Ways around being 1099?

[antelopedundee]

With being a tax CPA, I have been getting this question all the time. If you get over $600 cumulative from Paypal or Venmo goods and services then you will get a 1099-K. The IRS could care less about money sent via friends and family as long as it is below the annual gift exclusion and as long as it is for nontaxable items (holiday or birthday gift, paying someone for your share of rent, etc).

Most items we sell on here are at a loss (well maybe a slight gain because with the shortage everyone is selling at a high price right now) so it should not matter. The issue being, nobody really knows how strict the IRS is going to be on this as it was just announced not long ago. Technically they could require documentation on the original purchase price, which 99% of the time most of us do not have and will force us to pay tax on it or guestimate our purchase price. Which if the IRS ever questions they will likely disregard and make you pay tax anyways. I will keep looking for updated guidance on this.

But remember we were all promised no tax increases on anyone making under $400k/year lol FJB

They will probably modify Schedule 1 to accommodate these changes. If I was using it today I would probably put the 1099-k amount on line 8 z and any documented cost on line 24 z.

 

[antelopedundee]

The real question in my mind is let's say you sold three scopes this year. A couple newer ones you lost $200 each on but you also had a coveted silver Leupold you sold for $350 more than you paid for it 8 years ago. Who thinks you had a net $50 loss so nothing to see here and who thinks that each transaction stands on it's own so you need to pay tax on the $350? If you are a business, you wouldn't, but as an individual, what say ye?

Bonus question, I sold the scope but also drove 12 miles to UPS to send it. Do I deduct my $3.27 in packaging and my 24x$0.58 or whatever it is per mile from my profit? What if I drove 50 miles each way to buy in in 2014, is that a part of the cost of ownership? And when this happens 90 or 100 million times over, how does the IRS manage this. tracking down these scofflaws and getting their $28 in taxes?

I believe that you can use losses to offset gains, but you can't claim a net loss.

You'd likely need to be a business in order to deduct shipping and other expenses.

 

[antelopedundee]

I hope all read this!
Money order can be very bad. I normally don't buy if a MO is requested for form of payment.
I had a bad experience gave a sell a MO for a item 900.00 which is MO limit. He said he never got it and said I'd have to resent payment, I went to the post office and explained he didn't receive payment, the post office said it would take 30 days to trace it , to make sure no one cashed it and if not cashed they would stop it.
The person sold the item to someone else and within a month the guys wife cashed my money order, dead horse there, I lost 900.00 I exhausted all avenues, lawyer's,police, D.A. S office and I was told money orders were bad form of payment.
Not all people are bad but it only takes one.
P.S. that did not happen on this Forum.

The safest way to send that kind of payment is in a bubble pack envelope. You can put some styro peanuts into t so it's at lest 3/4 inch thick and it won't go thru the sorting machines. If you have a PP account you can go to www.paypal.com/shipnow or www.usps.gov click n ship and generate a label and get FREE tracking. He couldn't have denied receiving it since tracking would have shown that it was delivered. If you have proof via email or PM that he sold the item to someone else then you should have been able to claim that the MO was stolen by the recipient since it was cashed and not returned.

 

[Predator 22]

Grabs popcorn and waits to here how this gets blamed on Brandon as well.......

If it isn't his fault, who's fault is it?

 

[LkeAF]

If it isn't his fault, who's fault is it?

Well, if you read 26Reload's comment that I was referencing which referred to similar "extra taxes" here in Idaho and then knew anything about Idaho you would know that we have the reddest of the red state legislatures. So, the answer to your question would be to blame the Idaho GOP for those taxes. But, I know that doesn't fit the narrative on here of blaming everything on Democrats, which is why I pointed it out. Don't get me wrong, I don't love the Democrats. But, I am also smart enough to know that most of them aren't Communists or pedophiles. Just like most Republicans aren't insurrectionists or Authoritarian types who wish to overthrow our democracy and end the great experiment that is the United States. I am the fatigued and fed up majority who are tired of the BS and see how dangerous this tribalism is for the country.

 

[antelopedundee]

If it isn't his fault, who's fault is it?

Whose administration was in power at the time and came up with the stimulus package?

Hint: It wasn't the current one. Congress still has to act on it and set limits. $600 has been the standard for some time.

 

[KyleC]

Whose administration was in power at the time and came up with the stimulus package?

Hint: It wasn't the current one. Congress still has to act on it and set limits. $600 has been the standard for some time.

I believe you are wrong. The $600 IRS watch is in Brandon's "build back better" bill.

 

[antelopedundee]

I believe you are wrong. The $600 IRS watch is in Brandon's "build back better" bill.

From the Forbes article.

The new rule results from the American Rescue Plan signed into law in March 2021 and will mainly impact business owners using third-party payment network providers. The IRS is cracking down on payments received through apps, such as Cash App, Zelle or Paypal to ensure those using the third-party payment networks are paying their fair share of taxes.

Then I'd stand corrected. PayPal has been sending 1099s [not to me tho] if you had either $20K in receipts or 200 transactions in activity for a couple of years or more and I know that Biden wasn't the POTUS then. This is just an extension of that.

FWIW the reporting is why I will no longer be selling anything but personal items here.

 

[3darcher2]

The article I read said that if the $600 sounds familiar, it was part of the ACA a decade ago, but was eventually dropped due to public outcry and the enormous burden it placed on everyone involved after Obama admitted it was too cumbersome for small business.

The $20K/200 transaction thing has been in place for several years from what I can tell, and is actually targeted at people who are running a real business, not a guy selling his old dining room furniture on FB Marketplace. It is in fact the ARPA passed in 2021 that takes us back to the same thing that was trashed as being unwieldy by the current guy's former boss.

The clamoring to see who sold 1000 bucks worth of T-shirts on Etsy or a couple of scopes here seems to not be the best use of resources to me, when there are hundreds of thousands, if not millions, of people working under the table daily, if we are worried about fair share and all, unless for some reason, the Administration isn't interested in taxing those people.

 

[purpledragon]

Sorry, a little off topic but equally as asinine. Also, this tax season don't forget to claim your drug sales and stolen goods....taken directly from Publication 17 off of the IRS website https://www.irs.gov/publications/p17

Illegal activities.
Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity.

Stolen property.
If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year.

Now that's funny right there....... Like anyone will report it..LOL

 

[antelopedundee]

The article I read said that if the $600 sounds familiar, it was part of the ACA a decade ago, but was eventually dropped due to public outcry and the enormous burden it placed on everyone involved after Obama admitted it was too cumbersome for small business.

The $20K/200 transaction thing has been in place for several years from what I can tell, and is actually targeted at people who are running a real business, not a guy selling his old dining room furniture on FB Marketplace. It is in fact the ARPA passed in 2021 that takes us back to the same thing that was trashed as being unwieldy by the current guy's former boss.

The clamoring to see who sold 1000 bucks worth of T-shirts on Etsy or a couple of scopes here seems to not be the best use of resources to me, when there are hundreds of thousands, if not millions, of people working under the table daily, if we are worried about fair share and all, unless for some reason, the Administration isn't interested in taxing those people.

The best thing is that forewarned is still forearmed. I expect this change is aimed at businesses skirting the rules. Thing is when you cast a wide net you invariably catch things that you weren't fishing for. So all one needs to do is be careful how one takes payment and/or be able to document the cost of what one sells.

Write to your Congresspeople and ask them raise the limits to more than $600.

 

[59FLH]

Best way to avoid a 1099 for those posting for sale in the Classified sections is to give your stuff to me, .........freight paid.

 

[Kimber7man]

I see this as another way they can put taxpayers under an audit, and harass the everlovin**** out of law abiding citizens. "Oh, PayPal reported you received $2,100 in goods and services last year. We need to audit you"…..

Why else would they need $$ billions more to hire thousands more IRS employees?

 

[BillLarson]

I hope all read this!
Money order can be very bad. I normally don't buy if a MO is requested for form of payment.
I had a bad experience gave a sell a MO for a item 900.00 which is MO limit. He said he never got it and said I'd have to resent payment, I went to the post office and explained he didn't receive payment, the post office said it would take 30 days to trace it , to make sure no one cashed it and if not cashed they would stop it.
The person sold the item to someone else and within a month the guys wife cashed my money order, dead horse there, I lost 900.00 I exhausted all avenues, lawyer's,police, D.A. S office and I was told money orders were bad form of payment.
Not all people are bad but it only takes one.
P.S. that did not happen on this Forum.

Same thing happened to me..