Paypal and the 1099-K

tfm · Posted: Wed Sep 14, 2011 7:30 am Post subject: Paypal and the 1099-K

It was such a pleasure to read Paypal's notice today that they will start reporting 200/$20K in gross sales to the IRS. This great information would have been nice in, oh, say December 2010, giving people a chance to keep better records of their expenses. Thankfully, the US government has provided us with the 1040 Schedule C. I'm pretty sure my wife and I have been discussing ebay when we go lunch on Mondays and Fridays. And there's the gasoline required to take my packages to the post office, not to mention the cost of shipping the item and the cost of the item itself. And, of course, the coup de grâce, those wonderful ebay and Paypal fees.

In short, ƒuck you Paypal.
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scribe · Posted: Wed Sep 14, 2011 12:07 pm Post subject:

You might already know this, but you can subtract the original cost of goods (with money you already serviced with taxes) vs the cost of sales. And if retroactive situations are a concern, you can amend your returns to reflect any changes. But with deductions, it is very unlikely you will have any tax liability.
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tfm · Posted: Wed Sep 14, 2011 4:07 pm Post subject:

Yeah, I already knew that about the cost. Virtually all costs associated with selling an item on ebay are deductible, including what you paid for it. I have a good accountant who has handled our estate for years, but I do feel awful for those who don't know how to use the system. Paypal is reporting activity in terms of gross, so I imagine that it will put a lot of people in a tight spot when their bottom line at the IRS jumps significantly versus what a W-2 would say. People will get stuck owing money. Paypal should have clearly spelled out these terms in 2010.
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scribe · Posted: Wed Sep 14, 2011 6:43 pm Post subject:

Tax liability is up the individual whether Paypal reports activity or not. Wink

In most cases, if an individual can organize an affordable accountant, they can actually get more money back out of uncle sam if they would file deductibles as small business making 'earnings' from the sale of items on eBay.
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beasterbrook · Posted: Fri Dec 23, 2011 11:23 pm Post subject:

Mars · Posted: Sat Dec 24, 2011 7:41 pm Post subject:

That is how it would work in Canada. Your business would have a loss.

As a "powerseller" on Ebay, I think my info is now forwarded to Revenue Canada and they may or may not want me to put something on my taxes about it. But with 14 years of buying and probably 80% of my feedback from purchases (20% selling), I will have a very large business loss as well.

tfm · Posted: Wed Feb 29, 2012 11:42 pm Post subject:

Well, I finally finished looking up everything I sold in 2011. Here's my breakdown for the IRS:

Paypal reported $31, 260 in Payments received

My Schedule C pertaining to ebay/paypal:

Item cost: $23,150
Paypal fees: $1136
Ebay fees: $2904
Shipping fees: $2366
Supplies: $1342

As you can see, I made $362 with ebay last year.
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cgould42 · Posted: Thu Mar 01, 2012 1:15 am Post subject:

Wow! That is a lot of ebay going on.

How did you determine item cost? I have you maintained records over the years? MSRP?

Cheers,
Curt

tfm · Posted: Thu Mar 01, 2012 3:08 am Post subject:

Both. I keep pretty good records up to a point. Where it gets challenging is lot purchases, you know, 20 games at a time, because there is no individual ebay record. When this happens, I'm entitled to use the current market value.
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