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Paypal Reporting Income to IRS with 1099-K. eBay Sales Over $20,000 AND Sold Over 200 Items

blackblaze 3,214 February 2, 2012 at 07:18 AM
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I was reading this article this morning and posted it in another thread regarding 1099-K

http://www.forbes.com/sites/kelly...taxpayers/

I know there are a lot of folks here who buy and sell (using Paypal to receive payments) based on slickdeals they come across. Some folks for profit, some folks, to get their item for free (buy 4, sell 3, get their slickdeal item free). I've been able to get some great deals going the route of buying a few extra and getting the item for free. However, with so many great slickdeals throughout the year and selling, for some, you may have cross the threshold of now receiving a 1099-K from Paypal ($20K gross received and 200 transactions) that is also reported to the IRS

http://www.irs.gov/instructions/i1099k/ar02.html

So, how does one handle this. Some questions that come to mind:

1. What distinguishes hobby seller from small business?
2. Reported amount is gross, not net, where is clarity to show just net income?
3. If you receive this form, and somehow show a result of net income, can you claim expenses, itemized deduction (mileage to acquire items, etc, etc.)?
4. Since this is new, how well are tax accountants prepared to help tax preparers to navigate this new form?
5. Should you create a new Paypal/Ebay account to account for selling personal items/friends items, etc vs items strictly for resale?

Wanted to open it up for discussion. Cool2

256 Comments

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#136
Quote from aqan View Post :
How does PayPal figure out the cost basis? You may be selling for a.loss.
That's your job.
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#137
Quote from LivninSC View Post :
That's your job.
That's my point dude.. what is PayPal going to report if they don't know the cost basis.
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#138
Quote from aqan View Post :
That's my point dude.. what is PayPal going to report if they don't know the cost basis.
It's called a 1099-K.

Here's a write-up on Amazon.

http://www.amazon.com/gp/help/cus...=200663310
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#139
so when ppl say 200 transactions they mean only money that is put into a persons paypal account not money going out (or in other words, just items sold)? is that correct?
for example if i've had a total of 300 transactions but 196 of those are me buying something and the other 104 is selling then I wont need a 1099k.
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#140
so to be clear i can go to paypal, login, view history, and use payments recieved filters and then if theres less than 200 transactions or less than 20,000 in net amounts then I am safe?
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#141
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#142
Quote from itsaulgoode View Post :
so when ppl say 200 transactions they mean only money that is put into a persons paypal account not money going out (or in other words, just items sold)? is that correct?
for example if i've had a total of 300 transactions but 196 of those are me buying something and the other 104 is selling then I wont need a 1099k.
Quote from itsaulgoode View Post :
so to be clear i can go to paypal, login, view history, and use payments recieved filters and then if theres less than 200 transactions or less than 20,000 in net amounts then I am safe?
Probably an opportunity to clarify this question now that the 2012 1099-K are officially out by Paypal.
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#143
I need help with the 1099-K!!

How can I claim the expenses for each transaction? For example, shipping cost, eBay fees, PayPal fees, and cost of good.
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#144
Quote from invisibleman View Post :
I need help with the 1099-K!!

How can I claim the expenses for each transaction? For example, shipping cost, eBay fees, PayPal fees, and cost of good.
Did you document mileage for picking up and shipping goods, any associated tolls? Bigger question, did you document your purchase and sales, cause if not, then you have to backtrack 2012 and do A LOT of estimates, especially if you don't have receipts. You don't want to raise any red flags and you don't want to have to overpay if you don't have too.
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#145
Quote from invisibleman View Post :
I need help with the 1099-K!!

How can I claim the expenses for each transaction? For example, shipping cost, eBay fees, PayPal fees, and cost of good.
Get an accountant.

Everything depends on how you paid, and what proof you kept.

I can certainly see why the gov has done the whole 1099k thing, the number of people selling and not reporting seems huge.
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#146
Quote from BargainSnatcher View Post :
Get an accountant.

Everything depends on how you paid, and what proof you kept.

I can certainly see why the gov has done the whole 1099k thing, the number of people selling and not reporting seems huge.
which means bigger potentials for audit
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#147
I go to my Amazon Account, Click "Report Tab" and it said.
"According to our records, your seller account did not meet both of the Form 1099-K threshold requirements of $20k of unadjusted gross sales and 200 transactions. No Form 1099-K is available"
Do I need to report my income from Amazon? In the whole 2012 I didn't meet the thresholds, My sale is under 20k$ and under 200 transaction.
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#148
Quote from blackblaze View Post :
Went to HR Block today to get some information, and as expected, EVERYONE is learning how to treat the 1099-K. Was told today that information the 1099-K will then lead someone to do a Schedule C

http://biztaxlaw.about.com/od/glo...edulec.htm

So this probably takes folks out of the realm of a hobby seller, into a self-employed type bracket or small business, even if its not your primary job. And all that is associated with that (expenses, deductions, profits, loss) should be known so to report that.
Get yourself a real accountant. I wouldn't trust H&R block for anything except doing basic tax where someone has a job and no other income. Check out a CPA in your area.
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#149
Quote from BargainSnatcher View Post :
Get yourself a real accountant. I wouldn't trust H&R block for anything except doing basic tax where someone has a job and no other income. Check out a CPA in your area.
Thats the plan, have a meeting with one this week.
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#150
Quote from Snyder.698 View Post :
I had a lot of amazon sales and received my 1099-K. I filed earlier this week via Turbotax.
Do I need the Premier or the Home Business version?

If I received a 1099-k for selling too much on ebay, do I need the Premier or the Home Business version?
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