PayPal and the 2020 Taxes 1099-K Form Reporting - IL, VT, MA, VA, MD 1 1

[wilbil]

35 minutes ago, Mutant Manatee said:

I will have my accountant/tax preparer look into this, but according to a post above hobby expenses are no longer tax deductible as of 2017.   I don't know if I can report this income as a business and therefore deduct my expenses.  I have never had a tax ID number.

yes, you can. your accountant knows what to do. the post you are referring to is not quite correct. go to irs.gov. the test for business vs. hobby is stated. how to report income is stated, for both hobby and non-hobby earnings and profits. if you had 10k in sales, i assure you irs considers you a business, and you have meticulous sales records....ebay records. listen to shad. he is giving you excellent advice. the deductions you can take is the fun part (including a percentage of your residence used for the business....phone/electric/mortgage/etc.)

your tax id number is your ssn. file 1040 with c,d, and whatever the heck other forms you need to after talking with your accountant.

there is not one reason to not do so, other than trying to scam the irs and not apy the taxes. why anybody does that is beyond me, when the government gives you plenty of legitimate methods to lower the tax that may be owed.

i do not see any reason for quitting ebay sales because of this, especially when it is a benefit to you for record keeping.

checks and money orders is not the answer, and could be a bigger problem down the road.

fwiw. been there done that.

run it as a business. it will be to your benefit.

it is not what you make, it is what you keep. 

[grebal]

^yeah, but your cost basis in the comics you sold (to calculate your gain in the first place) can be hard to document, especially for comics bought years earlier (original purchase price plus shipping etc).

Documenting today's expenses (fees, postage, shipping supplies, bags/boards etc.) is comparatively easier because you have recent receipts.  Though I agree about the 'fun' of deducting a portion of your overhead (allocate part of your home, climate control costs ...).

[1Cool]

[manetteska]

So I buy a comic at the LCS and pay tax.

I sell a comic on eBay and pay tax on the sale (as income at EoY).

And the buyer pays tax on that purchase.

Cool.

[wilbil]

26 minutes ago, grebal said:

^yeah, but your cost basis in the comics you sold (to calculate your gain in the first place) can be hard to document, especially for comics bought years earlier (original purchase price plus shipping etc).

Documenting today's expenses (fees, postage, shipping supplies, bags/boards etc.) is comparatively easier because you have recent receipts.  Though I agree about the 'fun' of deducting a portion of your overhead (allocate part of your home, climate control costs ...).

all that is required is a reasonable cost estimate. i would be surprised if historical reasonable comparatives could not ebmade. what would a person want....doing a reasonable cost comparison to determine the basis, or letting the irs do It? you don't want my answere, because it would not be a pretty conclusion.

[D84]

46 minutes ago, D84 said:

Unless you are an accountant, be careful about giving out tax advise. Several states have different laws as to what constitutes a business and what licenses are required.

To clarify, I'm not condoning lying on taxes. I'm advocating doing it all correctly with local, state and federal governments.

After rereading it, I thought it might have sounded shady and that was not my intention. 

[wilbil]

Just now, manetteska said:

So I buy a comic at the LCS and pay tax.

I sell a comic on eBay and pay tax on the sale (as income at EoY).

And the buyer pays tax on that purchase.

Cool.

....and you get to deduct all the legal deductions, and keep more.

[shadroch]

I don't understand peoples fear of taxes. My new neighbor bought a house for his mother a few blocks away. She died and it is empty. I offered to rent it from him but the City of bisbee has a 2.5 % tax on rental properties.  He'd rather let it sit empty than pay $25 a month on a $1,000 income

[CatskillMike]

You can expect more of this scrutiny to obtain "missing" tax dollars to get even tighter as states are scrambling to find money to pay for the enormous pandemic costs.  As for getting money orders and personal checks, they leave a paper trail also, with your bank. If you get audited they will find that in 2 seconds. I'm pretty sure that is what wilbil was referring to.

To me it looks like all those sellers that never paid a dime in tax money all these years are in for it.  Private sellers selling off or turning over keys and making $1000's of dollars in profit might now be paying taxes. Here, ebay, everywhere. 

Consider this scenario- Blob or Dale or one of the true dealers sells an FF#1 for $15,000.  He priced it knowing he has to pay taxes on the gain. But if I wanted to sell my FF#1 for the same amount, I shouldn't pay any taxes?  Then I should sell mine for less, right?  This levels the playing field for selling, imho.

I assume this will not be a popular post. 

Edited January 25, 2021 by CatskillMike
spelling

[CatskillMike]

4 minutes ago, shadroch said:

I don't understand peoples fear of taxes. My new neighbor bought a house for his mother a few blocks away. She died and it is empty. I offered to rent it from him but the City of bisbee has a 2.5 % tax on rental properties.  He'd rather let it sit empty than pay $25 a month on a $1,000 income

Not too bright.

[comicdonna]

I usually lose money on every book I sell so, I shouldn't have to pay too much in taxes.

[wilbil]

1 minute ago, CatskillMike said:

You can expect more of this scrutiny to obtain "missing" tax dollars to get even tighter as states are scrambling to find money to pay for the enormous pandemic costs.  As for getting money orders and personal checks, they leave a paper trail also, with your bank. If you get audited they will find that in 2 seconds. I'm pretty sure that is what wilbil was referring to.

To me it looks like all those sellers that never paid a dime in tax money all these years are in for it.  Private sellers selling off or turning over keys and making $1000's of dollars in profit might now be paying taxes. Here, ebay, everywhere. 

Consider this scenario- Blob or Dale or one of the true dealers sells an FF#1 for $15,000.  He priced it knowing he has to pay taxes on the gain. But if I wanted to sell my FF#1 for the same amount, I shouldn't pay any taxes?  Then I should sell my for less, right?  This levels the playing field for selling, imho.

I assume this will not be a popular post. 

it is a popular post in the circles i travel in.

and yes, that is what i am referring to, and...it triggers the 7 year look back after they nail a person to the cross for the present review. it is not worth testing. at all. testing means you lose.

[wilbil]

3 minutes ago, comicdonna said:

I usually lose money on every book I sell so, I shouldn't have to pay too much in taxes.

that is what everybody tells the irs.

[bluehorseshoe]

Alternative idea: declare yourself a sovereign citizen. :Spoon: taxes, having to have a drivers license, and get on livin your life, that L-I-V-I-N.*
 

 

 

 

 

 

 

 

 

 

 

*Not legal or tax advice. Seek assistance with an attorney or tax professional. Not valid in all states, but definitely the crazy ones like Florida, West Virginia, and Idaho. 

[masterlogan2000]

5 hours ago, vheflin said:

On 1/24/2021 at 2:31 AM, lou_fine said:

Wow, sounds as though they are really tightening the screws on all of this online internet selling that's taking place in this pandemic driven economy. 

Any idea if the major auction houses are also required to send out these tax forms to you, and if so, do they also provide a matching copy to the IRS on your behalf to make sure that everything gets reported?    

It applies only to third-party settlement organizations such as Paypal.

Though the major auction houses and eBays of the world are acting as First Party platforms for us to sell our warez, those entities act as Third-Party settlement organizations when it comes to payment.  Afterall, the payment goes from the buyer to the auction house to the seller (vs directly from buyer to seller).

If they are not already sending out tax forms to their sellers, I expect the screws to only be tightened as time goes on.

[masterlogan2000]

OP here...

So after a bit of digging and some quick calls to some tax professional acquaintances of mine, the amount in the 1099-K is not the amount I'm being taxed on.  It is the amount of reported sales by the 3rd party settlement organization.  It is up to me to deduct the expenses against that number to get the true taxable amount at the end.

This is far from me giving out tax advice, but moreso the approach that I am taking on this.  To me, it makes total sense that my $1,000+ in sales here in Illinois does not equte to $1,000+ in profit.  Those books I sold have a cost of acquisition associated with them, along with the cost of any rebags/reboards, plus all the expenses of going to conventions to pick up the books.  These expenses are all going to be reported against my sales under the "Other Income" section of my filing.  Now, if only I can deduct a reasonable amount for all my time that I spent on this "business" since apparently it's no longer a hobby to me.

The bottom line here is to keep meticulous records of everything.  I already keep a cost basis and transactions log in Google Sheets.  I've been toying with the idea of cleaning up my code and releasing it out to GitHub, but that's low on my list of priorities.

[Tnexus]

It's really not hard to change this into a business. If you buy a $1000 in comics a year, that's $1000 you can potentially write off. If you sell $1500, then you're only liable for $500. And of that $500 you can probably write off a chunk of it for various expenses. (You can write off mileage just going back and forth to the post office and comic shop potentially at about 55 cents a mile for instance.) It's annoying, but it can keep the tax man at bay.

[thunsicker]

I've got a similar question.  I have a job and earn a good salary.  Does my company need to report my income to the government?  I'd prefer not to pay any taxes.  

[FlyingDonut]

12 hours ago, Mutant Manatee said:

I got a 1099 from PayPal also and it was a shock.  I now owe about $3,000 in taxes that I wasn't expecting.  (I'm in Illinois.)  Now eBay wants to force everyone into "Managed Payments" and you must give them your Social Security number or Tax ID.  I will have no choice but to stop selling on eBay and stop accepting PayPal payments for online sales.  

This really sucks.   

As someone who does in fact pay his taxes, I'm quite happy that you're no longer cheating the system. You don't need a business tax ID, you can file them on your Schedule C on your 1040. Talk to your accountant.

[FlyingDonut]

11 hours ago, Mutant Manatee said:

$3,000 in taxes based on approximately $10,000 in sales where payment was made via PayPal.

If you had $10,000 in sales, you absolutely did not have $10,000 in profit. You pay your taxes on your net not your gross.