PayPal 1099 tax reporting?

[BellaBlades]

I'm not the one in the house who does the taxes so please excuse me.

Hypothetically.

Let's say you sell $1,700 of knives in a year that you have purchased and paid state tax on already. Which is then used to buy other knives.

Are you required to claim it as income ?

 

[michaelm466]

There was a thread awhile back about this, the poster was able to show he only netted about $50 on everything, so only had to pay tax on that amount, not the $40k or so of knives he had sold that year.

 

[jlauffer]

The limits depend on the state. Most states go by the federal limits of $20k and 600 transactions, but so far MA and VT have lowered the limits to $600 and one transaction. So I got blindsided by a PP 1099 last year and had to fill out the tax forms as if I had a small business. The 1099 was for about $3k and I was able to get the taxable amount down to about $600 by going back thru PP and eBay history to see what they cost in the first place, and my expenses for shipping, etc. If I had known this was coming I would have kept better records, which now I do. Still waiting to see if I get one this year...basically stopped selling after that, but had sold some stuff at the very beginning of the year.

 

[BellaBlades]

The limits depend on the state. Most states go by the federal limits of $20k and 600 transactions, but so far MA and VT have lowered the limits to $600 and one transaction. So I got blindsided by a PP 1099 last year and had to fill out the tax forms as if I had a small business. The 1099 was for about $3k and I was able to get the taxable amount down to about $600 by going back thru PP and eBay history to see what they cost in the first place, and my expenses for shipping, etc. If I had known this was coming I would have kept better records, which now I do. Still waiting to see if I get one this year...basically stopped selling after that, but had sold some stuff at the very beginning of the year.

Thank you both for all of the information. So if I sold $1,700 worth of items and I'd initially spent close to $2,200 + lost shipping cost etc. I end up losing close to 20% .

I guess my best option is to call PayPal and discuss it ?

I can propabably back track my orders and put something together. I guess I just need to prove I'm under the $600 mark. What a PIA

 

[Malpaso]

I guess my best option is to call PayPal and discuss it ?

Don't bother, they're required by law to produce a 1099 for anyone that received over $600. All you can do is fill out a Schedule C and list your expenses against your revenue.

 

[jlauffer]

Don't bother, they're required by law to produce a 1099 for anyone that received over $600. All you can do is fill out a Schedule C and list your expenses against your revenue.

Exactly. Once they issue the 1099 it's all on you. And even though the threshold to issue the 1099 is $600, once it is issued, I believe even if you get your "profit" under $600, it will still be taxed. But if you have the records to prove the $2200+ spent against the $1700 gained, you should have no trouble getting the tax to zero.

 

[Malpaso]

Exactly. Once they issue the 1099 it's all on you. And even though the threshold to issue the 1099 is $600, once it is issued, I believe even if you get your "profit" under $600, it will still be taxed. But if you have the records to prove the $2200+ spent against the $1700 gained, you should have no trouble getting the tax to zero.

This is correct.

 

[22-rimfire]

I know paypal is convenient. I will not use paypal to sell anything. USPS money orders and some time or nothing....

Paypal does not interpret what is income. They just record sales. That is up to you to define. I could easily see selling old knives that are 20 years old and getting stuck for taxes even if I was taking a loss on them simply because I can't prove it. I would rather toss them in the trash than report income that isn't income on the private sale of knives from my accumulation.

 

[JB in SC]

It's not an issue in most states. PayPal is easy. I can print the label and drop off the package, without going to the PO to verify and cash the MO during normal business hours.