or Connect
Styleforum › Forums › General › General Chat › Question about 1099-K form from Paypal for Taxes
New Posts  All Forums:Forum Nav:

Question about 1099-K form from Paypal for Taxes

post #1 of 17
Thread Starter 
This is the first year Paypal is going to start taxing those who made over $20,000/year and I honestly didn't think I made enough to qualify. I guess I did. I got a 1099-K form in the mail this year. I know there are a lot of sellers on here who make a lot more than $20,000/year so I have a question regarding this. Am I going to owe a ton of money to the government because of this? Are they taxing the amount over $20,000 I made or on the whole amount. Apparently I made $21,000. I'm kind of worried because I ran my taxes thus far through TurboTax and wasn't getting much back as it is. Can't really afford to pay in right now.
post #2 of 17
im having the same issue although im hitting close to 100k, you can deduct your fees, shipping costs, refunds, and stuff you havent sold yet if you have receipts, also i think you can deduct all that gas you used to go thrifting as a business expense, (DONT FORGET TO DEDUCT THE CURSED POLO SWEATER!) so your probably gonna make out pretty good, use a good accountant pay a little more get a lot more back don't use turbo tax.
post #3 of 17
Unfortunately it looks like you aren't going to be able to treat this as a hobby but will have to treat it like a business. Tracking your costs is the key.

Definitely back out your cost of goods you sold during the year, the inventory you purchased, scrapped, redonated during the year. Gas and milage on your car can be expensed.

But you can easily take it a step further. Determine how much of your time spent online and on your cell is used as part of your thrifting "business". These could also be considered expenses. Without going into the IRS documentation you may also be able to consider a part of your mortgage a business expense depending on if you have a home office or area set up speficially used for your sales.

Frankly if you're going to sell that much in a given year and it's going to be reported to the goverment it may be worth setting up as an LLC or S Corp.
post #4 of 17
Quote:
Originally Posted by hmmurdock View Post

You can easily take it a step further. Determine how much of your time spent online and on your cell is used as part of your thrifting "business". These could also be considered expenses. Without going into the IRS documentation you may also be able to consider a part of your mortgage a business expense.
Frankly if you're going to sell that much in a given year and it's going to be reported to the goverment it may be worth setting up as an LLC or S Corp.

i was told to set up an llc , i shouldve. i will this year, i know lots of sellers here did that
post #5 of 17

This is interesting... 

post #6 of 17
Quote:
Originally Posted by Nataku View Post

This is the first year Paypal is going to start taxing those who made over $20,000/year and I honestly didn't think I made enough to qualify. I guess I did. I got a 1099-K form in the mail this year. I know there are a lot of sellers on here who make a lot more than $20,000/year so I have a question regarding this. Am I going to owe a ton of money to the government because of this? Are they taxing the amount over $20,000 I made or on the whole amount. Apparently I made $21,000. I'm kind of worried because I ran my taxes thus far through TurboTax and wasn't getting much back as it is. Can't really afford to pay in right now.


 

You're going to file a Schedule C, as any small business would. From Sch C instructions: "Also use Schedule C to report...certain income shown on Form 1099-K, Merchant Card and Third Party Network Payments.

 

The $21,000 is reported on 1b for the 2011 tax year (not 1a),

 

On line 2 you deduct returns and refunds mainly. Fees are shown under expenses. Paypal does not adjust the 1099-K for (see below) certain things, you have to breakout your fees (paid to both paypal and ebay), postage and other expenses in Part 2. Part 3 is used to figure out how much your "goods" cost you, which is used to reduce the Gross.

 

 

 

 

As required by IRC 6050W, the $20,000 will be calculated by looking at a seller’s gross payment volume for sales of goods or services. Gross amount means that any adjustments for credits, cash equivalents, discounts, fees, refunded amounts or any other amounts will not be netted out.

In addition, the reported amount will include any shipping and handling, sales tax or other fees which are included in payments you receive. We realize that these amounts may or may not be included in your taxable income, but we are required to report them. You should work with your tax advisor to determine how these items should be treated for tax purposes.

 

 

 

 

 

post #7 of 17
Quote:
Originally Posted by eddievddr10 View Post

use a good accountant pay a little more get a lot more back don't use turbo tax.

+1.

Without getting into details, my taxes are complicated. I once ran a little experiment: I spent 8 hours slogging through Turbo Tax doing the taxes myself. Result: I owe $X (with X having an uncomfortable number of zeros). Then I gave my taxes to "my guy", who I've been using for years. Result: I am OWED $Y (with Y being a multiple -- albeit small -- of X). Seriously. It was pretty dramatic, and nothing shady I could see. Plus: less work.

Best. $450. I. Spend. Every. Year.
post #8 of 17
So last year I purchased over 30 pairs of shoes at about $15,000. I also purchased a ton of wardrobe items that totaled another $15,000. I ended up selling $20,000> of the items for one reason or another (fit, etc. see sig biggrin.gif) Why am I getting taxed for making poor sartorial purchasing decisions?
post #9 of 17
Nat, you CAN file this stuff yourself, but once you start getting into the really complicated stuff it is often best to consult an accountant... hate to say that but honestly, it can really help you out. Most people just aren't aware of how many things a business, even a nominal one, does that can have tax implications.

And yes, consider forming an llc for next year... there's all kinds of nifty tax tricks you can pull to make your personal return better. I imagine many of the guys on here won't be very forthcoming for fear of drawing scrutiny to their own particular situation, and that's completely understandable. Having drawn up this sort of thing for others and having seen (though not prepared) their taxes, I can say it's a real, well, laypeople might call it a racket. peepwall[1].gif

Remember, a business need not actually make a profit even though the presumption is that that's their purpose! lol8[1].gif

I've started keeping better records of my purchases & trips this year, in anticipation of claiming it on my taxes next year - I'd suggest you do the same. Honestly, the major downside to it is somewhat increased audit risk, in addition to the more complicated return or returns. If you set things up right, depending on income levels, your "thrifting business" may be right in the range that you can have the business get a refund AND qualify you for a refund as well... that's what we're hoping will happen here ^^;
post #10 of 17
I got 1099-K'd as well. Fortunately I keep a spreadsheet with Paypal costs, shipping costs, eBay fees, etc.
post #11 of 17
Quote:
Originally Posted by NAMOR View Post

So last year I purchased over 30 pairs of shoes at about $15,000. I also purchased a ton of wardrobe items that totaled another $15,000. I ended up selling $20,000> of the items for one reason or another (fit, etc. see sig biggrin.gif) Why am I getting taxed for making poor sartorial purchasing decisions?

You should come out okay provided you show your costs and fees on your taxes....
post #12 of 17
Those who are not getting 1099ed from paypal, do you typically include your ebay/paypal income on your taxes or do you pretend it doesn't exist? Hypothetically speaking or course.
post #13 of 17
im assuming most ppl never reported it, it was like free money nod[1].gif
post #14 of 17
Quote:
Originally Posted by NAMOR View Post

So last year I purchased over 30 pairs of shoes at about $15,000. I also purchased a ton of wardrobe items that totaled another $15,000. I ended up selling $20,000> of the items for one reason or another (fit, etc. see sig biggrin.gif) Why am I getting taxed for making poor sartorial purchasing decisions?

+1, which has me confused.

Say you bought a $600 suit 5 years ago and decided to sell it for $200. Obviously, that $200 is not revenue to you. How do you account for that type of transaction (non-thrifting ebay revenue)?
post #15 of 17
According to Paypal, all of the 1099Ks have been sent out by now. In a way, I can understand the desire for the IRS to have them report this, but I took issue with the fact that it was retroactive to 1/1/11. Had I known that I should have kept every little receipt, I would have. It would also be nice if there was a way to track my total number of transactions for goods and services through my paypal account. I use my account to send and receive a lot of personal payments, so I had no clue if I was going to receive a 1099K.
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: General Chat
Styleforum › Forums › General › General Chat › Question about 1099-K form from Paypal for Taxes