How to treat a 1099 from PayPal
1630Boston
Posts: 13,798 ✭✭✭✭✭
I am not a dealer but I sold a few things on the BST. PayPal is sending a Form 1099 to me and the IRS.
I am not looking for paid professional tax advice here, just looking for comments on how to treat the income.
Any thoughts are welcome.
Boston
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
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Comments
So far as my understanding.... Technically speaking it is income as far as the IRS is concerned. If you have documentation showing how much you paid then you can show capital gains or loss on the result. If you don’t, then expect it to be added to your regular income.
TurtleCat Gold Dollars
What kind of 1099? It is likely a 1099-K (Payment Card and Third Party Network Transactions) given it is from PayPal. If so, look at all the boxes, box 1 is $s, box 3 is # of transactions. You have some accounting to do.
Schedule C.
A1099 will be matched up with the IRS. it’s your responsibility to come up with a cost basis and report the sale as either Long Term Capital Gain, Short Term Capital Gain, Long Term Capital Loss or Short Term Capital Loss.
It’s Not Ordinary Income...A coin is a Capital Asset...
Coins are fun.
I get one from paypal for my stuff I sell on ebay, and it goes on my IRS Form 1040 C.
Not you, but for some people, it is a hard concept to grasp that the 1099 form is just a nice "compilation" of the money that was paid to you, and reported to the IRS. People still have the obligation to account for the income, be it $200 or $10000.
28%: Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate.
https://www.irs.gov/taxtopics/tc409
Sch C is ordinary income for self employed "dealers", box 3 on the 1099-K would be an indication if you're regularly dealing. Sch D is Capital Gains on assets held for personal purposes or investment. Coins and bullion are collectibles, subject to the 28% rate.
What's the threshold income to receive the form??
It is $20,000 AND 200 transactions. You have to pass both thresholds in a calendar year to receive a 1099-K.
https://www.paypal.com/us/webapps/mpp/irs6050w
Well... another issue I need not be concerned with....no sales, no 1099....
Life is good....Cheers, RickO
But he old only a FEW things on the BST.
I had 2 transactions for a total of $1032.
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
I had 2 transactions in 2019 ???
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
I thought 1099 requirement was tripped at $600. For my small business I need to send a 1099 to any lawyer or service provider i spend more than 600 with. This excludes suppliers / inventory cost.
Instagram
Not true in Massachusetts and Vermont. Over $600 in sales and you are getting a form.
Did you receive a 1099-Misc?
Since you mentioned a “few” it probably is not a 1099-K; because K is required for $20,000 and 200 transactions.
Depending on the box that has the income will generally indicate how/what to do with it on a 1040 and a Schedule C.
Either way, not too difficult as long as you kept your receipts for the items bought and then sold.
When did you find out you were getting the 1099?
did they mail it to you or send you an email saying it was coming?
Email notification that it’s available to download.
You can download it from PayPal. They also mail out hard copies, should be to you by the end of the month.
They will only mail it though if you hit the thresholds for “Your State”
it is income like you were running a small business - it will all be considered net (and you pay applicable income and social security taxes) unless you file a Schedule C with applicable expenses (cost of items, shipping, grading, mileage) which can easily bring it down to zero.
That is bizarre. Maybe call up PP and see if they can tell you why you're receiving one? If you have been using PP for a while, have you received a 1099-K from PP in the past?
If you read the rest of this thread, you will have your answer. Hint: the OP is in Massachusetts.
https://ecommercebytes.com/C/blog/blog.pl?/comments/2018/2/1517955236.html/2/20
My thoughts, due to the low amount and low transactions, is that it is a state requirement perhaps.
bob
Anything is possible in Massachusetts
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
It is a 1099-K for 2 transactions, total $1032.
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
In Massachusetts I believe you will receive a 1099 from PayPal once you reach $600 and it does not matter if it is 1 transaction or 1,000 transactions.
Edited to add #1: I don't recall right now where I found the info when I googled it in 2017. I received a 1099-K from PayPal in 2017 with only 3 transaction. One transaction was not even a sale. It was a PayPal deposit from eBates for my cashback rewards which I had to report as income for that year.
Edited to add #2: I filled out a Schedule C form for it.
Donato
Donato's Complete US Type Set ---- Donato's Dansco 7070 Modified Type Set ---- Donato's Basic U.S. Coin Design Set
Successful transactions: Shrub68 (Jim), MWallace (Mike)
Massachusetts has a very low eBay/PayPal threshold. $600. Even if you sell some used household goods or clothing and it exceeds $600 you will get a 1099. Very irritating. It's like taxing a yard sale. Maybe in some abstract concept of taxation it is technically correct, but I doubt this is what the Founding Fathers intended.
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As far as how to report it, I believe in general the system assumes that if you are getting a 1099-K you operate a business and you are expected to report it on your Schedule C. If you do not have a business, then I have no idea.
Since the IRS reporting threshold is higher maybe you don't have to pay Federal Tax on it, only Massachusetts tax. I'm not sure. Though in that case your Massachusetts and Federal tax returns will report different income. Sounds like a problem waiting to happen.
LIBERTY SEATED DIMES WITH MAJOR VARIETIES CIRCULATION STRIKES (1837-1891) digital album
The reporting threshold is not the same as the taxability threashold. If you make $1 on a $2 sale, it is technically taxable even though there is no automatic reporting requirement.
Consider tips. Tips are 100% taxable even though often unreported by the employer.
you can't take a capital loss on coins. you can use a loss to off set gains on coins, but if you are in a negative at the end of the year, you have to eat it. It's a collectible.
There are instances that you might be able to take the loss, but most collectors do not qualify for that
Ike Specialist
Finest Toned Ike I've Ever Seen, been looking since 1986
This is true, but only if you are not a business. A coin business can write off losses.
Interesting stuff
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
Once I got my first 1099k in 2018 I no longer did any other transactions outside of coins on PayPal. No football pool No nothing. It all shows up and I am liable for tax on that income.
It was also the first year they issued that form and I got quite a surprise in the mailbox, I had to scramble and figure out what to do, thought I was fine since I didn’t hit the 200 transactions and 20K sales.
Have smartened up a lot and now have a accountant do my monthly/year statements
Write off everything possible!
Especially in Mass, they have a nervous breakdown on every cent
If you're set up as a business, you can deduct everything business related. I have had years where I ended up owing virtually nothing.
Just like sales tax, wait til ALL states have a $100 paypal threshold.
And make it retroactive for 5 years.
It depends on the state you live in
or Schedule D.
Depends on if your sales were business inventory (C) or investments (D).
To me D is the simplest for the casual seller. Also, coins are collectibles for investment tax purposes.
Remember, the real purpose of the 1099K is for the payment processor to inform the IRS of your income (just in case you forget to do so). The IRS came up with various 1099s years ago to turn tax cheats into tax payers.
Your coins are investment capital assets if filing a Schedule D, business inventory if filing a Schedule C.
Federal requirements trigger a 1099K for $20K in payments AND 200 payment transactions. Some states have lower limits that will trigger a 1099K. OP is in such a state. Keep in mind 1099s go to both the Feds and the State, so if your state's lower threshold triggered a 1099, the Feds were also notified of the income.
Unfortunately taxing authorities are going to view the entire 1099K box 1a "gross amount" as income. It is up to you to have the documentation (proof) of offsetting expenses that will lower the amount when you complete your tax forms. Also, it is my understanding that paypal's total in box 1a includes any state taxes they collected from your buyers that got forwarded on to the respective states. That is not taxable income for you and a filer will need to have documentation to prove that amount. I'm still searching for that "total" in paypal.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Investment income, Schedule D. Depends on if you are running a business. For the guy on ebay who has no brick and mortar shop, no website, or anything that indicates a "business" he should have no problem treating his coins as investments. Really no different than the rare car or art collector who does not run a business in what he is buying and selling.
All income is taxable (with a very few exceptions) at both the federal and state levels. 1099's are documented income and should be treated as such. File it as income on both returns.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
And if you choose to go the "investments" route with a Schedule D you can deduct all expenses specifically related to each investment sold (cost, fees, mailing, grading, etc.). While you do not get to enjoy the benefit of overall expenses that are business related, with the Schedule D you will not get hit with the 15.3% self employment tax (social security/medicare that "business owners" get hit with when they file their Schedule C.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
That's helpful info. Thanks!
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note that the 1099K has, besides the annual total in block 1a, 12 other blocks that break it down into monthly income. Many do not realize the IRS wants it's tax payments at a maximum quarterly. Your paycheck meets this requirement because your employer withholds (and remits your taxes) every time you get paid. If one does not pay quarterly taxes on income that is otherwise not taxed until the end of the year, the IRS can, and often, hits the tax payer with a penalty for taxes not remitted in the quarter when the income was earned. They offer some leeway on this but my personal rule of thumb is any quarter with $2K or more in investment income requires me to send in a quarterly tax payment (mail in form available at IRS website). I don't fuss with any formulas/calculations, I just send them 25% of the income (more than enough) and don't worry about the over payment because just like your payroll taxes withheld it all balances out at the end of the year when you file the actual numbers.
There is a line on you tax return where you report your earlier, quarterly payments which in turn will be subtracted from your total tax due. You get credit for those quarterly payments on the final return.
The OP specifically asked for comments and I have provided mine. I am not a tax professional and all of the information I have provided is strictly information I have learned over the years talking to the IRS and researching their very informative website. Doing your own taxes, even with investments or business income is not that difficult if you do the proper research. Your tax decisions are yours to make and if you feel unqualified to make them get professional help.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
This is sensible. If you Google "how do I report 1099-K" you will find dozens of stories of silly things triggering the new 1099K threshold. Things like credit card rewards miles and rebates on household purchases.
LIBERTY SEATED DIMES WITH MAJOR VARIETIES CIRCULATION STRIKES (1837-1891) digital album
Does't paypal allow one to have more than one paypal account? It would make sense to have one for strictly non-income receipts that do not amount to enough to trigger the 1099K.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
I have 2 and even though 1 is below the threshold I get it on both
.> @derryb said:
Likely because the same SSN is on file for both. I got a 1099K and my wife's paypal did not. Try that route.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Does ebay issue 1099K's as well?
Edited to add: Appears they do but only if you are enrolled as a "managed payments seller."
OK, so what is a managed payments seller. Seems such a seller is restricted from listing in certain categories including coins.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Hmmm, Actually my 2nd account was opened in my Wife's name and it morphed into mine....go figure!
Thanks @derryb
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date