new 1099-K rules

[theshleps]

Originally Posted by birdman42

It appears non-commercial transactions will be included; there's no mention of a distinction in the IRS instructions for completing the form. In one way this is going to be a shock to some people. On the other hand, if there were a distinction we might see parties such as PP clamping down on the use of F&F. I see the PP page mentioned above, but there's no mention of F&F transactions being exempt. And again, the IRS instructions for the form don't appear to allow for an exemption for non-commercial transactions. I'd really, really like to be wrong about this, but I believe I'm correct.

Bill

From the paypal page
1099-K Threshold Change:
This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.
So F/F still no limit

[birdman42]

Originally Posted by theshleps

From the paypal page
1099-K Threshold Change:
This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.
So F/F still no limit

Yay! I'm sure PP's legal team has done their homework on this. Two things stand out for me: the "currently" disclaimer, and the lack of an exclusion in the form instructions.

Happy to be wrong,

Bill

[mrreality68]

1. It will be interesting to see how pay pal and others adjust
2. It will be interesting to see how this impacts new purchases on this forum for collectors
3. It will be interesting to see if trading picks up between collectors.

Does it mean more people starting to pay via checks again?

Only time can tell what this truly holds for the forum

[bnorth]

My only concern is how it will affect the amount of items I see for sale. Waiting to see what all the non tax paying ebay "dealers" are going to do.

The real question is will it be cheaper to just pay the tax or pay an accountant to sort it out when just selling a few items you no longer want. My guess is just pay the tax.

[BobC]

Originally Posted by bnorth

My only concern is how it will affect the amount of items I see for sale. Waiting to see what all the non tax paying ebay "dealers" are going to do.

The real question is will it be cheaper to just pay the tax or pay an accountant to sort it out when just selling a few items you no longer want. My guess is just pay the tax.

Not so sure you want to do that.

Say you get a 1099-K for $2,000, and the items you sold cost you $1,000. That means you profited and should be paying income tax on just $1,000. But if you include nothing in your return, the IRS automatically assumes the entire $2,000 reported to them is ALL taxable profit, refigures your taxes with this added income, and bills you for the difference that you didn't pay them when you originally filed your tax return. And of course they will also tack on interest and penalty charges to your tax bill as well.

And since the 1099-K is mainly for reporting transactions from the sales of goods and services, I can also see the IRS assuming this unreported income as coming from a business you run. In which case the IRS may simply assume you are self-employed, and charge you self-employment tax (social security and Medicare tax) on top of the delinquent income taxes as well. And the IRS pretty much shares info with all the states that have income taxes, so depending on where you live, you may end up hearing from your home state as well. And in some locations there can even be city income taxes involved. So there can end up being more than one letter. Lots of fun.

Depending on your situation, you could decide to report such 1099-K activity as a business, and include the reported sales on a Schedule C business reporting form in your tax return. But if you don't want to report your sales as a business, you would probably need to report each individual sale included on the 1099-K you get as a separate item sold on the appropriate Form 8949, that then ties back to Schedule D, and all gets included in your tax return as a type of capital gain or loss then. It may be more work having to list each individual sale as a capital gain/loss through Schedule D, but at least it will keep you from having to also pay self-employment tax on the income you would have otherwise reported as business income on Schedule C.

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

[swarmee]

Originally Posted by BobC

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

Based on the post you responded to, I think bnorth was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

Edit: thought it was originally posted by someone else.

[Gorditadogg]

Originally Posted by swarmee

Based on the post you responded to, I think Peter was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

That's how I read it too. Still, a lot of good information in BobC's post.

Sent from my SM-G955U using Tapatalk

[BobC]

Originally Posted by Gorditadogg

That's how I read it too. Still, a lot of good information in BobC's post.

Sent from my SM-G955U using Tapatalk

Not sure either, see post #30.

[BobC]

Originally Posted by swarmee

Based on the post you responded to, I think bnorth was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

Edit: thought it was originally posted by someone else.

Wasn't exactly sure what he meant either, as he mentioned just paying the tax, or getting an accountant to help. I thought he may have been referring back to what Bill/birdman42 had said earlier about the IRS sending a letter and tax bill to people who wouldn't properly be reporting their 1099-K info on their returns, and just paying that IRS tax bill as opposed to hiring an accountant/tax preparer to prepare and file their return correctly to begin with.

Even if my interpretation of his question was wrong, my post is still relevant to show people they are probably better off getting an accountant/tax preparer to help them properly file if they can't do so themselves. At least for the first year they get a 1099-K.

[bnorth]

Originally Posted by BobC

Not so sure you want to do that.

Say you get a 1099-K for $2,000, and the items you sold cost you $1,000. That means you profited and should be paying income tax on just $1,000. But if you include nothing in your return, the IRS automatically assumes the entire $2,000 reported to them is ALL taxable profit, refigures your taxes with this added income, and bills you for the difference that you didn't pay them when you originally filed your tax return. And of course they will also tack on interest and penalty charges to your tax bill as well.

And since the 1099-K is mainly for reporting transactions from the sales of goods and services, I can also see the IRS assuming this unreported income as coming from a business you run. In which case the IRS may simply assume you are self-employed, and charge you self-employment tax (social security and Medicare tax) on top of the delinquent income taxes as well. And the IRS pretty much shares info with all the states that have income taxes, so depending on where you live, you may end up hearing from your home state as well. And in some locations there can even be city income taxes involved. So there can end up being more than one letter. Lots of fun.

Depending on your situation, you could decide to report such 1099-K activity as a business, and include the reported sales on a Schedule C business reporting form in your tax return. But if you don't want to report your sales as a business, you would probably need to report each individual sale included on the 1099-K you get as a separate item sold on the appropriate Form 8949, that then ties back to Schedule D, and all gets included in your tax return as a type of capital gain or loss then. It may be more work having to list each individual sale as a capital gain/loss through Schedule D, but at least it will keep you from having to also pay self-employment tax on the income you would have otherwise reported as business income on Schedule C.

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

All I am saying is if you have a easy tax form and can do it yourself it would be cheaper to just pay the extra tax on all your sales than hire a accountant to pay the amount you really need to. Accountants doing taxes with many different forms are very expensive in my many years of experience

I am in no way saying cheat on your taxes. I have been audited by everyone state level and the IRS. It sucks but I had an amazingly honest accountant and I never owed anybody anything when they were done with me. I have done some sketchy stuff in life but cheating on taxes isn't one of them.

[BobC]

Originally Posted by bnorth

All I am saying is if you have a easy tax form and can do it yourself it would be cheaper to just pay the extra tax on all your sales than hire a accountant to pay the amount you really need to. Accountants doing taxes with many different forms are very expensive in my many years of experience

I am in no way saying cheat on your taxes. I have been audited by everyone state level and the IRS. It sucks but I had an amazingly honest accountant and I never owed anybody anything when they were done with me. I have done some sketchy stuff in life but cheating on taxes isn't one of them.

Ben, My bad then as I wasn't quite sure what you meant. But what I (and birdman42) was saying is still pertinent and should be useful to everybody, so its all good. Just be careful, and even if you do your return yourself, you may still want to try running a question or two that you may have by someone that knows better. While it may cost you more to have an accountant/tax preparer help you by preparing and initially filing your tax return, I can almost guarantee you it would likely cost you even more to then bring somebody in to help straighten things out with the IRS after the fact if you prepare and file it yourself, but unfortunately mess something up. Good luck.