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

blackblaze 3,246 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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Joined Oct 2012
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#166
Quote from gpister View Post :
Since I have Ebay and knows I "use to" sell (I told him ur not gona get much with the fees and the competition but seems pretty hard headed) he wants me to do it which I don't feel comfortable with the whole 1099. I was also thinking of telling him to give me his Paypal so the funds would go to his account.
I would set up a new account for him with all of his information, both eBay and PayPal. Much easier to deal with since if you used your own account you would have to calculate fee's, shipping cost, and the possibility of returns and or chargebacks (rare but they do happen).
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#167
Quote from BreakingTheBank View Post :
I would set up a new account for him with all of his information, both eBay and PayPal. Much easier to deal with since if you used your own account you would have to calculate fee's, shipping cost, and the possibility of returns and or chargebacks (rare but they do happen).
Very truth I will tell him that I also don't want to do math and fees and all this I rather have him receive all the funds much easier thanks.
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#168
When will I receive the 1099 form from ebay/PayPal if in case I was eligible for that? Thanks
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#169
Quote from rockingsd View Post :
When will I receive the 1099 form from ebay/PayPal if in case I was eligible for that? Thanks
they have already been sent out, and available in your Paypal account.
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#170
Anyone know if the IRS can change the guidelines for this at random? My concern is the end of 2013 comes along and the IRS says ok now your going to get a 1099 for 50 Sales and 10K in revenue for 2013.
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#171
Quote from BreakingTheBank View Post :
A little late to the conversation but I wanted to add my experience. I made just under 200 transactions on eBay and about $14,000 in sales. Thought I was in the clear. I have a separate Paypal account I use for payment on consulting work I do for other businesses. Between the 2 accounts I went over 200 and 20K. I received two separate 1099's. So in short, it's not only sales that count towards your total, it's any payment, gift, Mass Pay, or any other type of transaction handled via Paypal and having separate accounts with the same social does not help.

Yes and they dont count refunds or anything. I sold over $400k this year so im getting hit hard this tax year. FYI, if you have 2 paypal accounts and put in your SSN at both of them, that will combine them also.

EDIT: Didnt see your note there at the end for SSN. The idea would be to not enter your social on the 2nd account.
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#172
Quote from rotogrip300 View Post :
Yes and they dont count refunds or anything. I sold over $400k this year so im getting hit hard this tax year. FYI, if you have 2 paypal accounts and put in your SSN at both of them, that will combine them also.

EDIT: Didnt see your note there at the end for SSN. The idea would be to not enter your social on the 2nd account.
Going to try and set up an account right now with no social.

Thank You
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#173
Quote from BreakingTheBank View Post :
Going to try and set up an account right now with no social.

Thank You
In order to get fully verified and no limits. You need a credit card attached as well as a bank account. Both of which have to be different from your original account.
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#174
Quote from rotogrip300 View Post :
In order to get fully verified and no limits. You need a credit card attached as well as a bank account. Both of which have to be different from your original account.
For now I am going to add a bank account. I get paid via Paypal Gift every week. Going to try next week and see if it allows me to accept the payment.

Thanks for all the tips everyone woot
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#175
Quote from rotogrip300 View Post :
Yes and they dont count refunds or anything. I sold over $400k this year so im getting hit hard this tax year. FYI, if you have 2 paypal accounts and put in your SSN at both of them, that will combine them also.

EDIT: Didnt see your note there at the end for SSN. The idea would be to not enter your social on the 2nd account.
So you have to have an EIN to show you truly have a business account and a personal account, otherwise, even more work to how much of that 400K is profit. What a PAIN, but good to know. I always thought that two separate accounts was good enough to separate business and personal funds.
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#176
Quote from blackblaze View Post :
So you have to have an EIN to show you truly have a business account and a personal account, otherwise, even more work to how much of that 400K is profit. What a PAIN, but good to know. I always thought that two separate accounts was good enough to separate business and personal funds.
I only had one business account this year and its one hell of a time figuring out all this. I sold personal stuff in there as well so I had to go through every transaction and figure out what was personal. Paypal sends the 1099-k to the IRS but they dont necessarily use the exact # given since they know some accounts will have personal transactions in there.
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#177
this is why you got to keep track of your expenses as you go, it makes tax time a hell of a lot easier.
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#178
Is it $20k AND 200 transactions

OR

$20k OR 200 transactions.
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#179
Quote from daniel32 View Post :
Is it $20k AND 200 transactions

OR

$20k OR 200 transactions.
$20k AND 200 transactions
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#180
Quote from Mathfalterd View Post :
$20k AND 200 transactions
oh that is relief. +4
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