Paypal and irs question--help pls!!
 

I think I understand that if you sell over $20, 000 with over 200 transactions in 2011, then paypal gives that figure to IRS--So is this entire amount then counted as income?? are you taxed above and beyond the 20K?? what if you don't have proof of purchase (s) from 5 yrs ago when the vintage prices were way higher and now you sell at a loss??? and finally, hopefully for a tax person to see this, if I am on Social Security and one's income can't exceed 14K+ , does this count towards income vs Soc Security benefits???????
thanks in advance
Bill

That is a hard one. You are going to have to have some kind of proof of what you paid, or the IRS is thinking that you have received 100% profit and is going to want a cut of it. The whole thing is a logistical nightmare for the average seller, who happens to be selling valuable items such as baseball cards.

You need to show a cost on the items purchased, and be filing a Schedule C for a self employed individual. Sadly, if you paid, say 10000 for the stuff, and can NOT prove what you paid, the entire 20K is taxed. Now, without a business schedule C, whic shows other costs of a BUSINESS, such as advertising, computer costs. mileage, etc, then you probably would need to put the entire 20K as a capital gain, or estimate the cost. Then, that NET amount is taxes at the "collectibles" rate, which is 28 pct I believe right now. Its kinda complicated, all depends on how you have handled paypal sales before too.

Far as the SS amt, the "NET PROFIT" goes toward earnings amount. So, if you can't come up w a "defendable cost" to reduce the 20K net profit figure, then yes, you would need to include the whole 20, as if it was all just cash income.

Also, if you are not in a BUSINESS of buying/selling and put the 20K on schedule D, you can NOT show a higher cost and deduct the whole amt of the loss, only a 3K max. Again tho, I don't recommend putting a higher cost figure, unless you are somewhat sure of what you paid, and have some documentation.

PM me if you can give me more details. Im an accountant, who files a small schedule C for my ebay and NET54stuff, so I can help best I can, maybe in addition to what I said here.

Bill,

Unless you have been making it a habit to continue to buy cards with cash why would you NOT have records as to what you have paid for all the cards you have sold? Not that you should not buy cards with cash but no paypal transactions? No canceled checks? No credit card receipts? Admittedly selling cards is my business so I have records of every purchase and sale I have made. With or with the recent paypal/ebay reporting requirements, sales of collectibles from any source are supposed to be reported, even if you have lost money on the transaction. Those sales are considered reportable income.

I recall several posts over the years where you have inquired about cash transactions. I know a few of us sent you PMs to be careful with what you post on a chat board, especially one in which the FBI is allegedly reading. I will again go on record publicly, as I already have done so privately, to suggest you seek professional advice with regards to your card transactions. A CPA will due for now so that later on you do not need the help of a lawyer. It seems that you might need some guidance here.

As someone who has represented clients in audits, in my former life, I would highly recommend gall bladder surgery without anesthesia over the audit, if given the choice.
Greg

Where on my paypal account does it show how much in sales I have done so far this year?

Does your "income" get reported to the IRS if you exceed 200 transactions, but not $20K?

PayPal does a good job of hiding the info, as does Ebay. My main beef is that if they want us to be compliant, at least show is our YEAR TO DATE transactions, so we can shut things down if we want to!!!!!

I emailed PayPal asking where I could find this info or if they could provide it. What I received back were instructions on how to download all of my transactions in to a spreadsheet so I can total it up myself. Ridiculous lack of service.

Maybe I'll just buy an old ledger and keep a running tally...:rolleyes:

For bigger ticket items....
 

offer the buyer/winner a slight discount if they pay via Paypal gift. It'll save u ebay & paypal fees. Or to buy it here on the B/S/T, that way their is public record of it to make the buyer feel more trusting.

Bill, can I make a suggestion? Call an accountant and don't discuss this on a public board. Rumor has it that law enforcement tend to peruse these boards. And as for what Greg said, I agree. I've been audited numerous times, once for sales of baseball cards. It was a tremendous pain in the ass.

No
 

No, you must meet both requirements.

Jeff

an earlier poster mentioned using a schedule C, which is for a business. but what if you're buying/selling as a hobby -- could it then be considered as investments, in which case it'd be subject to capital gains rather than business income?

I don't sell on eBay, but I wonder why anyone who does would ever respond at all to this thread. Talk about a potential shipwreck . . . At least with respect to this issue, I would think the rule on a chatboard allegedly monitored by the FBI would be STFU.

Gee. You think?

As I stated earlier, yes it could be. I mentioned all this in my post, plus will reply to a PM from the original poster w more advice.

Investments and Hobbies are also treated differently. Here is a link to an IRS article, describing Business and HObby Income and losses. Far as "investment", think of buying a rare card as an investment, then selling it, Its more of a "random transaction", and would be more likey a capital transaction, than doing this regularly, w hich would qualify as a business if the intention is to make a profit, or a "hobby" if you are just fooling around, or show consistent losses.

http://www.irs.gov/newsroom/article/...169490,00.html

Now Jeff, be nice. I was trying to be . . . .

Paypal and irs question
 

This info is for your Social Security ?



What income counts ... and when do we count it?

If you work for someone else, only your wages count toward Social Security's earnings limits. If you are self-employed, we count only your net earnings from self-employment. We do not count income such as other government benefits, investment earnings, interest, pensions, annuities and capital gains.

If you work for wages, income counts when it is earned, not when it is paid. If you have income that you earned in one year, but the payment was made in the following year, it should not be counted as earnings for the year you receive it. Some examples are accumulated sick or vacation pay and bonuses.

If you are self-employed, income counts when you receive it—not when you earn it—unless it is paid in a year after you become entitled to Social Security and earned before you became entitled.

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Special rule for the first year you retire

Sometimes people who retire in mid-year already have earned more than the yearly earnings limit. That is why there is a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you are retired, regardless of your yearly earnings.

In 2011, a person under full retirement age for the entire year is considered retired if monthly earnings are $1,180 or less. For example, John Smith retires at age 62 on October 30, 2011. He will make $45,000 through October.

He takes a part-time job beginning in November earning $500 per month. Although his earnings for the year substantially exceed the 2011 annual limit ($14,160), he will receive a Social Security payment for November and December. This is because his earnings in those months are $1,180 or less, the monthly limit for people younger than full retirement age. If Mr. Smith earns more than $1,180 in either of those months (November or December), he will not receive a benefit for that month. Beginning in 2012, only the yearly limits will apply to him.

Also, if you are self-employed, we consider how much work you do in your business to determine whether you are retired. One way is by looking at the amount of time that you spend working. In general, if you work more than 45 hours a month in self-employment, you are not retired; if you work less than 15 hours a month, you are retired. If you work between 15 and 45 hours a month, you will not be considered retired if it is in a job that requires a lot of skill or you are managing a sizable business.

xdrx wrote:

"Maybe I'll just buy an old ledger and keep a running tally..."

My accounting system has been exposed!

I sell cards (infrequently) to buy other cards, but every card I have ever sold has been reported on my tax return. There has never been a year where I sold $20,000 or had 200 transactions.