This 1099-k rule...

jonathan1138

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Ok, know its been posted here before - but could use quick "advice" please.

First off, this is a hobby, i lose money at it. Dont want to lose more to the accountants / IRS / etc.

Closed a transaction today, got an email from Paypal for my SS #:



We'll use your tax ID number to send tax Form 1099-K to you and the IRS
when the payments you receive exceed both of these milestones in a calendar
year:

- $20,000 in gross payment volume for goods or services
- 200 payments for goods or services




I did an audit of where i am for the year with PP - 90 PAYMENTS received, amount received less than 20k (but nearing 20k).

So - questions

--- if i STOP using PP through the end of the year (to receive payments) - am i safe / exempt from the 1099-k rule? Good to know because i was thinking of selling another big ticket item (unrelated to this hobby).

-- Payments sent dont have any impact right (like an offset impact - i paid 20k, received 20k, so its a wash?).

-- Does the 20k come from amount received or NET received after PP fees?


Hoping i dont have to file a 1099-k. If i do, i need to itemize my "restores" and show that i break even on most of them (and even take a loss on most). That is a horrible thought, the time that would take would be terrible.

Thanks.
 
Seeing that i need to reach BOTH i am happy to see that i am safe (right)?

i guess a reminded for anyone else that are swinging alot of deals. Thanks.
 
I am worried about it as well. I wonder if it has to be both.. starting in January I think I might go legit and keep books. I need to see how much of my house bills I can write off, since I work out of the house, and use the utilities and insurance for it. Plus how much of the 20k I have in equipment can be wrote off against it.
 
It's $20k GROSS AND 200 transactions. The key word in the new rule is AND.

If you are at $19,999 + 200 transactions you are safe.

$20,000 + 199 transactions or less, you are safe.
 
Mylstar - thanks. So, GROSS is the amount before PP takes their fees. That sucks too.


Glad that PP at least alerted me to this - i was planning to list a bunch of stuff that could drive up my transaction count (lots of magazines), that + nearing the 20k mark, i am done for the year (dont need to do it, dont want to open another account).
 
This is why I keep records and receipts of EVERYTHING I buy or sell. If I ever get accused of running a "business" and am forced to account for "income", I'll have all the records of all my "expenses" that will surely more than offset it...
 
This is why I keep records and receipts of EVERYTHING I buy or sell. If I ever get accused of running a "business" and am forced to account for "income", I'll have all the records of all my "expenses" that will surely more than offset it...
Of course that's a good idea, but I'm pretty sure that doesn't take care of the need to charge sales tax when selling stuff in-state. IIRC someone here got audited a few years ago, and they used that same argument... that they don't "make money", and what they settled on was him paying the sales tax for everything he sold. I don't remember who that was, but I'm sure a search would find it (I think it was someone from MN or WI, or somewhere around there).

DogP
 
Well then, I guess I'm okay. I almost never sell to anyone in-state, and never over PayPal. I usually do trades or cash-and-carry...
 
I don't move much through PayPal, the most one year was around $7000 but I put it all in my taxes. Since I use my computer to make that money I write off my internet and part of my house, I write off all my eBay and PayPal fees along with shipping and whatnot. In the end we can push the whole thing into the neg and actually help me on my taxes and I don't have my thumb up my ass if the IRS comes asking about all that money. My tax guy told me they are really cracking down on people using PayPal so just use it to your advantage and cover your ass at the same time. Either way, just run it by your tax person and see what they can do with it to benefit you.
 
Well then, I guess I'm okay. I almost never sell to anyone in-state, and never over PayPal. I usually do trades or cash-and-carry...
Yeah, of course Paypal and ebay are easy targets because the documentation is readily available... but that's not to say if audited, that it'd be wise to deliberately hide any transactions, just because you don't think they could find out about them. That seems like a great way to get deeper in trouble.

BTW, it was rmackie6661 that had the problems several years back... here's the threads:
http://forums.arcade-museum.com/showthread.php?t=39084
http://forums.arcade-museum.com/showthread.php?t=40082

DogP
 
Yeah, of course Paypal and ebay are easy targets because the documentation is readily available... but that's not to say if audited, that it'd be wise to deliberately hide any transactions, just because you don't think they could find out about them. That seems like a great way to get deeper in trouble.

BTW, it was rmackie6661 that had the problems several years back... here's the threads:
http://forums.arcade-museum.com/showthread.php?t=39084
http://forums.arcade-museum.com/showthread.php?t=40082

DogP

This is the EXACT reason my tax guy set me up to claim all my eBay and PayPal transactions. Technically you are supposed to claim ANY money you make, even a yard sale. They want to know where all your money comes from but if you do it right and obviously know how to keep many of your purchases off the radar you'll be okay. I was a little bothered when he told me to start claiming this stuff but when he was done working the figures using my costs to do all this and I saw I actually got a return from it I was stoked. Trust me, I've done my own taxes on paper just to see what I came up with and it looked bad. The $350 I paid the tax guy was less than my calculations on what I would have to pay in taxes and I got almost $1000 return!
 
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