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

blackblaze 20,456 3,352 February 2, 2012 at 07:18 AM
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Last Edited by blackblaze February 3, 2012 at 04:29 AM
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

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266 Comments

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#256
Quote from HarryF2229 View Post :
Open a new ebay account with a different bank account, a bank account opened under your, say daughters name, establish sales under this ebay name, have online access to the bank acct. and the pay pal account under daughters name, when needing money from pay pal have check sent to daughter and she signs it over to you, good for up to 19,999.00
That's what I was going to do, but as I explained Paypal *says* they'll figure it out based on the items you sell under each account & then they'll just combine the two and issue a 1099. Whether they actually do that or not, I don't know…but that's what they claimed when I called. I just pull all my ads off eBay when I get close to $20k and then relist everything on Jan 1st.
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#257
Do you guys know if the limit with paypal/ebay is $20,000 or 200 items or is the limit $20,000 and 200 items to go over? I've been wondering this for awhile.
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#258
There are a lot of Sellers that use Pay-pal..Today i Received a IRS notice CP2000 for 2013,Not knowing this law about Pay-pal/E-bay in bed with IRS..in 2012 i sold a lot of Items using pay-pal..My Truck and two boats and a lot of other items i had in Storage ..Items i sold for 1/2 my Coast or less..I NEVER RECEIVED A 1099 from pay-pal or any kind of notice ...Now they are saying i never claimed this..REALLY..Wow i never had a clue and pay-pal failed to let me know any thing..Im think Millions of People are going through the same thing..!! If Pay-pal would have sent something or had Told all there Users ,People would have add it to there Tax's..All this Does is Piss me Off..To the point of Telling them Never again..It's hard times for a lot of Family out there with out having these blood sucking trash playing there games to get more money and hurt or Country more.. Signed PISSED OFF..
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#259
Quote from JoshuaB4966 View Post :
Do you guys know if the limit with paypal/ebay is $20,000 or 200 items or is the limit $20,000 and 200 items to go over? I've been wondering this for awhile.
You must trigger BOTH, not one or the other
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#260
So here is the big question, lets say I have two separate Paypal accounts, both under different SS numbers. If my eBay is linked under SS #1 and when it reaches $19k, can I just simply delete that one from my eBay account and switch to the other Paypal account under SS#2...thus never really going over the 20K limit and avoiding the 1RS?
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#261
Quote from MarvinM8581 View Post :
There are a lot of Sellers that use Pay-pal..Today i Received a IRS notice CP2000 for 2013,Not knowing this law about Pay-pal/E-bay in bed with IRS..in 2012 i sold a lot of Items using pay-pal..My Truck and two boats and a lot of other items i had in Storage ..Items i sold for 1/2 my Coast or less..I NEVER RECEIVED A 1099 from pay-pal or any kind of notice ...Now they are saying i never claimed this..REALLY..Wow i never had a clue and pay-pal failed to let me know any thing..Im think Millions of People are going through the same thing..!! If Pay-pal would have sent something or had Told all there Users ,People would have add it to there Tax's..All this Does is Piss me Off..To the point of Telling them Never again..It's hard times for a lot of Family out there with out having these blood sucking trash playing there games to get more money and hurt or Country more.. Signed PISSED OFF..
I've not actully received/seen a CP2000 myself, but, in your situation, wouldn't you just sign it and verify that there is nothing wrong with your reported income? What you described, i.e. selling personal items at a loss does not constitute income. Income might occur if you sold at a profit, but if that's the case, and you treated it like a business, you would also be deducting all kinds of expenses assocated with the sale...potentially including things like the costs of storage, preparing for sale, and possibly even office related expenses.
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#262
This thread has made a distinction between hobby sales / losses versus normal earned income when filing the 1040.

All of my income is from self employment, a combination of 1099s as a consultant and a 1099-K from PayPal for a small real business. The 1099-k, comingles my small business sales with the occasional sale of a household incidental.

If I sell my old SLR camera, its shows up on the 1099-K but I don't report the sale or purchase price from 25 years ago - result, the total sales in my business bookkeeping doesn't match my the 1099-K because of the sale of household incidentals.

To avoid audit how is someone supposed to document the 1099-K reported sale of personal incidentals that don't go into my business bookkeeping. Since the sale of household incidentals is always below the cost basis, I certainly don't want to pay taxes on the sale.
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#263
Quote from swbca View Post :
This thread has made a distinction between hobby sales / losses versus normal earned income when filing the 1040.

All of my income is from self employment, a combination of 1099s as a consultant and a 1099-K from PayPal for a small real business. The 1099-k, comingles my small business sales with the occasional sale of a household incidental.

If I sell my old SLR camera, its shows up on the 1099-K but I don't report the sale or purchase price from 25 years ago - result, the total sales in my business bookkeeping doesn't match my the 1099-K because of the sale of household incidentals.

To avoid audit how is someone supposed to document the 1099-K reported sale of personal incidentals that don't go into my business bookkeeping. Since the sale of household incidentals is always below the cost basis, I certainly don't want to pay taxes on the sale.

Separate PayPal accounts under a different SSN. Never co-mingle your "hobby" income from legitimate SE income. Put the hobby PayPal account under another family member.

For this year, you technically have to report what is on the PayPal 10099 - it's already too late to effect change for 2015. Theoretically, you could offset the hobby income in your Schedule C of your legit business through cost of goods, expenses, etc, but leave that up to you
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#264
This can potentially change how some smaller private businesses do things.
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#265
Quote from JurtisCackson View Post :
This can potentially change how some smaller private businesses do things.

Should have no impact as PayPal and Amazon have been sending 1099s for several years now.


Whether they send you one or not, you the tax-payer are still obligated to report your income.
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#266
Question for ebay sellers: if you have one ebay account but 2 different paypal accounts with different ssn's. under different names but getting money from one ebay account with 20k+ in sales and 200 transactions combined between the two,will paypal report it?
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#267
I'm going through this same thing now
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