Recent Tax Implications Paypal/Ebay sellers alert

[BTD2]

FYI: to all those who are contemplating selling on ebay and using paypal as a means if payment....
Prior to 2020 the standard rule of paypal was 200 transactions and 20k threshold must be met in order to be served a 1099. This has changed.
I can only speak for my great state of Illinois (I believe 5/7 of our last governors served jail time).
Our state somehow forced paypals hand to send out a 1099 if 3 or more transactions with 1k or over threshold is met.
Not sure if any other states have done this as well. Im actually assuming if I sold here on RS and a buyer forced me to use paypal invoice vs. friends/family payment that would count as well.
Just wanted to make my friends in this community aware- I received a 1099 and was not too happy!

 

[toyman941]

I knew it was just a matter of time.

This was actually brought up during the Obama term for taxing internet sales. I'm surprised it took this long.

I'm out!!

 

[LukesSaber]

Worse for us in Massachusetts. We have a total of $600 in a year before we are taxed.

I no longer use PayPal when I get close to that threshold.

 

[HothLowlander]

Thanks so much for the heads up-Im in Indiana but Ill switch my method of payment now!

 

[porkinsred6]

is that any transaction? or just G&S ?

 

[LukesSaber]

Any for Mass

 

[DarthComedian]

Dying at the “5 of the last 7” are in prison. I’m in NY, we may be catching you soon. Lol.

All I know is when BBTS starting doing tax for NY I died a little. I get stores, but eBay is like a flea market or garage sale. It amazes me that over a figures life time through changing hands it may have produced more tax revenue than actual income.

 

[toyman941]

Agreed.

If they pulled an audit from my ebay history, they would see the money I earned went back into ebay sellers just as fast as I sold the items.

I sell to buy. I'm like the gambler that won 1000 dollars. I spent 10,000 before I won the 1.

 

[Astrozombie]

You get to deduct the original cost of each sold item. Be creative and you will pay little.

 

[TauntaunScout]

Worse for us in Massachusetts. We have a total of $600 in a year before we are taxed.

I no longer use PayPal when I get close to that threshold.

Yeah. But after I deduct paypal fees, ebay fees, shipping... I'm down to a fraction of whatever it was.

 

[jodo]

You get to deduct the original cost of each sold item. Be creative and you will pay little.

But how do I prove how much the original cost of a 1000 trading card set was? Most likely I bought 3500+ cards to even make that set, and those purchases would have been 15-20 years ago.

I am also in Illinois. With all of our state’s problems, I’m just glad we can finally be taxed on or PayPal transactions!

 

[DarthBeek]

I am thoroughly confused on all this....

How can I possibly know all this info ... fees, shipping, etc??? Am I supposed to do research for the entire year of selling?

What a pain in my ****ing *ss.

 

[DarthBeek]

I don't even see where to report this form.....

 

[BTD2]

Follow up...my buddy who is a cpa got back to me. You must utilize form 8949 and Schedule to figure out your cost basis (to the best of your ability) and capital gains. He also said you may want to file the 1099 k amount on schedule C and zero it off w reference to your other 2 forms.
This is such a pain in the ass. Who in their right mind if not a big time seller would consider selling over the ridiculously low threshold w paypal.
Now the question is if I sell on ebay and elect not to use paypal-(force buyers to use a cc) - will i get a 1099 either way? I mean at the very least we know they can change rules whenever they want

 

[Sykes]

Yes you will get a 1099-K no matter what. All the tax is based off the state you live in and is not related to PayPal or eBay or any other selling platform. I am sure if the selling platforms had their way we would pay no taxes.

 

[darth_sidious]

It looks like 9 states / jurisdictions now have lower thresholds to receive a 1099-K:

Taxes and import charges | eBay

• Arkansas: $2,500 in gross payments with no threshold on the number of transactions
• District of Columbia: $600 in gross payments with no threshold on the number of transactions
• Illinois: $1,000 in gross payments and a minimum of 4 transactions
• Maryland: $600 in gross payments with no threshold on the number of transactions
• Massachusetts: $600 in gross payments with no threshold on the number of transactions
• Mississippi: $600 in gross payments with no threshold on the number of transactions
• New Jersey: $1,000 in gross payments with no threshold on the number of transactions
• Virginia: $600 in gross payments with no threshold on the number of transactions
• Vermont: $600 in gross payments with no threshold on the number of transactions

I think $600 is a very low threshold, but as its been mentioned, most of it can be written off. I wonder if this will have an impact on scalpers and other resellers / flippers? That wouldn't be a bad thing in my opinion, as it would help control outrageous prices. Those using ebay as basically a virtual garage sale to get rid of unwanted items, likely wont be impacted much (if at all) though...

 

[BTD2]

While being able to write off most of it helps, the fact remains it takes all the fun out of buying and selling on ebay- Im done there- who in their right mind would opt to go thru the hassel or dealing w tax forms, wondering if some random irs person wants to look and see how exactly you paid thousands for SW merch and sold for similar thousands. Im guessing they would not understand our hobby passion (sickness).
Anyways I would rather sell at a 15-20% discount to ebay comps here than ebay. Maybe I will finally join FB too and get into those groups to buy/sell.

 

[jodo]

Follow up...my buddy who is a cpa got back to me. You must utilize form 8949 and Schedule to figure out your cost basis (to the best of your ability) and capital gains. He also said you may want to file the 1099 k amount on schedule C and zero it off w reference to your other 2 forms.
This is such a pain in the ass. Who in their right mind if not a big time seller would consider selling over the ridiculously low threshold w paypal.
Now the question is if I sell on ebay and elect not to use paypal-(force buyers to use a cc) - will i get a 1099 either way? I mean at the very least we know they can change rules whenever they want

I’m about to sell a large trading card collection on EBay, and I’m nervous about the tax implications...Thanks for this advice though. I will definitely be looking into this!

 

[LukesSaber]

It looks like 9 states / jurisdictions now have lower thresholds to receive a 1099-K:

Taxes and import charges | eBay

• Arkansas: $2,500 in gross payments with no threshold on the number of transactions
• District of Columbia: $600 in gross payments with no threshold on the number of transactions
• Illinois: $1,000 in gross payments and a minimum of 4 transactions
• Maryland: $600 in gross payments with no threshold on the number of transactions
• Massachusetts: $600 in gross payments with no threshold on the number of transactions
• Mississippi: $600 in gross payments with no threshold on the number of transactions
• New Jersey: $1,000 in gross payments with no threshold on the number of transactions
• Virginia: $600 in gross payments with no threshold on the number of transactions
• Vermont: $600 in gross payments with no threshold on the number of transactions

I think $600 is a very low threshold, but as its been mentioned, most of it can be written off. I wonder if this will have an impact on scalpers and other resellers / flippers? That wouldn't be a bad thing in my opinion, as it would help control outrageous prices. Those using ebay as basically a virtual garage sale to get rid of unwanted items, likely wont be impacted much (if at all) though...

But what about collectors who don’t flip. Who have large collections of whatever and decide to unload it. I have a very large music collection and it’s not my fault much of it becomes collectible and worth much more than I paid for it. eBay was a great place to sell what I didn’t want anymore and well that is not an option now.

But not everything goes up in price and I break even. The first year it was implemented I was unaware of it and had sales that year of $4800. Well, after that I never sold on eBay again or used PayPal. I get implementing a tax, but $600 was gross and not fair. To go from $20k to $600 was greedy on the states. So in the end they are no different than the flippers.

 

[TauntaunScout]

And if you actually take in precisely $600, minus fees, minus shipping (which would you immediately spend) minus the cost of the item, what's left after taxes? In theory you deduct that stuff so your taxable income is negligible. Which is why reporting such small amounts is stupid.

 

[darth_sidious]

But what about collectors who don’t flip. Who have large collections of whatever and decide to unload it. I have a very large music collection and it’s not my fault much of it becomes collectible and worth much more than I paid for it. eBay was a great place to sell what I didn’t want anymore and well that is not an option now.

But not everything goes up in price and I break even. The first year it was implemented I was unaware of it and had sales that year of $4800. Well, after that I never sold on eBay again or used PayPal. I get implementing a tax, but $600 was gross and not fair. To go from $20k to $600 was greedy on the states. So in the end they are no different than the flippers.

Oh, I'm not defending those states, I just said 600 is too low. Likewise, many local taxes are outrageous, but that's another issue. For everyone breaking even, there's no major impact, you can unload as much as you want, you'll just have extra tax forms to show that - I agree that's a burden for some though. Plus, there are other options / sites / apps that have no fees and aren't forced to tax users. When it comes to ebay - I think it could be a positive byproduct, if this helps reduce scalpers. They are a blight on the collecting community, and reduce available stock which results in artificially inflated prices.

 

[TauntaunScout]

Here's a question. Does it automatically raise some sort of red flag, or does it only matter if you get audited?

You could also file an amended return at your leisure I suppose, if you're going to zero it out. If the late fees are a % of what you owe, if you owe $0 that's fine.