1099 K ?

[brew4eagle]

Received my first 1099 K since my state dropped its threshold down to $600 in received paypal (and similar) payments.  I did some googling, but figured I'd ask here as well.  Is there a preferred way to demonstrate that while $X were received, the cost of those sold items was $Y, so the net income gain (or loss) for all transactions was = $X - $Y ?  Or is it even necessary to go through this exercise if I'm not running a business?  This new 'feature' may break my hoin' ways.

[third-times-a-charm]

Who sent you the 1099?

[TheMagicStinger]

received one of these as well.  wondering the same thing as @brew4eagle.   I assume you received it from Paypal?

[brew4eagle]

1 hour ago, TheMagicStinger said:

received one of these as well.  wondering the same thing as @brew4eagle.   I assume you received it from Paypal?

Correct, Paypal.  This may be one of the plusses for the new ebay seller agreement, direct deposits into an account rather than 3rd party paypal transactions.

[brew4eagle]

4 hours ago, third-times-a-charm said:

Who sent you the 1099?

PayPal

[TheMagicStinger]

My money out was far greater than money in and I could most likely reconcile  my paypal account to show that.    So I'd like someone to chime in on how us hoarders should handle this.

Edited February 5, 2021 by TheMagicStinger

[brew4eagle]

7 minutes ago, TheMagicStinger said:

My money out was far greater than money in and I could most likely reconcile  my paypal account to show that.    So I'd like someone to chime in on how us hoarders should handle this.

Exactly.  I might end up with a very slight "profit", but it would be so much less than the amount of paypal payments received.  To the point that it would be insignificant as far as adjusted gross income.  However, the time it's going to take will suck, plus like you I want to do it right.

[happygolfer]

The ebay information page for 1099-K

 

Looks like they generate the form @ $20K or 200 sales unless you are a from a state that has lower limits (sub $1K)

 

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

[brew4eagle]

1 hour ago, happygolfer said:

The ebay information page for 1099-K

 

Looks like they generate the form @ $20K or 200 sales unless you are a from a state that has lower limits (sub $1K)

 

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

Correct.  I'm not questioning why I received one, just how to demonstrate that the value is absurdly high as far as net income is concerned.

[wobgon]

1 hour ago, happygolfer said:

The ebay information page for 1099-K

 

Looks like they generate the form @ $20K or 200 sales unless you are a from a state that has lower limits (sub $1K)

 

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

So depending on the state, a person generating less than 20k or less than 200 sales would not receive one, correct?

[straightshot7]

Google “1099 hobby income” and you’ll get lots of information...

 

Such as:

 

”You are required to report any 1099 income that nets you $400 or more in earnings.  You are definitely required to report on $2500 1099-K on both your federal and state tax returns.  The IRS received a copy of your 1099 and will expect it to be reported.  You may get a letter from the IRS if you don't include this income.

Also, all state income figures are pulled from the federal return, so this income needs to be entered on your federal return first.  TurboTax will transfer it to your state returns for you.  

 

You should enter the full amount of the 1099-K and deduct all of your related expenses.  This will reflect your true NET income on both returns.  When you enter the 1099, yes it may put you in another tax bracket, but when you add your expenses, it will adjust back down.  If your expenses = your income it will be a wash, yet get reported also.”

 

https://ttlc.intuit.com/community/taxes/discussion/how-can-i-report-my-ebay-hobby-1099k-on-my-state-taxes-but-not-on-my-federal-taxes-as-it-is-not/00/697253/amp

 

basically yeah, you’ll probably need to put it on your tax filing. But after you deduct expenses it shouldn’t be something you really owe taxes on.

[brew4eagle]

45 minutes ago, straightshot7 said:

Google “1099 hobby income” and you’ll get lots of information...

 

Such as:

 

”You are required to report any 1099 income that nets you $400 or more in earnings.  You are definitely required to report on $2500 1099-K on both your federal and state tax returns.  The IRS received a copy of your 1099 and will expect it to be reported.  You may get a letter from the IRS if you don't include this income.

Also, all state income figures are pulled from the federal return, so this income needs to be entered on your federal return first.  TurboTax will transfer it to your state returns for you.  

 

You should enter the full amount of the 1099-K and deduct all of your related expenses.  This will reflect your true NET income on both returns.  When you enter the 1099, yes it may put you in another tax bracket, but when you add your expenses, it will adjust back down.  If your expenses = your income it will be a wash, yet get reported also.”

 

https://ttlc.intuit.com/community/taxes/discussion/how-can-i-report-my-ebay-hobby-1099k-on-my-state-taxes-but-not-on-my-federal-taxes-as-it-is-not/00/697253/amp

 

basically yeah, you’ll probably need to put it on your tax filing. But after you deduct expenses it shouldn’t be something you really owe taxes on.

From what I read this doesn't fall into "hobby income" anymore, but will admit I glanced it all hoping someone here had done the research or is otherwise qualified in the area

[straightshot7]

18 minutes ago, brew4eagle said:

From what I read this doesn't fall into "hobby income" anymore, but will admit I glanced it all hoping someone here had done the research or is otherwise qualified in the area

I don't think it matters if it's hobby or not, in this case. It should probably be reported as if its a business. With your income and expenses. 

But ultimately, only a tax professional or an article written by a tax professional can give you an authoritative answer on this. But yeah maybe there is one on this board. 

[brew4eagle]

PayPal did send an excel spreadsheet with the transactions.  By juggling paypal and ebay invoices I was able to show a net loss, but what a pain and for many of the items I don't have receipts to prove exact amounts.  Hopefully those won't be needed when I file.

 

This may really curtail the club purchases, too much work.

[brew4eagle]

19 hours ago, wobgon said:

So depending on the state, a person generating less than 20k or less than 200 sales would not receive one, correct?

Correct.  VA sends for > $600.

[brew4eagle]

Several of my 'sales' were friends/family paying me for split bills where they sent funds as 'goods/services' by mistake.  A bit annoying when it happens as you eat some unnecessary fees, but way more annoying now as have to explain to the tax man.

[TheMagicStinger]

So basically if i had 10k come in I need to look at my goods and services transactions for items I bought? 

[brew4eagle]

12 minutes ago, TheMagicStinger said:

So basically if i had 10k come in I need to look at my goods and services transactions for items I bought? 

PayPal sent an excel file that has each transaction (only funds received via 'goods/services') on its own row.  You can open that side by side with PayPal and figure out what each transaction was for.  I did that, then created new columns for PayPal fees, ebay fees, shipping costs, and actual item cost.  Work all that out and you can figure your bottom line.

Edit- but I'm not sure of the right way to communicate this 'net' $0 income to IRS.  Hoping the software I use to file will point me to the correct form(s).

Edited February 6, 2021 by brew4eagle

[e-man]

But what if you bought the items outside of eBay?  Or what if you purchased them on eBay but used a credit card to pay for it?  Also, what if the purchase was years ago and the resale just happened in 2020.  I know that I have lost money on every purchase/sale I have ever made but there is no way I would be able to document them all.  Honestly, for those of us who aren’t in the business of buying and selling, this is completely ridiculous.  

[brew4eagle]

27 minutes ago, e-man said:

But what if you bought the items outside of eBay?  Or what if you purchased them on eBay but used a credit card to pay for it?  Also, what if the purchase was years ago and the resale just happened in 2020.  I know that I have lost money on every purchase/sale I have ever made but there is no way I would be able to document them all.  Honestly, for those of us who aren’t in the business of buying and selling, this is completely ridiculous.  

Agreed.  Many of the items I bought outside of Ebay, was able to find most transactions in PayPal or credit/debit transactions.  Others I remember roughly what I paid, and not sure if depreciation matters, didn't account for that.  My net came to a negative few hundred dollars.  So hopefully it won't affect anything, just annoying.

 

Edit- for me this came from PayPal and only showed received 'goods/services' payments, so technically independent of eBay, though many of the sales were on eBay.

Edited February 6, 2021 by brew4eagle

[jblough99]

@brew4eagle How long ago did you receive the 1099-k from PayPal?  Was it via digital/email or did it come in the mail? 

This thread has me nervous as I know I probably have close to 10k in transactions this year, although total profits would be in the negative.

I've searched all over the PayPal app and website and they dont seem to have a section to view tax documents.  Anything else that sends tax documents usually has a section somewhere to view/download?

I'm located in PA and will have to look into if they require this or not.

Edited February 6, 2021 by jblough99

[brew4eagle]

8 minutes ago, jblough99 said:

@brew4eagle How long ago did you receive the 1099-k from PayPal?  Was it via digital/email or did it come in the mail? 

This thread has me nervous as I know I probably have close to 10k in transactions this year, although total profits would be in the negative.

I've searched all over the PayPal app and website and they dont seem to have a section to view tax documents.  Anything else that sends tax documents usually has a section somewhere to view/download?

I'm located in PA and will have to look into if they require this or not.

Received an email with attachments from paypal about 1 week ago.  Also retrievable from paypal under 'documents' iirc, but pretty sure have to be on desktop site for that.  PA seems to be in the general requirement of $20k AND 200 or more transactions. 

Edited February 6, 2021 by brew4eagle

[brew4eagle]

My tax consultant had me report the 1099-K amount as income, and then use Schedule C "cost of goods sold" (i.e., inventory) to offset the 1099-K "income".  Via ebay and paypal records, I was able to reconcile it all so that my "income" for my "business" was $0.

[BustedBogeyMachine]

I went club crazy a couple years ago. Received a 1099 from EBay that I nor my forensic accountant now ex wife, and not the reason she’s an ex-wife, could ignore. 

 

It became necessary to create a LLC based on our best tax options. At least that was the best option she presented. I was almost castrated though, so setting up an LLC seemed like a better option.  

[DYOS4]

@brew4eagle how were you able to get just the goods/services Excel file? Can't seem to find any option just for that file. Am I correct in understanding that Friends and Family payments are not taxable? 

[brew4eagle]

19 minutes ago, DYOS4 said:

@brew4eagle how were you able to get just the goods/services Excel file? Can't seem to find any option just for that file. Am I correct in understanding that Friends and Family payments are not taxable? 

The 1099K total amount and 'reconciliation' file I got from paypal didn't include any friends/family transactions 

[ALTSean]

I went through Turbo Tax chat and they told me to claim / file it is a self employed business instead of a hobby, but they could not really explain why.  They also said that generally you cannot deduct expenses for things purchases in a different year so for 2020, generally only purchases made in 2020 could be deducted.  I asked about purchases made in 2019 or before and they said you could call them "start up costs" for your business.  The whole thing is too complicated for what is basically an online garage sale that is making most of us $0 or negative "profit."

[MuskieCy]

Federal rule requires the issuance of a 1099-K,G,NEC,M...for any deductible transaction(from the payor perspective) to the individual or entity who received the income.

 

The recipient should file a Schedule C(sole proprietorship) to reconcile any expenses against the income and derive the net income(loss) which is then added(subtracted) on the individual's 1040.

 

If no C is included, then the taxable amount is what is on the 1099. Also, if there is taxable income, self-employment tax is calculated at the rate of 15.3%. This is the full social security(FICA) tax. An employee has a payroll deduction of 7.65%, the employer remits a matching 7.65%

 

 

[Mustard_Tiger]

Based on this news I will no longer be accepting PayPal for payments and when I sell things I will only be selling through eBay. I know I will be under 200 transactions (and my state does not have a lower threshold).

 

 

 

Edited February 22, 2021 by Mustard_Tiger

[brew4eagle]

1 hour ago, Mustard_Tiger said:

Based on this news I will no longer be accepting PayPal for payments and when I sell things I will only be selling through eBay. I know I will be under 200 transactions (and my state does not have a lower threshold).

 

 

 

I have a feeling ebay will be reporting all payments as well.  I'm definitely going to buy/sell way less moving forward.