PayPal 24% tax hold

[JustinD]

Originally Posted by bnorth

The real quandary here is how are you still accepting PayPal through eBay?

I thought everyone was on eBay Managed Payments now.

Oh, I don't sell on there since 2016 honestly. I guess I am talking out my rear then.

I always pay with paypal for my winnings, does that run though managed payments? I thought MP was just when it's credit card only.

[bnorth]

Originally Posted by JustinD

Oh, I don't sell on there since 2016 honestly. I guess I am talking out my rear then.

I always pay with paypal for my winnings, does that run though managed payments? I thought MP was just when it's credit card only.

I also still pay with PP. The payments now all go through eBay to the seller. Mine is set up to a bank account used only for that. Not sure what other places you can have eBay send the money to.

[hcv123]

selling to or doing a private consignment (NOT an auction) with your local Net54 board member (ME ) who is in the business and handles all the taxes and other selling headaches!

[Ben Yourg]

A couple of weeks ago,my wife read in the
paper that this $600.thing was not going into
play,this year.
Did anyone else hear this?

[Fred]

When we get friendly reminders from Leon to withhold 24% for BST sales to pay your capital gains and for everyone to start including the applicable sales tax to BST sales, then we'll know things have gone totally nuts.

I guess it's good that fleabay is providing these types of irritating reminders but 24% seems crazy. What if the gain on the card sale is 20%? You'd be paying more in taxes than the actual capital gains. Ok, I'm sure people would figure it out. Perhaps it's more of a friendly reminder that fleabay is now providing/reporting information to the IRS. At least they're trying to make sure the seller isn't going to be blind sided at the end of the year.

If I ever start selling on fleabay, I'll make sure to keep good records and not get burned at the end of the year..

Edited to add - ok replace ebay with paypal in the post.

[BobC]

Originally Posted by Fred

When we get friendly reminders from Leon to withhold 24% for BST sales to pay your capital gains and for everyone to start including the applicable sales tax to BST sales, then we'll know things have gone totally nuts.

I guess it's good that fleabay is providing these types of irritating reminders but 24% seems crazy. What if the gain on the card sale is 20%? You'd be paying more in taxes than the actual capital gains. Ok, I'm sure people would figure it out. Perhaps it's more of a friendly reminder that fleabay is now providing/reporting information to the IRS. At least they're trying to make sure the seller isn't going to be blind sided at the end of the year.

If I ever start selling on fleabay, I'll make sure to keep good records and not get burned at the end of the year..

Edited to add - ok replace ebay with paypal in the post.

Fred,

At this point, and hopefully never, would a site like Net54 be required to force users to do 1099 reporting or start forced backup withholding on sales. The backup withholding is totally linked and arising from non-compliance with the 1099 reporting rules and requirements. And as long as Leon and the site don't make anything off B/S/T sales and transactions, I don't see the IRS being able to come in and dictate anything to them regarding reporting. At least not that I am aware of under current federal tax rules and laws. Of course, my usual caveat, that can always change in the future, and lord knows what some particular state/city might try and throw into the tax mix as well. Always smart to check with your local, qualified and licensed tax professional/advisor then.

[philo98]

Who pays income taxes? I’ve worked in the past with quite a few investigative journalists in Europe, the Middle East and Asia and it’s amazing the flow of funds into offshore accounts. The best thing to ever happen was the release of the Panama papers, the Paradise Papers, HSBC papers, the Offshore papers etc etc etc.

[Fred]

Originally Posted by BobC

Fred,

At this point, and hopefully never, would a site like Net54 be required to force users to do 1099 reporting or start forced backup withholding on sales. The backup withholding is totally linked and arising from non-compliance with the 1099 reporting rules and requirements. And as long as Leon and the site don't make anything off B/S/T sales and transactions, I don't see the IRS being able to come in and dictate anything to them regarding reporting. At least not that I am aware of under current federal tax rules and laws. Of course, my usual caveat, that can always change in the future, and lord knows what some particular state/city might try and throw into the tax mix as well. Always smart to check with your local, qualified and licensed tax professional/advisor then.

I was being facetious with regard to N54 BST and any tax implications. However, if we all want to be good citizens and pay our taxes on what used to be a hobby transaction, then we conform.

It's understood what paypal appears to be doing at this time. It seems like they're trying to be compliant with new government regulations and prepping people for what's coming.

I rarely sell things so this doesn't impact me, but at least I'll be aware of this if I ever do decide to start selling via ebay.

What happens with AHs? If you consign something and the AH cuts you a check for $40K, does that get reported? Or has that been a standard practice for a while?

[BobC]

Originally Posted by Ben Yourg

A couple of weeks ago,my wife read in the
paper that this $600.thing was not going into
play,this year.
Did anyone else hear this?

Yes, there was already a thread started on it just before Christmas. Didn't last real long on the front pager though.

https://www.net54baseball.com/showthread.php?t=329367

[BobC]

Originally Posted by hcv123

selling to or doing a private consignment (NOT an auction) with your local Net54 board member (ME ) who is in the business and handles all the taxes and other selling headaches!

Howard,

This is a serious question, and not trying to be funny or cause problems, but have you in the past, or do you in the future, plan on issuing 1099s to the people who consign things to you to sell on their behalf? (And maybe don't answer that directly here on a public forum either, and consider my post as food for thought.)

You mentioned handling the taxes and such for people who would consign through you, which makes it sound like they don't have to worry about those issues at all then. That would supposedly take care of the sales tax issue, since you would be the one actually doing the direct selling, and thus incurring the sales tax collection/remittance responsibility. But that doesn't automatically remove any income tax responsibility your consignors may still have. One big thing to keep in mind is that when you act as the consignee and sell things for others, if you sell on a platform or use some third-party service that then reports those sales to you on a 1099 form, you are technically receiving those reported payments on behalf of others, in a capacity that is known as being a "nominee". The IRS recognizes "nominees", and expects them to actually create and send out what they then refer to as "nominee' 1099s to properly report the sales that really belong to all your consignors.

I assume you charge a percentage or fixed cost as a consignment/sales fee to people that consign with you, and take that out of the proceeds of the consignment sales you make on their behalf. So then, you actually only incur taxable income to the extent of your consignment fees. So, what are you going to do on your own tax return when you sell something for say $1,000 that was originally consigned to you, and for which you charged the consignor say a 10% consignment fee. You really only have taxable income of $100 ($1,000 X 10%), but if you sold that item through say Ebay, and got paid via Paypal G&S, you are going to get a 1099-K at the end of the year showing you had $1,000 of taxable sales to report, but again, you really only have $100 taxable income for yourself. How are you going to report that $900 difference on your tax return that the IRS automatically assumes is your taxable income, based on the 1099-K you get?

Just so you know, in my described circumstance the IRS technically expects you to prepare and send out 1099-K forms to your consignors to then report the "nominee" sales you originally received on their behalf. If you fail to report that $1,000 on your own tax return as taxable income, the IRS will get a hold of you if you don't otherwise report enough sales/taxable income to cover what got reported to you on the 1099 form(s) you receive. And if you do report that full $1,000 as taxable income on your tax return, what do you then put down on your tax return so you don't end up paying income tax on the $900 that actually went to your consignor? That "nominee" payment you collected and then remitted to your consignor is supposed to then be reported by you, to them and the IRS, on a 1099-K form as well. If the IRS ever came questioning you, and found that you had not properly issued a 1009-K form to your consignor, they could legally deny you the $900 deduction you may have taken against the $1,000 of taxable sales reported to you originally on the Paypal/Ebay 1099-K form you received. The 'nominee" 1099-K form for $900 you should have issued to your consignor is the proof the IRS would look for to show that $900 is a valid deductible expense on your own tax return. In other words, they could possibly make you pay income tax (and maybe self-employment taxes as well) on the whole $1,000 you originally got if they caught you and found out you didn't properly report the consignor's share of the taxable sales income on a 1099.

This is not anything new in the tax laws, and has been around for decades. It is also a probable reason why many AHs don't accept Paypal, or use any other payment services/platforms, that would require them to send 1099-K forms to the AHs once sales hit $600 for the year. If the AHs don't receive any 1099s, the IRS won't be expecting, or looking, for them to be sending "nominee" 1099 forms to their consignors. I've talked and posted about this "nominee" 1099 reporting expectation/requirement elsewhere on the forum before. Hopefully this will help to educate others to at least be prepared for what this could entail and involve given the new, lowered 1099 reporting threshold requirements that officially took effect on 1/1/2023, unless the IRS decides to postpone them again for another year from now. LOL

And for those that don't like me, and/or don't think I know what I'm talking about (not talking about you Howard), here are a few links to back up and prove what I'm saying, including the third/last link which it to the official IRS website. Just cursor down to Section A. Who Must File, and the very first thing the IRS talks about is nominee income and reporting. And don't get all hyper because these links don't specifically mention 1099-K forms. The 1099-K form reporting requirements weren't passed until 2011, and with 1099-K forms only first issued starting in 2012. These other links are pretty much just based on the IRS site terminology, which was written long before 1099-K forms even existed. The IRS just didn't see a need to specifically go back and redo their terminology since it already covered and referred to ALL 1099s being received and issued.

http://www.taxproplus-la.com/29729/N...20the%20income.

https://www.calculatedmoves.com/nomi...-requirements/

https://www.irs.gov/instructions/i1099gi

[Aquarian Sports Cards]

Actually Bob, Auction houses have a carve out and are specifically exempted from 1099'ing their consignors. There were questions about this with the new reporting but the NAA (National Auctioneers Association) got it directly from the IRS that auctions are not considered payment processors and our exemption holds. I gladly accept paypal and credit cards and report all my sales to the IRS and my payments to consignors are basically a deduction.

[BobC]

Originally Posted by Aquarian Sports Cards

Actually Bob, Auction houses have a carve out and are specifically exempted from 1099'ing their consignors. There were questions about this with the new reporting but the NAA (National Auctioneers Association) got it directly from the IRS that auctions are not considered payment processors and our exemption holds. I gladly accept paypal and credit cards and report all my sales to the IRS and my payments to consignors are basically a deduction.

Thank you Scott, I did not know there was a specific carve out for AHs. I'm assuming that they have to be properly licensed and/or members of a specified group such as the NAA to qualify for the exemption, right? In which case, what I was saying is still very applicable for someone like Howard, and other non-AHs in similar circumstances/situations.

My mistake, and apologies to everyone, for assuming they automatically applied these "nominee" reporting requirements to AHs as well. I've always admitted I don't know everything. But, given how everything else is going, I can also easily see the government possibly removing such an exemption in the not-so-distant future. Especially in the face of the lowered reporting threshold requirements for 1099-K forms, and the impact that is going to have on an awful lot of people. That ends up giving the AHs a distinct and somewhat unfair advantage over other consignment type sellers. And I am sure that they, and sites like Ebay, are not going to be happy with that advantage working against them, and thus exerting their own influence against/towards the government as well to correct this obvious inequity.

This is exactly why the Supreme Court finally ruled back in 2018 that online sellers were now going to be subject to sales tax on interstate sales, and to do away with the totally unfair advantage online sellers had over brick-and-mortar stores and businesses who were forced to charge sales tax, while online sellers weren't.

So Scott, I do have a very valid question for you. I assume then you do get a 1099-K for Paypal G&S payments, equal to the full amount of the sales through G&S and not just your commission fee on those sales, right? Paypal obviously wouldn't know how much your commissions actually are, so I assume they must still report the full amount of the sales you collected on behalf of your consignors in a 1099-K form then directed to you. Or are you able to send some kind of documentation, form, or something to Paypal in advance so that they do not send you any 1099-K form(s) at all? I am truly very curious for my own personal knowledge and reasons, as well as making sure you have the correct answer.

Or, is the exemption you're referring to based more on what I found in this accompanying link, from the NAA site itself, and only just recently confirmed with the IRS?

https://www.auctioneers.org/NAA/Advo...6-48f893f7a5b6

If the AH exemption you're referring to is based on this link and what it is saying, let me give you a word of caution then. This exemption refers solely to the designation of an AH as a Third Party Settlement Organization (TPSO), in other words treating the AH as though they are the same as Paypal or Venmo, and thereby requiring all AHs to report via 1099-K forms, ALL sales they collected for their consignors, and not just sales they got paid for through other actual Third Party Settlement Organizations (TPSOs). And I was already aware of this specific exemption whereby AHs are not considered as TPSOs. However, I don't think your AH not being designated as a TPSO automatically extends and exempts you from the "nominee" reporting rules and requirements, in regard to the IRS and 1099 reporting that I previously posted links to, either. That sounds and looks like an entirely different tax reporting issue and matter to me. You may want to do both of us a favor and contact the NAA for some clarification on this exemption they posted about, and specifically ask if it also covers and exempts AHs from possibly still being subject to the "nominee" reporting rules and requirements for valid 1099-K forms your AH does receive from other TPSOs you choose to do business through. This appears to be one of those "gray" areas that exist in the tax laws that aren't always fully known and clear right away, and may not ever be fully determined until someone takes the IRS to court over it, or the government changes the law somehow. I hope I am wrong and that the exemption you mentioned also covers "nominee" reporting rules and requirements as well. Please don't be mad at me if I end up being right though, and you do need to worry about 1099-K "nominee" reporting after all. As always, just trying to help and educate others on the forum as to possible issues that can possibly impact them in their various hobby activities.

[Aquarian Sports Cards]

Originally Posted by BobC

I can also easily see the government possibly removing such an exemption in the not-so-distant future. Especially in the face of the lowered reporting threshold requirements for 1099-K forms, and the impact that is going to have on an awful lot of people. That ends up giving the AHs a distinct and somewhat unfair advantage over other consignment type sellers. And I am sure that they, and sites like Ebay, are not going to be happy with that advantage working against them, and thus exerting their own influence against/towards the government as well to correct this obvious inequity.

That's why we (AH's) were so adamant about our National association getting a clear answer on the matter. As it stood we weren't sure without clarification. Ebay's "mistake" was in becoming a payment processor like Paypal. As for what AH's are covered, that I don't know. Many states don't require any licensing, and most sports auction houses are located in those states. Hunt, Wheatland and The Collector Connection are all in PA and all have a licensed auctioneer of record. Can't speak for any of the others.

[BRoberts]

Originally Posted by hcv123

selling to or doing a private consignment (NOT an auction) with your local Net54 board member (ME ) who is in the business and handles all the taxes and other selling headaches!

Buy a banner ad.

[Fred]

Bob,

We all know who the greatest lefty of all time is and we all agree who shouldn't be in the HOF...

What this tax reporting means to me is that if I ever decide to start selling on ebay or other platform that uses e-payments, then I better be prepared to have a full accounting items that are being sold (which includes purchase price of the items sold).

What a pain. Going forward, people better be prepared to treat this like a business with full accounting efforts. I'm going to guess that a lot of people that were buying/selling to add to a few bucks to their income or have a few extra "hobby" dollars are really going to dislike this. Selling cards will be like day-trading. Better keep tabs of everything.

[Schlesinj]

I sold a couple of items last year and my accountant asked me to create a spreadsheet to figure out basis. Luckily for me all of the cards were bought at some type of auction platform so I can easily figure out when and how much I spent.

[BobC]

Originally Posted by Fred

Bob,

We all know who the greatest lefty of all time is and we all agree who shouldn't be in the HOF...

What this tax reporting means to me is that if I ever decide to start selling on ebay or other platform that uses e-payments, then I better be prepared to have a full accounting items that are being sold (which includes purchase price of the items sold).

What a pain. Going forward, people better be prepared to treat this like a business with full accounting efforts. I'm going to guess that a lot of people that were buying/selling to add to a few bucks to their income or have a few extra "hobby" dollars are really going to dislike this. Selling cards will be like day-trading. Better keep tabs of everything.

Fred,

That coming up with tax cost basis is not a problem you alone are going to face at some point in the future, Many other collectors are in a similar boat and will have to also deal with it at some point. As I've said in the past, people should at least still go ahead and try to make reasonable estimates as to what their tax cost basis is, and be sure to include those estimated basis costs on their tax returns. The IRS does not summarily dismiss or disallow estimates when actual records are not always available or exist. They help, of course, but even the IRS can't rationally argue you may not have any cost basis at all for items you bought, where the seller only allowed you to pay them in cash, and never gave you a receipt. And if you do a reasonable and somewhat responsible job of trying to estimate tax cost basis of items sold, chances are the IRS isn't going to be wasting time coming to look for you anyway. Another big reason to file your tax returns accurately and completely the first time, so the IRS has no reasons to come back and look into your return further and ask more questions.