Interesting 2020 Paypal 1099K tax report observations
derryb
Posts: 37,206 ✭✭✭✭✭
Paypal has started posting 2020 1099K's.
If you are having trouble finding them best to just go to search and type in"tax documents." If you show no 2020 1099K would be wise to check back later; they may not be uploading them all at the same time.
Two of my PP accounts received them. Observations after comparing the 1099K to my account "activity:"
- 1099K shows in Block 1 (with a monthly breakdown in blocks 5a-5l) what Paypal is calling "goss amount of payment card/third party network transactions." This is your income that they are reporting to the IRS.
- One account had seven transactions and $5,651 gross income reported. Threshold limits not applied?
- Other account was below $20,000 threshold but exceeded the 200 transaction threshold. Did this invoke including the other account in the reporting (with it's own account number and 1099K) since both have the same social security number?
- 1099K gross reported to IRS in the 13 gross transaction blocks includes sales taxes collected and remitted by PP even though seller did not receive this as income. The form does not have a separate block to report sales taxes collected and reported that could be used to rectify the discrepancy in the gross block. Thankfully I included a column in my spreadsheet to identify the sales tax portion of each sale and will be able to defend the difference between Income reported on the 1099K and the income that I report of my 1040.
- Paypal gift payments are not included in the amount reported on the 1099K.
- I had no refunds so I am unable to report that PP reflected them correctly in my gross income.
So, my takeaway from the ensuing and sometimes heated discussion (my apologies to all) is that:
- The Paypal 1099K for the first time includes the sales taxes it processed from your sales in the gross amount reported.
- When reporting these sales on your tax return you report the 1099K gross amount, not the actual sales amounts.
- You then reduce this gross, on your tax return by claiming the tax amount as an expense.
- To do this you will need to know the amount of state sales taxes processed by paypal through your account. This amount IS NOT on the 1099K, you will find it on each transaction details page or its total the spreadsheet you can download in paypal.
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If you don't keep your own records, you can download your PayPal transactions for the year and there's a column for sales tax collected. Only takes a minute to get a total.
So if you have/had several or more PP accounts and none of them accrued enough income to require a 1099 would the IRS maybe suspect "structuring" assuming that they ever found out?
I assume that eBay also generates a 1099 of some sort.
Sad the IRS goes after the little guys when there are billionaires who don't even file a return yet the IRS doesn't have the "manpower/budget" to go after them.
anyone here download the annual for all balance affectingg?
it doesn't show buyers addresses, item descriptions, fees etc for me any more. i can't differentiate between sales/purch. tried pp chat and despite several inquiries, they simply tell me the data should be there.
No 1099 for me yet. Theoretically I should not get one so....
"It's like God, Family, Country, except Sticker, Plastic, Coin."
Structuring is a charge brought about when it involves an attempt to avoid reporting and paying taxes. If one properly reports all of his income to the IRS, there was no attempt to violate tax law. There are valid reasons for having multiple ebay and paypal accounts.
Thanks for the analysis of PP reporting
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
Thanks... I was not aware they were considering sales tax collected.... as gross income. No wonder their form does not match my records.....
are we supposed to send PAYPAL and eBay 1099's for their fees?
I noticed that in the program i use to list. They stopped feeding me the email address sometime between July and September of 2020. Now I just get a bunch of numbers/letters@members.ebay.com
But I do have every email address of every buyer going back to 2008. A large dealer here reached out to me years ago poking around to buy the list from me... I said NO WAY
If it is over $600 then technically yes. If you have time to waste doing this then go ahead.
ya.we still get phone #s though. i still contact ppl that way.
i really need to figure out this pp d/l thing. i made it a habit to d/l the pp annual reports with all customer and seller info going on the better part of a decade and something changed past couple years and that data is no longer downloadable as i can figure anyway. ebay statements are of no use in this regard either.
i guess if i have to do it manually, i just may have to devote a couple hours to opening the pp transactions individually. at least you can do that easily from the all activity page with the drop-downs.
i'd probably have a rather nice gift for someone to get me across this chasm.
Do you have a source indicating the IRS prioritizing small tax payers over billionaires who do not file a return?
I downloaded my PayPal transactions for last year and there are columns for:
Shipping Address
Item Title
Fee
among many others. eBay transactions are under "Type" and labeled "eBay Auction Payment". If the total is positive, it's a sale and if negative, it's a purchase.
Since you asked, try here.
https://forbes.com/sites/shaharziv/2020/06/08/irs-ignores-tax-dodge-by-rich-costing-45-billion-congress-wants-answers/?sh=704ab9a5634b
From the link.
“As a result, low-income taxpayers are audited at a disproportionately higher rate. This is unfair.” Neal requested that Mnuchin share an approach, along with resource plans, to address the high income nonfiler fiasco by June 15, 2020.
In general the smaller filer doesn't have the resources to fight back.
thanks for taking the time. i figured the negs were purchases but not certain as i thought previously some purchases had negatives even when fees were shown but i was able to simply look at the details and know instantly whether i sold or bought something. in any event you made me think maybe this a business vs personal account thing.
i've also been trying to find the previous d/l screen (classic) that i've used for years but all those links go to the new one.
at the least you've invigorated me to dig some more since someone finally confirmed that those details area available.
You can also tell which are purchases by the "Shipping Address" column. Obviously, if your address is there, it's a purchase.
that is the problem. i have like 5 columns whereas for the previous umpteenth years i've had 15? used to delete like half of them but i'd rather have too much than not enough in this regard.
Mine has 41.
horizontal or vertical? surely not horizontal. that would be way too much unless i'm not the super analyst you are.
Horizontal. A to AO.
Super analyst? You mean like- opening the file and looking at it?
I got an email that days I have a tax form from PP coming...
My sales do not come close to q it qualifying either for $ amt or number of sales.
Is someone implying above that purchases somehow also count toward the limits??
Billionaires are quite frequently audited.
What U.S. billionaire didn't file a return?
Um, none of the people in the Forbes article were "billionaires"...
A few things:
Edited to add:
The federal thresholds do not apply to each state. If you are getting a 1099 and are below the Federal reporting requirement, it might be your state. Vermont reporting requirement is apparently only $600.
https://www.paypal-community.com/t5/Reporting/Received-a-1099-K-Didn-t-meet-thresholds-MA-VT/td-p/1429744#
There are many more 100$ fish in the sea than $1mil.
Billionaires are flashy but families making 150k a year pay most of the taxes. That is where the irs focuses on
11.5$ Southern Dollars, The little “Big Easy” set
There is probably a boatload of articles about the issue ad one of them may have mentioned it. Not gonna peruse every one. High income non-filer works for me.
If you do the math, the average income of those non-filers in the Forbes article is under $200k per year.
According to this nearly 2000 taxpayers owing over a million dollars in estimated taxes failed to file a return for tax years 2014-2016 and I doubt that it has changed much.
https://money.yahoo.com/report-rich-americans-owe-billions-of-dollars-in-back-taxes-to-irs-125447531.html
Whatever, I'm not in that class and don't worry atall about PP or eBay transactions.
Only if you are required to send your car dealership one.
will you post the link of the page you use to d/l. maybe there is a different one out there?
I do not routinely sell cars
1099's are issued by the person paying the money, not the person receiving it.
Coins bore ya ?
Guess I’ll find out.
Log in to PayPal
Click "Proceed to Account Overview"
Click "Activity" -> "All Transactions"
Click "Date" -> "2020"
Click "Download"
Click "Create Report"
Thank you for pointing this out. The article clearly states that the numbers they are referring to are "those with income of at least $100,000". I guess some may hand wave the difference, but that's like saying someone who earned over $100 is a millionaire.
The real truth is also more complicated. With only partially derailing the conversation, the most important thing is to define what an audit is. If you file that you received a 1099 INT from your bank in the amount of $450, but the amount was actually $540, the IRS will likely send you a notice. The large majority of "audits" are of this type and not actual detailed examinations of the tax returns. It appears lower income filers are more likely to get these types of notices.
For a good summary of these more detailed audits per income level, this article is helpful, using 2017 data: https://www.forbes.com/sites/ashleaebeling/2019/05/20/irs-audit-rate-on-the-rich-collapses. In summary, the chance of audit is about the same up to $500,000 and then increases as income increases.
There has been a strong reduction in the overall number of audits, which has proportionally benefited, particularly in 2018 when there were only one third as many tax return examinations as compared to earlier in the decade.
I also followed the link in the article to the Treasury Inspector General report. From a brief perusal there wasn't any indication that a non-filer was more likely to examined if they were lower income. My guess would be non-filers across the income spectrum are less likely to be examined as it is a time consuming process to deal with a non-filer. The report explicitly states that of non-filers, high income earners should be targeted to get the best "return" on IRS resources. So making a bit of an assumption, I would conclude that a lower income earner is more likely to get some type of IRS action/notice than a non-filer is regardless of income level. I think most would agree that this is not an ideal policy, but government agencies typically have poor incentives and get messed with by politicians. But I don't think one can conclude there is some sort of intentional policy to help wealthy individuals.
Report income from a hobby? You might well be right, but where do I deduct all my hobby expenses? It has always been my understanding that hobbyists can't deduct expenses, so I wonder if the so-called income is considered differently.
coins are why I and a whole lot of people here get a 1099 from paypal. Feel free to not participate in a discussion if you have nothing to contribute to it.
Note that unlike with a 1099 MISC (interest income), the 1040 does not specifically request the 1099K info. It is just a heads up to you and the IRS that your reported income, somewhere in your filing, should include the 1099K total. In my case it shows up with income from capital gains. For others it may show up as business income. Depends on how you file.
All the above is why they make CPA's
I love paying my CPA to do the work for me.
Doing my own taxes helps me see my expenses and my income for what they really are. Last time I used a 'professional' I got audited and had to pay more.
By the way, didn't eBay/PayPal change the way they were handling sales tax in the middle of the year?
another reason to keep your own detailed spreadsheet.
Well, both methods should be reflected in the PayPal spread sheet.
If you keep your own detailed spreadsheet, you'll still have to reconcile it with the PayPal reporting to the Feds. So, I actually save myself the trouble of reconciliation by simply using the PayPal spreadsheet.
I only have to ensure that gross income I report from sales is equal to or greater than what the 1999K says. Since my spreadsheet tells me how much PP processed in sales taxes (and added to my income reported on the 1099K) I have all the information I need to know (and prove) what part of the 1099K total was actual income. My spreadsheet includes the info I need that appears on a PP spreadsheet and includes related expenses that the Paypal spreadsheet does not provide. Why use two spreadsheets when one will do the trick? I have no need to even look at a PP spreadsheet. Everything I need from PP is on each transaction details page and their 1099K. I only need the 1099K to ensure the income I report from sales is equal to or greater than what PP reports, after subtracting the sales taxes included in their total.
PP spreadsheet does not include my basis for the item sold, date it was purchased, related shipping cost, Ebay FVF, or grading fee. Knowing these expenses in addition to the ones a PP spreadsheet provides is essential in including all the costs when liquidating an asset.
Everything I need to know about my current inventory and my completed sales is available from purchase receipts, postal receipts and printed PP transaction details, all of which are hard copies in my records. A line item is initiated on this Inventory Sheet with each purchase and then completed upon sale of the item. It then gets cut and pasted to an identical sheet titled current year taxes. Keeps both sheets up to date. At any given time Inventory sheet shows current inventory with Excel "formulas" handling all of the math, including up-to-date totals at the bottom of the page.
It's not that I'm not interested in discussing 1099's , taxes, reporting, or the tax code. How sales tax affects my bottom line, or how the USPS delivers packages sent ( or missends them) . Just show me the coin.
Make money, lose money. Report.
I get a 1099K every year. Every year these discussions come up. This hasn't changed in fifty years. I'm tired.
The coins I made the best return on last year, were the uncirculated 2020 W gold eagles.
Bought 1 ( per household) for $2500, sold for $3250.
Had 3 friends, one being a forum member get me one. That was nice of them. I'm happy. Coins do not bore me. Instead of a "you suck", I get a 1099. It's cool.
The tax code remains the same. Make money, pay taxes.
Just wondering if they bore ya.
I lost the most money last year on a fraudulent check for 3 gold eagles. The police caught up with him, but it doesn't make my taxes easier. It just requires another form to be filed. And I won't be made whole. Not for the time spent buying and selling and reporting.
I've got mounds of paperwork and widgets. You should thank me for engaging you. Just to keep the fire burning.
Who do you think penned the name "PayPow" ?
Not everyone already knows everything and they welcome shared info on important matters that relate to coins. Major change this year with the paypal 1099 involving state sales taxes, but I guess this is just another thread you feel a need to respond to without knowing what is being said. LOL.
Not bored at all with the 2020 W. Mine earned a 70, spreadsheet says I netted 3943.73. Got lots of great tips on using an Excel spreadsheet in forum threads that weren't always just about a coin. It's not always about the coin, many collectors, buyer and sellers want to know about the collecting, the buying and the selling as well.
I love being the son of a CPA and having all the work done for me without having to pay. Well, I guess I pay in hugs.
Well the idea that sales tax collected by eBay has any change in the bottom line from PayPal is questionable. eBay doesn't take the tax from you. It might increase the fees paid but the 1099k reflects what was left for us to report.