PayPal 1099-K tax form?

walrus · Feb 3, 2018

For the first time ever, I got a PayPal 1099-K tax form in the mail. I have bought and sold things using email for several years - magazines, strings, picks, and also guitars. Transferred and received money to LTG members, too.

But never got this form before. Anyone else get one?

walrus

richardp69 · Feb 3, 2018

I've been worried about this because I do a lot of on line selling. Last time I checked into it (2 years or so ago) you had to have $20k of sales and 200 transactions in a given year before you got one of these. Maybe things have changed, I'm not sure.

walrus · Feb 3, 2018

It says, "You have received this form because you have either (a) accepted payment cards for payments or (b) received payments that exceed $20,000, etc.".

So maybe the first part is new?

My "gross amount" is $772, which I assume is what is being taxed. Won't know until my accountant explains it. It still sucks! Never got one before!

walrus

richardp69 · Feb 3, 2018

I'd call Paypal at 888 221 1161 and ask them about this. In years past it was that you had to BOTH have $20k in sales and 200 transactions. (not one or the other but both). There's been years where I've hit the $20 but never the 200 items sold. So, so far (knock on wood) I haven't been tracked down.

fronobulax · Feb 3, 2018

The Form 1099-K, Payment Card and Third Party Network Transactions, is an information return that reports the gross amount of reportable transactions for the calendar year to the IRS. If you receive a Form 1099-K, you should retain it for your records and may use it to assist you in completing your tax returns.

See https://www.wikihow.com/Report-1099-K-Income-on-Tax-Return which explains how to report the income, and incidentally quotes the Federal regulations which determine whether you get a form or not.

I am not a tax accountant not do I play one on television, although I have personally prepared my tax return since I started working.

My reading is that it depends upon what the payments were for. If you are running a business buying and selling stuff then you need the form to determine your taxable income. If you are buying and selling personal possessions then that activity is not normally taxable. If the amount is large enough then you should probably check and see when the IRS thinks an activity is an income generating business.

Bottom line, though is that it is just a report. It is generated and sent because you are processing payments through a third party. It's up to you to determine whether the payments are associated with a taxable activity or not.

marcellis · Feb 3, 2018

Interesting. I never received one - ever.

fronobulax · Feb 3, 2018

marcellis said:
Interesting. I never received one - ever.

The Federal regulations require third party transaction processors to send the report under certain circumstances. I believe the circumstances are 200 transactions OR a total of $20,000 although English is sometimes ambiguous. If you met one of those conditions and did not get a report then the transaction processor understands the regulations differently or they just didn't follow them.

walrus · Feb 3, 2018

I'm nowhere near the 200 or the 20K!! I'm selling stuff like old CD's and guitar picks, etc.

I'll call them on Monday and see what's up. Makes no sense...

Thanks for the info!

walrus

fronobulax · Feb 4, 2018

walrus said:
I'm nowhere near the 200 or the 20K!! I'm selling stuff like old CD's and guitar picks, etc.

I'll call them on Monday and see what's up. Makes no sense...

Thanks for the info!

walrus

The stuff I read said they were required to send the report under certain circumstances but there is nothing that prevents them from sending the report when it is not required. There were reports of people getting reports they did not expect and getting a response that "it is easier to send you an unnecessary report than it is to modify our software".

This is scary because the IRS is involved but, and understand just how much tax advice on an internet guitar forum is worth, the key issue is not whether you received the report, or not, but whether the activity generates taxable income. The report does not and cannot tell you that.

guitarslinger · Feb 4, 2018

Trouble now is, you got the form as did the Feds. You will need to account for it in your tax return. Usually that entails a schedule C. Your accountant or tax guy will show you how to offset the income with expenses and charge you extra for the privilege. (I am a tax guy and teach taxation courses.) Good luck.

walrus · Feb 5, 2018

Called PayPal - it's Taxachusetts. Anything over $600, MA requires the 1099.

walrus

Westerly Wood · Feb 5, 2018

walrus said:
For the first time ever, I got a PayPal 1099-K tax form in the mail. I have bought and sold things using email for several years - magazines, strings, picks, and also guitars. Transferred and received money to LTG members, too.

But never got this form before. Anyone else get one?

walrus

it is considered income to you, you are like a contractor. you have to report it. 1099-K is when you get paid from a source using like debit card, credit card, etc. different from 1099 MIsc. that change happened like back in 2012. so you report it on return as income like you would a 1099-MIsc.

walrus · Feb 5, 2018

Westerly Wood said:
it is considered income to you, you are like a contractor. you have to report it. 1099-K is when you get paid from a source using like debit card, credit card, etc. different from 1099 MIsc. that change happened like back in 2012. so you report it on return as income like you would a 1099-MIsc.

Only in MA. Not an issue for most "small time" PayPal/eBay users.

walrus

fronobulax · Feb 5, 2018

guitarslinger said:
Trouble now is, you got the form as did the Feds. You will need to account for it in your tax return.

I'm afraid I have not made my point clear. The information is a report that goes to you and the IRS. The report, by itself, does not indicate any taxable activity has occurred. That is up to you, the taxpayer, to determine. So if you are trying to hide income from the IRS and the income was generated via a third party transaction processor, then yes, you have to account for it. But if it was a non-income generating activity, such as selling personal items, then the report has no impact on your taxes.

By monitoring the transaction processor the IRS is certainly trying to find and catch people who are running a business selling things at a profit and not reporting the income but the transaction count or dollar volume are not indicators of taxable activity. It's like a cash transaction of $10,000. The transaction had to be reported to help catch criminal money laundering activity but there are far more reports than actual instances of money laundering.

fronobulax · Feb 5, 2018

The IRS says

All income from auctions, traditional or online, and consignment sales is generally taxable unless certain exceptions are met.

The generation of the report does not mean the "certain exemptions" were not met. A trivial example is there is no requirement to report a transaction that generated a loss on a 1040 unless there is an attempt to use that loss to offset income generated from other sources or transactions.

bluesypicky · Feb 5, 2018

fronobulax said:
The information is a report that goes to you and the IRS. The report, by itself, does not indicate any taxable activity has occurred. That is up to you, the taxpayer, to determine.

^This^
My bank sent me a form for "reported interest" on my checking account, in the amount of $1.47 for me to process it (in the shredder) only because they are required to, as our favorite bot mentioned.

fronobulax said:
I am not a tax accountant not do I play one on television

Now we all wanna know if you stayed at a Holiday Inn Express in the past 6 months?

FNG · Feb 5, 2018

If you sold a personal item for more than you paid for it, I wonder if they could tax it as a capital gain?

Whoever was running this by their accountant, I'd be interested to hear the answer.

walrus · Feb 5, 2018

I'm going to ask my accountant what to do with it, but PayPal told me over the phone it is a Taxachusetts thing, so I'm thinking the feds may not need it - although I will do whatever my tax guy suggests.

walrus

fronobulax · Feb 5, 2018

walrus said:
I'm going to ask my accountant what to do with it, but PayPal told me over the phone it is a Taxachusetts thing, so I'm thinking the feds may not need it - although I will do whatever my tax guy suggests.

walrus

I'd like to hear your accountant's answer but I have a hard time believing PayPal on this one. It is a Federal report. While not unheard of, I have a hard time believing the Commonwealth of Massachusetts can compel PayPal to issue a Federal report to Massachusetts residents who would not otherwise receive the report under Federal regulations.

I apologize for sounding like the cartoon below. It's been one of those weekends.

GAD · Feb 5, 2018

bluesypicky said:
^This^
My bank sent me a form for "reported interest" on my checking account, in the amount of $1.47 for me to process it (in the shredder) only because they are required to, as our favorite bot mentioned.

Wait... Frono is a bot?

PayPal 1099-K tax form?

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