The eBay 1099-K limit is $1000? not $10k?
Samuel8
Posts: 380 ✭✭✭
"Because your payouts for the current year exceed $1000, we're required to generate your Form 1099-K to comply with tax requirements. ..."
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It's not an ebay limit, it's an IRS limit. Or your State.
Paypal will have the same limit, and any other corporate payer.
so
Supposed to be $600 in 2022
Doesn't bother me.
I agree.
So, to the OP, why does it matter?
Keep detailed records, pay your taxes, and all will be well.
Are you in Illinois? NJ?
Most likely. And probably not worth stressing over the small chance of problems.
And on THIS forum, probably not stressing over the possibility of government overreach...
Meh... I'm not sure accurate reporting counts as overreach.
The real issue is "garage sales". If you sell some used clothing on eBay, it's going to be in the total and are you going to have accurate records?
Personally, I doubt the IRS is going to even look at a few hundred in ebay sales. But there are coin and shoe and video game flippers that probably are not reporting income.
As someone who pays all their taxes, I would like the government to crack down in the evaders. I'd especially like them to crack down on sales tax cheats at coin shows.
"The real issue is "garage sales". If you sell some used clothing on eBay, it's going to be in the total and are you going to have accurate records?"
this is the key issue. Not someone who actively buys and sells on ebay. How many people have years worth of things, that cost money, that if they sell would not have any receipts for them? any person downsizing would have this issue.
Now, didn't I JUST say not to stress about possible gov't overreach?
I'm not a ebay seller. What I'm more interested in is, as a lightweight collector, am I supposed to have kept careful records of my purchase price for the mercs and morgans I bought (or traded for) 20 years ago? I haven't much of a clue.
That would come under the "garage sales" problem I mentioned. The exception is that you might have an actual gain in value.
You would be surprised at how reasonable the IRS can be. And you only need to show documentation during an audit.
It was never $10k as far as I know. Some states have lower limits, but the federal limit was $20,000 AND 200 transactions, which drops to $600 total next year, regardless of # of transactions.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
A quick internet search showed at least NJ and Illinois have $1000 limits.
Sounds like OP may be in one of the aforementioned states then.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
According to our accountant, their firm has never seen an issue with listing the cost of goods sold as the same amount as income for smaller income amounts from selling old stuff. Not to say that it theoretically couldn't be a problem without better documentation, but based on the type and variety of the items sold, which is easy to obtain records for, one can pretty easily conclude if you are clearing out stuff in the basement or are running a business or flipping electronics or collectibles.
The total income amount probably matters as well from a practical standpoint as it's probably not cost effective for the IRS to dig into a few thousand dollars in sales, hence the $10K federal limit. With the upcoming $600 limit, I still find it hard to believe the IRS is going to demand receipts/records for cost of goods sold on a $700 1099 from eBay. In reality it likely won't make much of a difference but politicians can declare a win on cracking down on tax cheats (while making it more annoying for non-cheats).
Regardless of whether it was always reported or not, it was always taxable income (at least on the capital gains). If you pay your taxes, this changes nothing.
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I thought the $600 was recently revised in the new bill, it was going to be $10,000 or more because of all the backlash the $600 limit was getting such backlash?
Different $600 limit. That was bank transactions not sales.
Thanks, that's too bad.
I am in NJ.
There ya go!
Blame The Garden State! [Although thanks to the Feds, it will be $600 next year!]
Man, there is going to be straight carnage next year after some people realize they're gonna get smacked with multi thousand dollar tax bills. Ugh.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
Well, anyone getting hit with a thousand dollar tax bill has probably been evading taxes for years
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I had a client who got a letter from the IRS because she had 20k plus in PayPal transactions and reported less than that amount on schedule c.
Apparently she was in some kind of Facebook group where they buy and sell used designer clothes for their kids to each other. Kids wear them once or twice and off to the next mom. Always for less than cost. IRS was fine with an explanation letter and reassurance there was no gain on any of the sold clothing. Also reassurance that business related PayPal transactions were included in income reporting on schedule c.
My Ebay Store
If you’re selling used personal items you do not have to pay earned income in that
...if sold for less than you paid as you can deduct the cost of the items. If the items generated a profit, then that is taxable income.
I would like to think that if most people got a surprise 1099 indicating $5000 in "income" they would run not walk to an accountant who would help them figure out their real liability. Am I just incredibly optimistic?
How many people get $5000 from a garage sale? If you have $5000 in sales, you are running a business and should be paying the taxes.
You're forgetting the 15% self employment tax.
They don't even need an accountant. They just need to file schedule C.
If people want to run a business, they should pay the taxes. I want a level playing field. It will be good for people to understand the costs of running a business and the implications of the tax code. Maybe they'll pay more attention to what Washington is doing rather than just pretending it applies to someone else.
Look how mad people got about the collecting of internet sales tax that was owed.
I understand that. I don't even disagree. My assumption was that someone received a 1099 for $5000 "profit" completely unexpectedly. This would likely upset or alarm people and they ae not likely to think until they reach the most efficient option. Even if they understand that they know to, and how to, fill out a schedule C, it might be comforting to ask an accountant how you're supposed to account for your basis in the twenty years worth of clothes you sold, rather than asking a bunch of goofballs on social media.
Call it whatever you want. If this new policy affects what you pay to the IRS and your gross income is unchanged, it is because you were previously cheating on your taxes.
Wrong.
Why should everyone else subsidize them? If all the cheaters would pay up, the government wouldn’t need to discuss raising taxes as much even to cover its bloated spending.
Thank you for the laugh! 😂🤣
I only sell knowledge, and I pay taxes on my income... Cheers, RickO
Ok. Fair point. At least it would bring down the national debt some. 😂
This is so true. On several levels.
There's a lot of underreporting that goes on due to the underground cash economy. Independent contractors. Tips. Full blown eBay businesses. Vest pocket coin dealers. Baby sitters - the adult kind.
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That's true. However it wasn't clear in your original post that you were referring to that.
But this 1099 provision doesn't make those items taxable. It just means you'll need to declare the cost basis.
Who the hell saves receipts from 5 years ago in a world where you had to have $20k and 200 transactions for it to matter?
"It's like God, Family, Country, except Sticker, Plastic, Coin."
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If you originally bought it with a credit card, you can go into your online statement archives.
You will also find that the IRS is not going to require receipts in all cases even in an audit. They are not trying to jam people up for a hundred bucks.
Technically, this same issue applies now. You can just evade the issue by ignoring you garage sale income. Now, you have to explain it. Big deal. See the post above with the clothing exchange.
This is all very confusing. They previously , including this current year, did not send out 1099's unless you sold over 20 K. Is this something new?
I'm not sure what to think- on one hand, the reporting level is kind of intrusive but on the other, if it opens the eyes of people to what all the small businesses who do keep legitimate records have been dealing with for years, perhaps some good might come of it.
Don't overlook the fact that an ebay/PP 1099 INCLUDES amounts they collected from buyers for state sales tax. Your income reported on these 1099's is actually less and should be offset by you claiming the sales tax collected as an expense.
Repetition of ignorance is ignorance raised to the power two.