for lack of a better term) as investment income (sale of collectables). I will title / report these as "1099-K income" and list each of the knives sold, reporting their acquisition date, price / sale date, price / and profit/loss (which, in most cases, will be a loss). All this will add needless time and effort at tax time ... for the crime of enjoying my hobby. But ... seems like the easies route for me. The only thing I am yet unsure of is (like with the sale of stocks) whether I can list all of my sales as an aggregate (rather than list each knife sold individually) and enter "various" for the acquisition date. Still have to research that ... but it would make it a little easier.
 
I guess postal money orders are going to make a comeback after all these years.


From H%R Block website:

"Don’t accept nontaxable payments via credit or debit card​

It may not be advisable to accept non-business payments using a card reader. For example, if you split the rent with your roommate, it’s probably not a good idea to have them pay you for their half using their debit card and a smart-phone card reader, because the processor will not be able to differentiate the payment and may issue a Form 1099-K including the rent payments.

Splitting rent with your roommate is not generally a taxable transaction, but the IRS will probably send you a notice if you’re issued a Form 1099-K and that amount does not appear anywhere on your return."


This is gonna bite all those non-cash-carrying, never-written-a-paper-check GenZ kids in the ass. :(
 
LMT66 said:
If their system see's a pattern with your account and it raises a red flag that you may be using F&F to evade taxes, they can send you a 1099. Then it's you and the IRS to figure out.
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Is PayPal sending out 1099s for F&F payments you just saying it's something possible, or is it actually something expected to happen? Not trying to be a dick (in case it reads that way), just trying to make sure I know the actual facts versus FUD since your post is the first I've seen about F&F being treated the same as G&S
 
Not to worry if the new “infrastructure bill” passes any time a deposit of more than 600 dollars hits your checking account banks will be required to report the transaction to good old Uncle Sam. Write your Congress critters now.
 
r8shell said:
I've heard people say that if you operate at a loss, after some number of years it's classified as a hobby, rather than a business. I don't understand how that would work. Is there a Schedule C / hobby form?
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Edited because my post has now been corrected by several more knowledgeable folks. Leaving it struck out for posterity.

I'm not a tax lawyer (etc.), but the IRS has different rules for hobby income:

Five Things to Remember about Hobby Income and Expenses | Internal Revenue Service

Tax Tip 2017-80, November 21, 2017
www.irs.gov www.irs.gov

If your hobby is knife collecting, and you only ever sell knives at a loss, then you'd claim the income from selling them and then deduct all of it as hobby expenses. Hobby expenses can't exceed hobby income, and you can't use those deductions to reduce your other income.

So provided you already itemize your deductions, this sounds like about 2 minutes of work and shouldn't incur any additional taxes. (Again, I want to stress that I'm not anyone's tax lawyer. Anyone planning to do this should do some homework. ;))

If your knife-collecting hobby is a business, you have to follow the rules for operating a business. This has some benefits, such as being able to deduct business expenses (e.g. you need your computer to sell knives on the internet, but while buying a computer isn't a knife-collecting hobby expense it is a business expense), but also some downsides, like taking inventory, recordkeeping, etc.
 
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Dadpool said:
I'm not a tax lawyer (etc.), but the IRS has different rules for hobby income:

Five Things to Remember about Hobby Income and Expenses | Internal Revenue Service

Tax Tip 2017-80, November 21, 2017
www.irs.gov www.irs.gov

If your hobby is knife collecting, and you only ever sell knives at a loss, then you'd claim the income from selling them and then deduct all of it as hobby expenses. Hobby expenses can't exceed hobby income, and you can't use those deductions to reduce your other income.

So provided you already itemize your deductions, this sounds like about 2 minutes of work and shouldn't incur any additional taxes. (Again, I want to stress that I'm not anyone's tax lawyer. Anyone planning to do this should do some homework. ;))

If your knife-collecting hobby is a business, you have to follow the rules for operating a business. This has some benefits, such as being able to deduct business expenses (e.g. you need your computer to sell knives on the internet, but while buying a computer isn't a knife-collecting hobby expense it is a business expense), but also some downsides, like taking inventory, recordkeeping, etc.
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Or you could avoid all that by using USPS money orders and don't deposit knife funds in a bank account . :)
 
Dadpool said:
If your hobby is knife collecting, and you only ever sell knives at a loss, then you'd claim the income from selling them and then deduct all of it as hobby expenses. Hobby expenses can't exceed hobby income, and you can't use those deductions to reduce your other income.
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Not sure that is entirely correct. A lot depends on how you classify what you are doing relative to the amount reported by PP on the 1099-K. For the purposes of what we BF knife collectors do (buying knives and then selling ones that we've grown tired of or want to shuffle out of the collection) .... expenses (paypal fees, shipping costs, etc) are NOT deductible. I believe that change took place in 2018. The referenced link is from 2017. And btw ... I am not a tax professional either. But, this is what I have learned in my research.
 
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As a VA resident that was bored in last years lock down I bought/sold a lot of knives using PayPal throughout 2020. Got a real nice 4K 1099 earlier this year.

I’ve not sold one since I got that 1099. I have a handful I want to move but will be doing business strictly by money order or if I know them, personal check.

Has definitely changed my knife buying habits. I pay enough in federal/states as it is.
 
Dadpool said:
I'm not a tax lawyer (etc.), but the IRS has different rules for hobby income:

Five Things to Remember about Hobby Income and Expenses | Internal Revenue Service

Tax Tip 2017-80, November 21, 2017
www.irs.gov www.irs.gov

If your hobby is knife collecting, and you only ever sell knives at a loss, then you'd claim the income from selling them and then deduct all of it as hobby expenses. Hobby expenses can't exceed hobby income, and you can't use those deductions to reduce your other income.

So provided you already itemize your deductions, this sounds like about 2 minutes of work and shouldn't incur any additional taxes. (Again, I want to stress that I'm not anyone's tax lawyer. Anyone planning to do this should do some homework. ;))

If your knife-collecting hobby is a business, you have to follow the rules for operating a business. This has some benefits, such as being able to deduct business expenses (e.g. you need your computer to sell knives on the internet, but while buying a computer isn't a knife-collecting hobby expense it is a business expense), but also some downsides, like taking inventory, recordkeeping, etc.
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Since 2018 you have NOT been able to deduct hobby expenses from hobby income. https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-expenses-from-hobby.html. You're right you used to be able to do it with itemized deductions, but that's not true now (but could be again in 2026).


Yeah it's dumb businesses can and people with hobbies can't.
 
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