OT: IRS Paypal Tax Situation

[mybuddyinc]

Thanks everyone, especially Bob, for very insightful and helpful info.

I'm going to contact an accountant and go from there. I'm sure I can prove expenses, and see where I stand.

I will update when I have more information, as I think this is important to many of us.

Not so much Not Fun, Scott

[maximus35]

So if you do over 200 transactions and spend over $20k (buying cards not selling) you do not have anything to worry about, correct? ITs only if your selling cards?

[tschock]

Originally Posted by maximus35

So if you do over 200 transactions and spend over $20k (buying cards not selling) you do not have anything to worry about, correct? ITs only if your selling cards?

Depends on your wife.

[birdman42]

Originally Posted by maximus35

So if you do over 200 transactions and spend over $20k (buying cards not selling) you do not have anything to worry about, correct? It's only if you're selling cards?

Correct. The 1099 series is used to report money paid to you by others. When you're buying your only tax responsibility is to keep track of your costs, so that when you do eventually sell you'll be able to substantiate your basis.

Your cost is everything you paid to acquire the card--buyer's premium, shipping, etc. If you bought a card raw, I'd even include any grading fee as part of the cost. The cost basis does not include storage, insurance, etc.

Bill

[Eric72]

I sold less than 20 items and gross revenue was less than $2,000. So, I obviously don't do this for a living. Would it be reasonable to compute taxes owed through the calculations below?

Total sales, minus eBay fees, minus PayPal fees, minus postage, multiplied by 28%

[egbeachley]

Originally Posted by Eric72

I sold less than 20 items and gross revenue was less than $2,000. So, I obviously don't do this for a living. Would it be reasonable to compute taxes owed through the calculations below?

Total sales, minus eBay fees, minus PayPal fees, minus postage, multiplied by 28%

Sort of. You forgot to subtract how much you originally paid for the cards. Plus it's only 28% if you are In the 28% tax bracket.

[mechanicalman]

Does anyone know if auction houses report your "income" if you consign some cards and subsequently receive a large check?

[blackandgold]

Originally Posted by mechanicalman

Does anyone know if auction houses report your "income" if you consign some cards and subsequently receive a large check?

This thread certainly got my attention. Sort of tying into the question above, back in the 80's and early 90's, I was big into collecting vinyl albums. Now, as I get older, I decided to part with them, as I'm trying to decrease my collections. If I understand the info posted here so far, if I sell them through an auction house, I will owe taxes on the winnings? And since it was so long ago, I have NO IDEA what I paid for them. Ugh.

[dougscats]

Scott,

Sorry to hear all this.
It so complicates/makes more costly the hobby of card-collecting.

As I may someday be in the same position, this thread is very informative and interesting to me. I realize now that I'm going to have to go about my record-keeping/accounting more professionally.

Fortunately, I have a hard-copy of almost all my ebay purchases over the years. I did also have a File for my Net54 transactions; unfortunately, I mistakenly deleted it a couple of years ago, and all those transactions are in cyber-space somewhere.

However, it occurs to me that I probably still do have records of many Net54 transactions in my Sent Mail file, so that might be a resource for you, too, if you're missing records.

And let me point out one bright side to your predicament:
You've been looking for a new project.
Now you've got one.

Hopefully, after deducting your COGS, you won't get killed.

Best.

Doug

[ruth-gehrig]

Originally Posted by mechanicalman

Does anyone know if auction houses report your "income" if you consign some cards and subsequently receive a large check?

Within the past 2 weeks REA, Goldin and SCP have all told me they DO NOT report sales to the IRS

[Eric72]

Originally Posted by egbeachley

Sort of. You forgot to subtract how much you originally paid for the cards. Plus it's only 28% if you are In the 28% tax bracket.

Unfortunately, they were purchased over 15 years ago. I don't have any receipts and cannot remember what I paid for them.

As to the 28%, I thought the sales of collectibles were reported separately and taxes on those sales were capped. Long story short - I was under the impression this was not treated as ordinary income. Again, I don't do this for a living and certainly don't operate a business. So, no Schedule C.

Is the 28% cap correct, or am I missing something?

[Batpig]

I'm looking at a similar circumstance, however I'm selling for my dad using my paypal/eBay. I'll get the 1099, but will I just report an equal amount paid out as consignment somehow? Do friend and family transactions count toward that limit?

No good deed goes unpunished...

[Bocabirdman]

Originally Posted by Batpig

I'm looking at a similar circumstance, however I'm selling for my dad using my paypal/eBay. I'll get the 1099, but will I just report an equal amount paid out as consignment somehow? Do friend and family transactions count toward that limit?

No good deed goes unpunished...

Yes ..F&F transactions count as do refunds credited back to your account.....

[ajjohnsonsoxfan]

This happened to me last year and I had to go back and resubmit returns showing COGS and expenses to offset the gains as Paypal only reports total incoming amount of account. The real shitty part is I use my Paypal account for a lot of other things including collecting entrance fees for fantasy baseball, softball dues and various others non hobby related things that have nothing to do with income earned. I had to open another paypal account under my wife's name/info to split up the transactions to fall below the 200/$20,000 threshold

[Leon]

Originally Posted by Bocabirdman

Yes ..F&F transactions count as do refunds credited back to your account.....

That is not my understanding. Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.

Personal payments that are not payments for the sale of goods or services will not be counted when determining if the IRS thresholds have been reached and will not be included on your Form 1099-K if you exceed the thresholds. However, all payments received for the sale of goods or services will be used to calculate the gross payment volume to be reported. PayPal monitors accounts to ensure that personal payments are not being used for sales of goods and services.

[Bocabirdman]

Originally Posted by Leon

That is not my understanding. Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.

Personal payments that are not payments for the sale of goods or services will not be counted when determining if the IRS thresholds have been reached and will not be included on your Form 1099-K if you exceed the thresholds. However, all payments received for the sale of goods or services will be used to calculate the gross payment volume to be reported. PayPal monitors accounts to ensure that personal payments are not being used for sales of goods and services.

You may be right Leon.....It was a couple years ago...I likely am misremembering.............

[birdman42]

Originally Posted by Batpig

I'm looking at a similar circumstance, however I'm selling for my dad using my paypal/eBay. I'll get the 1099, but will I just report an equal amount paid out as consignment somehow? Do friend and family transactions count toward that limit?

No good deed goes unpunished...

Second question first: If you're using PP to send him the proceeds by F/F, then no it doesn't count--because the 1099-K only shows money you've received. See Leon's response above for the situation if you're receiving money via F/F.
Now to the main event. I've prepared returns for people in your situation--where their eBay/PP account is being used as essentially a consignment shop. In that case I showed all the income (from the 1099-K), all the expenses, and the balance as cost of goods sold--so exactly zero profit. It's up to your dad to report the income on his tax return.

If you're selling off his long-time collection, then the income gets reported on his Form 8949 (which flows to Schedule D) with his costs as the basis. The amount of his receipts is everything he got from you.

Here's an example:

You sell a card for $100 plus $3.75 in shipping = $103.75. eBay/PP fees and shipping come to $20. You give your dad the remaining $83.75. On your Schedule C you show income of $103.75, expenses of $20, and COGS of $83.75.

Your dad paid $15 for the card in 1962. On his 8949 he shows a selling price of $83.75 and a basis of $15.

Did one of you pay to have the card graded? If it's you, the grading fees appear as an expense. If it's your dad, they show up as an increase in his basis.

If this series of events were ever questioned (and that's possible, with a Schedule C showing exactly zero) then in your reply you'd explain that this was a consignment situation for your dad, and include a copy of his return showing where the gain was reported.

Bill

[Batpig]

That's really helpful information. Thank you very much!

Originally Posted by birdman42

Second question first: If you're using PP to send him the proceeds by F/F, then no it doesn't count--because the 1099-K only shows money you've received. See Leon's response above for the situation if you're receiving money via F/F.
Now to the main event. I've prepared returns for people in your situation--where their eBay/PP account is being used as essentially a consignment shop. In that case I showed all the income (from the 1099-K), all the expenses, and the balance as cost of goods sold--so exactly zero profit. It's up to your dad to report the income on his tax return.

If you're selling off his long-time collection, then the income gets reported on his Form 8949 (which flows to Schedule D) with his costs as the basis. The amount of his receipts is everything he got from you.

Here's an example:

You sell a card for $100 plus $3.75 in shipping = $103.75. eBay/PP fees and shipping come to $20. You give your dad the remaining $83.75. On your Schedule C you show income of $103.75, expenses of $20, and COGS of $83.75.

Your dad paid $15 for the card in 1962. On his 8949 he shows a selling price of $83.75 and a basis of $15.

Did one of you pay to have the card graded? If it's you, the grading fees appear as an expense. If it's your dad, they show up as an increase in his basis.

If this series of events were ever questioned (and that's possible, with a Schedule C showing exactly zero) then in your reply you'd explain that this was a consignment situation for your dad, and include a copy of his return showing where the gain was reported.

Bill