Paypal and 1099k's

[PBGBodyFan]

Just caught wind of this a week ago or so. Not too surprised, the argument is so many people are now part of the “gig” economy a ton of stuff is avoiding getting taxed. You can make your own call on whats fair or not, that isn’t my point. eBay still might be worth it, you simply get way more money for most parts even after their fees and now taxes, in some cases vs local sales, in my experience anyway and it sells faster. But it will take the bite and incentive out of it knowing instead of just 13% being kept by eBay now you need to pay maybe 20%(rough estimate, for arguments sake) on top of that in taxes on the back end.

Wonder how much will be noticeable starting next year or in future years, many small scale sellers won’t think about it until they see a 1099k in 2023.

Might benefit the big players and actual companies like Mike’s Monte’s or Dixie, places that already deal with all of this but will have much less competition for the used parts by people who no longer think it’s worth it.

 

[69hurstolds]

It's not going to be worth it for me. I'll sell $599 worth of sh*t per year on Ebay, then call it a day. Anything else will be on a cash only basis. No more Paypal. Don't like it, buy from someone else.

Not going to get Covid-taxed. It's not about skirting the taxes at this point. It's the principle of things.

 

[Jakefromstatefarm]

Not going to get Covid-taxed. It's not about skirting the taxes at this point. It's the principle of things.

Exactly.

I dabble in woodworking,customization, and fabrication of various things... The times I get taxed are ridiculous. Go to work, get charged income tax. Then go buy materials to make the item(s), get charged sales tax. Sell said items using previously bought tools (also taxed twice) and my own damn time, to then have the government want to tax me again... That's ultimately taxing 3 times on the same money... It's ridiculous.

 

[JimmyCamino]

The threshold for when paypal generates a 1099 varies by state, in some states regardless of number of transactions or amount of money transacted. Example car parts free just for the cost of mailing paid through paypal. Could your congress and the IRS be so greedy to think someone should pay tax on the pass-thru mailing costs? Should a taxpayer be so naive to think bureaucrats understand the difference between a hobby and a business? Personally I'm a spreadsheet guy so I routinely keep track of costs and expenses. And I report gains, despite how minimal they are. I'm on forum boards for other hobbies, too - lots of similar sentiments expressed about paying tax selling stuff for which sales tax was already paid with income that was already taxed.

 

[pagrunt]

Could your congress and the IRS be so greedy to think someone should pay tax on the pass-thru mailing costs?

Just about all tax collecting venders are collecting sales tax on postage/shipping cost. A local grocery store nailed me for taxes on USPS stamps the other day. Since postage is kinda a form of taxes, I didn't think you could tax a tax.

 

[69hurstolds]

Just about all tax collecting venders are collecting sales tax on postage/shipping cost. A local grocery store nailed me for taxes on USPS stamps the other day. Since postage is kinda a form of taxes, I didn't think you could tax a tax.

Buying stamps from USPS for mailing stuff is supposed to be tax-free according to U.S. federal law. You're purchasing the service from the postal service buying and using those stamps on parcels. If you were buying collector stamps strictly for putting in books, etc., to show later, then that's likely taxable as it's then treated as a commodity.

Here's the caveat. I believe you have to purchase the stamps FROM USPS or a licensed, authorized seller for it to be tax free. It may also have something to do with the state laws as well. Retailers who purchase stamps for reselling at their venue without a license/authorization may be required to collect tax on the postage stamp sale price whether you use them strictly for postage or not. It's kind of stupid if you ask me. But check with the local laws on that. I'd challenge the store on the tax to see where they are as far as their reseller status.

This thing about Ebay, Etsy, etc., is just going to get worse. The general public normally doesn't dabble in taxable goods and business rules when they do what I consider "garage sales online". But the tax-grubbers will find a way. People will avoid the headache of having to hire a CPA to do their taxes by exploiting loopholes, going underground and not using these "venues" to sell their wares at all. $600 or less is considered "hobby" level. It's kinda like the online sales taxes on Ebay, Amazon, and other places you can sell through. THEY collect and distribute the sales taxes as applicable. Makes it easier on the sellers by not having to deal with the taxes. If they did that with the federal taxes, more people would use the service. But when they don't, people aren't going to think it's worth the hassle. There's a few states out there like Rhode Island that require places like Amazon and Ebay, et al., to send them NAMES AND ADDRESSES of the people selling stuff on their sites. So if you think they're not watching you, think again.

It'll take the same amount of paperwork to format and file for $900 in annual sales vs. $9,000. So the casual Joe Seller isn't going to go through all that for $600 in annual sales. They'll find another way. It's not about paying the tax, it's about the burden of the paperwork and record keeping for selling your kid's old Nintendo system on Ebay. Or even postage stamps as collectibles.

 

[doood]

I've made a few big cash purchases on the order of $10k over the years, used cars, paying contractors for remodeling... Going to the bank to take out anything more than $1000 becomes a 30-minute ordeal, and it sure doesn't seem like the concern is protecting me and my finances - check the balance, it's there arshole. VISA/MASTERCARD have made 2% make on EVERY transaction (taxable or not) we've made for the last 3 decades - we've allowed parasitic entities to collect "payment convenience taxes" in addition to the interest they accrue on our debts. There are other payment methods that take 4% (i.e. "Square"). Send money overseas, and the "payment convenience taxes" are hidden in a depressed exchange rate. There is a lot of churn; the grinder is everywhere you look. As for me, cash burns a hole in my wallet. My wife sold something the other day to a woman across the country for $3500 using "Zelle" through WellsFargo online banking. Not really sure what the scam is there, but it appears to have been free of charge.

 

[oldmansmonte]

I used friends a lot on PayPal as I sell a lot of military truck parts to friends. It’s a small community. Got notified by PayPal a few weeks ago that I am now banned from accepting friends and family. Even from family. And friends.

So my sales circle got much smaller for cash sales only.

WOW

 

[81cutlass]

I know there has been efforts to consider 'Gig' employees like Uber/Lyft drivers actual employees in certain states so they are eligible for health insurance (and another reason is so they pay into medicare, social security and income tax, it's just that politicians won't TELL people that because health insurace = good and taxes = bad, and the number one rule of politics is to not tell people 'bad' things.

I can also kinda see where large hotel chains and taxi companies would be for it, AirBnB's, Uber are cheaper than 'brick and mortar' hotels and taxis because they don't have the overhead. They drivers don't pay taxes on earned income because it's 'Gig' contractor work so Uber gets to be lazy and say it's up to the driver to deal with it. Really it allows Uber to pay the drivers less because they aren't paying ~30% of the income to tax.

I can also see why Paypal can be used as a backdoor to pay people.


But putting a blanket $600 cap is asinine. WAAAY to low and way to coarse. Which is why I assume SOMETHING is missing here, I just can't find it. It assumes ALL transactions on paypal/ebay are value added 100% labor/services and not just goods.


If you buy a tent for $200, use it once and decide you don't like it and ebay it for $100, you LOST money on it. Why are you being taxed on the $100 like you were given free fabric and a sewing machine and created that $100 tent out of your labor?

Certainly the friends and family option on paypal is going to get used more often and many people will get kicked for using it.

I 100% see people at places like farmers markets, craft sales, and other hobby related side gigs just abandoning electronic payment. Not only would the prices have to raise to the point of being uncompetitive, but the extra paperwork on the CPA side, trying to calculate what tax you need to keep in an account for the end of the year and managing the whole thing for say $8000 of yearly revenue is going to be not worth it.

Certainly people can create a legit LLC and 'book' everything where they show their costs and expenses and only pay tax on profit, 'pay' yourself zero and just bury expenses in other things like food, the business truck or whatever, but ish, what a mess.

 

[PBGBodyFan]

AirBnB's are taxed like hotels, or similarly at least. I suppose it could depend on location or state but that is something that may of somewhat recently changed, in the last couple years at least in WI (not something that changed with new administration or a 'Rona bill) as more and more people are doing it. The legit companies rooms/units are listed with will collect/pay the taxing entity. If someone is running it on FB or something not through one of those sites maybe, but not sure if that's even a thing and assume people are only renting these from sites/companies where listed. And in WI the municipalities collecting the room tax have to spend a certain percentage of it towards tourism or related expenses, that is something that changed here several years ago where before the money collected was just rolled into other revenue.

When filing the 1099k isn't that much more work if you file yourself or use some typical tax software, but that is the fun part, expensing it out or trying to figure out how much you paid for parts you bought, packaging, shipping....creative bookkeeping but even if you are being honest who keeps track of a part they bought at a junkyard, swap meet or off FB 3-4 years ago? I wouldn't want to imagine an audit of that, it's a mess. And I plead the 5th on how I am familiar with filing for one.