Bad Paypal 1099

I've heard that starting Jan 1 2022, PP and all the rest of the online payment guys are going to need to 1099 anyone with more than $600 incoming to their account.

Assuming this is true, it'll greatly affect site like this. You could easily do 1 transaction above that here. Is anyone planning some different way to receive payment?
 
NPT said:
I've heard that starting Jan 1 2022, PP and all the rest of the online payment guys are going to need to 1099 anyone with more than $600 incoming to their account.

Assuming this is true, it'll greatly affect site like this. You could easily do 1 transaction above that here. Is anyone planning some different way to receive payment?
Click to expand...
Basically you are left with cash, check or money orders and even then, technically it is income whether hobby or business and is supposed to be reported anyway. If using an online payment processor (Paypal, Venmo, etc.....) you will get the 1099.

Although this is tied to the American Rescue Plan from last year man y states have been starting to do this on their own so only a matter of time till more or all would anyway.

The other way around it is to keep track of every purchase, all expenses and costs as well as sales and operate as a business filing a Schedule C each year so costs of "inventory" can be deducted along with selling costs (postage, packaging materials, etc....). One catch with this is as a "business" and when filing a Schedule C (Profit and Loss From Business) you would also typically file Schedule SE (Self Employment Tax) and be withholding around 16% to pay that. There is no free ride it seems.
 
Last edited:
Heirphoto said:
Basically you are left with cash, check or money orders and even then, technically it is income whether hobby or business and is supposed to be reported anyway. If using an online payment processor (Paypal, Venmo, etc.....) you will get the 1099.

Although this is tied to the American Rescue Plan from last year man y states have been starting to do this on their own so only a matter of time till more or all would anyway.
Click to expand...

Yep.

On the plus side, this will more or less force a some folks here into better spending habits, as those forms of payment won't allow someone to run up their credit card. I guess you could purchase a money order with a credit card, but most banks/lenders will treat it as a cash withdrawal, which means a hefty interest spike. Oops!

Given how many people are on the Exchange selling knives as usual this week, I think a lot of them are in for a surprise at the end of this year.
 
Quiet said:
Yep.

On the plus side, this will more or less force a some folks here into better spending habits, as those forms of payment won't allow someone to run up their credit card. I guess you could purchase a money order with a credit card, but most banks/lenders will treat it as a cash withdrawal, which means a hefty interest spike. Oops!

Given how many people are on the Exchange selling knives as usual this week, I think a lot of them are in for a surprise at the end of this year.
Click to expand...
At least for me, paypal has been hounding me for months to give them my tax info or I may not be able to accept money through them. People have been warned. And at least in my case, paypal can pound sand....
 
Make no mistake about it, this is just a plain tax increase - just not called such. As we speak more people are being hired at the IRS. This whole $600 thing is nonsense. It should at least $5000. This was not done to effect business or companies. This is going after the average Joe to squeeze some more out of us. This is not Paypal's doing - it's the current folks in charge in DC.
Anyone have any idea what they are going to accept as "proof" that I bought X knife at $350 and sold it at $300 - thereby taking a loss and not $300 in profit??
 
Last edited:
Gastonknife said:
Anyone have any idea what they are going to accept as "proof" that I bought X knife at $350 and sold it at $300 - thereby taking a loss and not $350 in profit??
Click to expand...

I am sure some sort of receipt , and PP transaction likely won' work in most case, since most don't give a description of the item on their payment. Of course none of that matters unless you are audited and they ask for the proof-but that is certainly a gamble. I have never kept any receipts for any of my knives including those bought new, so technically I would owe tax on the whole amount of sale. Without receipts they have no way of telling if it is a profit on a sale you are being taxed for or straight income-which some seem to be using PP for.
No doubt screwed up for those using PP for a hobby. I am guessing sales will be slowing down and the days of buying a knife just to see it will be a thing of the past for most. No necessarily a bad thing, but we might have to think about our purchases more.
 
Last edited:
I can tell you this for sure...I will not be racking up more than 600 in income with PP this year. Nor at any other similar sites, don't have any other accounts anyway.
 
Peter Hartwig said:
I am sure some sort of receipt , and PP transaction likely won' work in most case, since most don't give a description of the item on their payment. Of course none of that matters unless you are audited and they ask for the proof-but that is certainly a gamble. I have never kept any receipts for any of my knives including those bought new, so technically I would owe tax on the whole amount of sale. Without receipts they have no way of telling if it is a profit on a sale you are being taxed for or straight income-which some seem to be using PP for.
No doubt screwed up for those using PP for a hobby. I am guessing sales will be slowing down and the days of buying a knife just to see it will be a thing of the past for most. No necessarily a bad thing, but we might have to think about our purchases more.
Click to expand...
IRS does have a rule for businesses (resellers) turning their own personal items into inventory/merchandise to resell.

There is a bit more to it but there is a set way that IRS will accept for valuing personal property turned into inventory/merchandise. A few CPA/Tax people have Youtube videos showing what is allowed in this case.

Again though you need to file taxes and keep records like a business which has both plus and minus aspects.
 
Last edited:
Quiet said:
Yep.

On the plus side, this will more or less force a some folks here into better spending habits, as those forms of payment won't allow someone to run up their credit card. I guess you could purchase a money order with a credit card, but most banks/lenders will treat it as a cash withdrawal, which means a hefty interest spike. Oops!

Given how many people are on the Exchange selling knives as usual this week, I think a lot of them are in for a surprise at the end of this year.
Click to expand...

Agree with your post.

Regarding the part I bolded:

I was told at my post office recently by the postmaster that you can't buy a money order with an actual credit card. It has to be a debit card or cash.

Just a heads up I wanted to point out. And maybe you meant credit card in a general sense (to include debit card) anyway, in which case, my apologies.
 
J. Doyle said:
Agree with your post.

Regarding the part I bolded:

I was told at my post office recently by the postmaster that you can't buy a money order with an actual credit card. It has to be a debit card or cash.

Just a heads up I wanted to point out. And maybe you meant credit card in a general sense (to include debit card) anyway, in which case, my apologies.
Click to expand...

No, actually, a credit card is indeed what I meant. I didn't know that (I can't recall the last time I had to actually get a money order, it's been many, many years!), and just assumed a grocery store or whatever would let you do it. I did Google it and found several pages that mentioned that you could buy a MO with a credit card.

Either way, this is also going to cut down on the "From screen to hand in a few days" timestables on this hobby for sure. Gotta wait for the Seller to get your money order, then they cash/deposit it, THEN send you your knife.

On top of that, there's no protection when using a money order or check either, just like using PPFF that everyone is so up in arms about lately. Sooner or later, everyone's going to realize you have two options:

1. Use PPGS be "protected" (Venmo/CashApp/ApplePay won't protect a buyer to my understanding, so PPGS is really the only way) and expect a tax bill on your hobby at the end of the year
2. Be "unprotected" and fly under the radar using PPFF. Those are really the two choices, especially if these companies are going to essentially report every dollar you receive.

And even then, I fully expect Paypal to become MUCH more observant on PPFF usage and start banning people. The element of risk in buying or selling...well, anything on the Exchange or Reddit or Facebook or Instagram just went up significantly on January first. Well again, unless you're good with owing further taxes.
 
Quiet said:
No, actually, a credit card is indeed what I meant. I didn't know that (I can't recall the last time I had to actually get a money order, it's been many, many years!), and just assumed a grocery store or whatever would let you do it. I did Google it and found several pages that mentioned that you could buy a MO with a credit card.

Either way, this is also going to cut down on the "From screen to hand in a few days" timestables on this hobby for sure. Gotta wait for the Seller to get your money order, then they cash/deposit it, THEN send you your knife.

On top of that, there's no protection when using a money order or check either, just like using PPFF that everyone is so up in arms about lately. Sooner or later, everyone's going to realize you have two options:

1. Use PPGS be "protected" (Venmo/CashApp/ApplePay won't protect a buyer to my understanding, so PPGS is really the only way) and expect a tax bill on your hobby at the end of the year
2. Be "unprotected" and fly under the radar using PPFF. Those are really the two choices, especially if these companies are going to essentially report every dollar you receive.

And even then, I fully expect Paypal to become MUCH more observant on PPFF usage and start banning people. The element of risk in buying or selling...well, anything on the Exchange or Reddit or Facebook or Instagram just went up significantly on January first. Well again, unless you're good with owing further taxes.
Click to expand...
Well said.

On the money order part, now I'm curious. I wonder if it is just a USPS money order that can't be bought with a credit card? It is ENTIRELY possible that my ultra rural local post office employees don't know what they're talking about. For my own personal knowledge, I'm going to check on that.

As to the rest, you've laid out the options quite well as far as I can see.

From a knifemaker perspective, PayPal has been cracking down on makers using F&F for a year or two and as you suggest, it almost certainly will come under more scrutiny. As will folks trying to get multiple payments under $600 for one transaction, as I've already seen suggested.

**EDITED TO ADD**:

Apparently a credit card can not be used to purchase a USPS money order. From USPS.com:

How to Send Domestic Money Orders​

  1. Decide on the money order amount. You can send up to $1,000 in a single order anywhere in the United States.
  2. Go to any Post Office location.
  3. Take cash, a debit card, or a traveler’s check. You cannot pay with a credit card.
  4. Fill out the money order at the counter with a retail associate.
  5. Pay the dollar value of the money order plus the issuing fee.
  6. Keep your receipt to track the money order.
Click to expand...

www.usps.com

Money Orders | USPS

You can buy money orders at any Post Office to send anywhere. You can cash money orders at the Post Office. USPS replaces lost, stolen, and damaged money orders. Find out how much a money order costs or if your money order is real and whether it has been cashed on USPS.com.
www.usps.com
 
Last edited:
It is correct that one cannot purchase a USPS money order with a credit card. (A debit card can be used.)

I know this because I send in a fee to the NC Dept of Justice for my LEOSA qualification credential annually, and when I have tried to purchase with a credit card, I have been advised that only a debit card may be used. (I don't use debit cards.)
 
Money orders are basically cash. If I was selling them, I would not take credit cards where someone might latter file a claim on the transaction.
Standard procedure is to send the item out on receipt of a USPS money order(which is very easy to identify a legit one) and hold other money orders and checks until they clear. Of course you can do as you wish. Once you have seen a USPS money order you will see how it would be hard to fake. They have a number of security features in them.
USPS money orders are extremely safe for the seller, but not so much for the buyer. They can be lost in transit (I send them priority with tracking) and the item may not be sent. I have no doubt that if you commit fraud with money orders, through the mail, a number of laws will be broken, but not so sure of what the official follow up would be.
I have been using USPS money orders exclusively for my transaction the last couple years and partially before that, and can assure you it is not as easy to create or execute the transaction as with PP G&S. Likely we will see members moral objection to F&F weaken a bit.
 
While the knee jerk reaction to this is screw them, since this is both new and a bit hard to swallow , I think most will find the best use of their time and energy is to go on as they have been and just do the paperwork and taxes. You have to drive to the PO for the money order and wait in line(some time very long line) and on the other side take the money order to the bank(you can't do the photo deposit with USPS money orders). Between money order and delivery is some time, so no instant gratification, and pay me in 15 minutes or I go on to the next guy is certainly gone also.
 
*Thinking out loud*

Could I still avoid being 1099'd for 2022 IF:

After I sell $599 this year via Paypal G&S, could I open a Venmo and sell $599? Open an ApplePay and sell $599? Open a Cash App and sell $599? ad inifinitum < or at least until the Apps that provide seller coverage are exhausted :p >

Also, I realize Venmo is owned by Paypal...are they gonna allow $600 each app -OR- a total of $600 on both before 1099's are issued?
 
The issue with treating it as a business is your likelihood of being audited goes up (and you'll probably get reclassified as a hobby so then owe back taxes for the income that you cancelled out by deductions).

Schedule C (business) is heavily targeted, and businesses with losses every year are targeted even harder.
 
PeteyTwoPointOne said:
*Thinking out loud*

Could I still avoid being 1099'd for 2022 IF:

After I sell $599 this year via Paypal G&S, could I open a Venmo and sell $599? Open an ApplePay and sell $599? Open a Cash App and sell $599? ad inifinitum < or at least until the Apps that provide seller coverage are exhausted :p >

Also, I realize Venmo is owned by Paypal...are they gonna allow $600 each app -OR- a total of $600 on both before 1099's are issued?
Click to expand...

Might work, also might be considered tax evasion

we may be overthinking/overestimating this problem. A little record keeping a smig more time when doing your taxes
 
You must log in or register to reply here.
Back
Top