Paypal 1099 changes? What is going on here?
bronco2078
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I was under the impression that paypal was going to 1099 people for over $20,000 and over 200 transactions.
I'm handling my uncles estate , he passed away in 2017 and his mail comes to me now. Some of it that I've changed the address on comes to me directly but others which are forwarded get hung up for a while and show up whenever.
Today in the mailbox is a forwarded 10099 to him from paypal. Gross payments $606.15 , 37 transactions.
Last time I checked 606 is way less than $20,000 and 37 is way less than 200. Do I have to file this when I do his estate taxes ? I have no idea what he sold but doing a little math the average sale value is $16 . He was a stamp collector so it was probably stamp related , which probably means he lost money on every sale . 
Not knowing what he sold is not going to make that easy to prove though.
Is this only happening because he died or are other people getting 1099's from paypal for tiny amounts?
Comments
Interesting, and frightening. I wonder if he had a business PP acct (is there such a thing?).
With no way to know what he sold, you can't estimate profit. Assuming it was not 100% profit, the amount was small (or nonexistent) so hopefully the IRS wont pay any notice.
I should have posted this in the BST
In the blink of an eye PPG only would appear in a lot of posts
File the 1099 as income. Despite the fact that PP, or whoever uses a different threshold for sending out their forms, the seller is still liable for income derived through those means. Not sure if that amount raises the tax much, but I'm sure the code states we have to report it. So (for me) why chance it ?
``https://ebay.us/m/KxolR5
With all due respect, I do not think this is correct. $606.15 is gross income, but the taxpayer is entitled to deduct costs, etc. It is not all taxable income. You might well be correct that the IRS could be looking for this to be listed somewhere on a tax schedule, but it should not all be taxable.
600 is no big deal , just more work for me. I will have to probably call paypal and get them a death certificate so i can get into his account . He had told me in the past that he never left money in the account and where i didn't have the password I figured there was no reason to get into it.
Being named an executor is a series of wonderful exciting surprises
In the state of Massachusetts and I believe Vermont it has changed to $600 as the limit. See link below.
Donato
https://mass.gov/service-details/new-massachusetts-reporting-requirements-for-third-party-settlement-organizations
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I'm not an accountant or tax guy, so do the research you must. I also know from experience , that there are associated costs/fees/expenses that come with selling online.
The code was complex. Unsure of all the changes upcoming in the code, but as to "income", PP could actually send out 1099's to anyone receiving more than $600 income sales (gross) or more, per year (IIRC the code correctly from past businesses) , if they wanted to. I'm not sure why the threshold is so high with PP, but the accounting practices remain the same. Why your uncle got one is beyond me, I have some friends who have also been named executor of family estates. Seems to tear more families apart than brings them together. I feel for you.
``https://ebay.us/m/KxolR5
Tried to note this in last post. The executor has his work cut out for him.
``https://ebay.us/m/KxolR5
Wondering if it's a case of, "Once we do a 1099 for you once, we will do it forever?"
in other words, maybe he hit the limit in past years, and they do a 1099 for every year after that?
All of this is very disturbing. The idea that a state can lower the threshold to 600 for PP might be legal but will severely complicate things for a lot of people. Don't get me wrong - pay your taxes, what you owe, but in my case I sell a few scraps just to recoup some money, not make money. The accounting nightmare would be horrendous.
If you got a 1099 the the IRS got a copy too so they are expecting to see it somewhere on the estate's return. I've not included 1099-B amounts for less that $25 and it was never questioned. As executor you should request his PayPal history, but it likely won't be of much value unless it shows purchases. If you can't document the basis then the IRS assumes it to be $0. The simplest thing would be to include the $606 as income and be done with it.
I HATE to agree with you on this but it is probably the best advice.
Why would PP issue the 1099 if the money was paid by another party? It's up to the other party to issue the 1099, no?
Interesting...that is only a State income tax requirement. The prior $20k IRS thing still holds
Another thing that is weird about this is I'm sure there have been a gazillion sellers with sales over $600 that read this....is this the ONLY person that got a 1099 (those with sales under $20k). I didn't see any "I got one also" reports
What 1099? Never got it. ???? who??
Just live dangerously and let the IRS come after you for $600.
bob
I got a 1099 from PayPal as well, the explained that because my transactions were in excess of 200 they were required to send the 1099-K.
Now I have to file a schedule C and claim a loss.
The limit is $600 in some states - see the other posts.
PayPal doesn't determine who gets 1099's. Federal and state law determines who gets 1099s.
They will. It's all digital now. Computer just crosses 1099 against your tax form and will immediately send you a bill. The bill will assume that it was $600 pure profit rather than $600 in gross revenue.
See above. It depends on the State in which you live.
Ok...let me rephrase.
Anyone here that sells on Ebay AND is from MA or VT AND has less than $20k in sales OR 200 transactions gotten this form? I'm sure there are a few in those two states that sell on Ebay
When someone passes away, the financial assets are revalued as of the date of death, regardless of what the original cost was. And for $606 worth of stamps, I doubt any reasonable person would insist on an appraisal. My point is, if the stamps were worth, let's say $500 on the date of death, and you sold them for $606, the profit would be $106 minus any expenses not included in the $606 (probably PayPal fees would not have been included in the $606, so these fees and any other expenses such as shipping would be deducted. Net net you are probably breakeven, but you will have to file a form including the income (the revenue), then subtract the basis and the expenses of sale.
I'm not a tax accountant, but I think what I've stated is pretty close to what the requirements are.
Edit to add: you are required to follow the rules, but declaring the entire $600 as income overstates your true tax on the transaction.
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Another advantage of Nevada, no state income tax.
bob
PS: Mid 70's all this week.
I ignored one of these and the IRS picked it up, with penalties. Explained that I am a collector and just provided my costs and expenses, which of course showed a loss overall. That was the end of it, no penalty. A bit of hassle but no problem. However, this reporting rule was new at the time, they may be taking a harder line.
Instead of claiming it as all income, worst case is you can deduct the face value of the stamps
. I was the executor of my mom’s estate, so I feel for you. My condolences on your loss.
If the stamps were sold by the late gentleman while he was alive, how could they be in his estate at the time of his death (and thus be eligible for a basis change)?
I would pay taxes on the $606 and be done with it.
It is my personal experience that 1099s do get matched up, by the IRS computers.
It will also make closing the estate and paying the probate court and all that other junk if you just claim the 1099. The IRS will consider it all taxable and writeoffs would be negligible. I also hate to agree but it's the smoothest way, especially in a low amount, to just wrap things up.
My apologies for your loss OP. I know how frustrating this can be, and how much it impedes the grieving process for all involved.
Don't forget to claim social security as income. I know you probably know this already but as executor you're legally bound and duty bound to fulfill everything as legitimately as possible.
I had a co-executor fail to file his form with probate, and the following year my $2900 return turned into a huge negative, as they thought we had never paid taxes on the estate.
Be safe and well, and let the light and love be with you all.
Agree with the sentiment here. The IRS really isn't the "evil" organization it's sometimes presented as.....(Usually by people trying to cheat the system).
Make an honest effort with a logical basis, and you'll probably never even be questioned.
I was on hold with paypal I got disgusted and hung up. I read the link about mass and vermont and he did live in mass so thats probably what happened. I am going to dig through some of his stuff and see if I can figure out what his paypal password was . Maybe I can find out what was sold . If they were modern stamps they were most likely purchased at face value. If it was album pages or mounts or something like that I'll just deduct the fees and shipping and be done with it.
It seems like they are saying only Mass state knows about it but I'll assume the feds do also and put it on both returns.
...and I will assume he is the ONLY person in MA and VT that sold smalls on Ebay until I hear otherwise (I live in MA)..dumb statement but I think we should have heard many other reports of 1099's
In 2016 I was the executor of my Mom's estate which essentially was just her home. The IRS sent her (me) a failure to report a small amount of income...total tax and penalties was $51. I know it was reported 'cuz I did her taxes and had evidence but I just cut a check and it was over. Not worth the effort.
I don't think he sold the stamps after he was dead. It was his deceased Uncle's PayPal account.
It does, but he likely has no easy way to determine the basis for the sales so considering the relatively small amount of money involved it's best to just declare it and move on.
I agree. The IRS is easier to deal with than people think. For efficiency sake, I used to consider my hobby income to be money transferred out of PayPal. I didn't bother with the fees as it was money I never saw. [Yes, yes, I know it's wrong. But it was EASY.] So, the first year that PayPal provided data to the IRS, I got a bill from the IRS for $12,000 because I was missing $60,000 in income. [Ironically, that included the IRS double counting some of the revenue I had already reported.]
I had also forgotten to file $6 in royalty income that actually had $1.64 in withholding.
I called the IRS, explained my sloppy accounting. She told me to refile in the correct manner and include a letter explaining what I had done and what the correct numbers were. They actually then owed me a little over $1.00. They actually sent me a check for the buck and change and everything was hunky dory.
It is likely more efficient and cheaper for Paypay to send 1099s to everyone than to establish some threshold. In any event, reporting the income is required with or without the form.
There may be thousands of people who live in MA who got 1099's, but maybe they were expecting them or understood why they got one. Why would they automatically complain?
But there are some:
https://ttlc.intuit.com/questions/4215106-live-in-massachusetts-received-a-1099-k-from-paypal-for-the-amount-of-627-00-massachusetts-changed-1099-k-reporting-to-anything-over-600-00-where-do-i-enter-it
https://denofangels.com/threads/psa-paypal-sending-1099-ks-to-ma-and-vt-sellers.767165/
https://northeastshooters.com/xen/threads/ma-law-11-29-17-retroactively-taxes-all-3rd-pty-paypal-transactions-as-income.347142/#post-5782235
For starters the law requires you claim all "income", be it from your job, interest or dividends, a property sale, Amazon, or eBay, etc. It doesn't matter what the amount is. They also let you write off expenses associated with that income. Doesn't matter if you get a 1099 or not.
Hypothetically I think if you pay the kid next door over $600.00 over the course of a year for helping you pack your eBay sales and taking them to the post office on a regular basis you are supposed to issue him a 1099. A little extreme I know but that's what the IRS says you are supposed to do.
Even if the 37 transactions were from 37 different people he received the funds from PayPal as the payer and since he lived in MA I guess that is why they sent the 1099. The $20,000 / 200 rule that PayPal applied to payments was put in place so everyone that received a single PayPal payment wouldn't end up getting a 1099 but some states got greedy. As stated above, if you are are selling things for a profit on eBay you are supposed to report those sales even if you don't get a 1099. Does everybody do that? Probably not.
Accounting for the 1099 for 606.15 could be as simple as recording that amount as "gross receipts" on line 1 of a Form 1040 Schedule C-EZ and recording "expenses" on line 2 of the same form. The difference would be the taxable amount. To my knowledge PayPal reports "gross receipts" including fees so he would have at least 2.9% plus 30 cents per transaction in PayPal fees or about $28.00. If the sales were on eBay probably at least 10% or $60.00 in eBay fees. Even if the PayPal payments included shipping paid by the buyer there would still be shipping on 37 sales, $1.00 to $3.00 each? You can probably whittle that $606.15 down to a negligible amount or even a small loss.
Sorry for your loss. I don't envy you as the executor, it can be a daunting task. Just try to address one thing at a time, do what you think is best and try not to over complicate things by over analyzing them.
it's crackers to slip a rozzer the dropsy in snide
Thank you for that. I was just miffed that only one on this forum got one....not to complain but state a fact that it was received
Wow from the responses I've read in here looks like we have quite a few people that cheat on their taxes. You have to pay the taxman, well unless your gump. lulz
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Be thankful PP sent you a copy of what they sent to the IRS.
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Your talking about the same IRS that can't find any of their own documents?
Don't worry about it.
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if it is not a taxable event then the answer is no. But if you want to avoid an audit you can list it in and on expense and be safe. Some state laws are different then federal law. I image your state changed it to the basic 600.00 like many others.
I would check with the state law to be safe.
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I have a quasi similar issue, estate, paypal, etc.
I am still selling off stuff from my dad's estate, tools, stamps, curios, etc.
I set up a separate ebay id, and whatever the sales are for the Ebay ID, and by default, flows through to paypal, I just take the total of the paypal 1099, and list it as income for a little business ID, and then take the amount of the ebay sale (cost basis) and deduct it, and it all zero's out, and all is well.
its nothing to worry about. Many states require a 1099 now on 600 dollars 4 or 5 its a requirement. Just use a schedule a and c and SE if required if there personal items in that low of an amount its nothing at all. Easy to do and you can fill in the form with a PDF on line. It may be hobby income if the sales are not ongoing for more then a few percent of your income. I have been selling mid 5 figures on 2 accounts for 6 years now and if you have good tax software and keep decent records no big deal. If you use a tax preparer its still very simple. Pay the tax if you owe it. Deduct everything you can legally and you will see the tax is not bad at all if any. Records are vital.
Yes, I got one and I am from Massachusetts and had well below 200 transactions and well below $20,000 in sales.
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)
I doubt it. It is all done by computer and could be done with a few lines of code.
True. But mailing also involves certain discounts in fulfillment and postage that might save money if Paypal sends more forms.
So if you sell a $600 piece of junk that's been laying around in your attic for years on eBay, PayPal is going to 1099 you for it?
Great transactions with oih82w8, JasonGaming, Moose1913.
nevermind
The $606.15 has no affect on PP's corporate taxes, except for the fees (income) they collected on the transactions. They issue the 1099 to the IRS and to the account holder because they are a payment processor and federal tax law requires them to do so on transactions totaling $20,000+ and 200+ transactions. IRS could easily require them do so on any amounts they process, look for it to be lowered over time.
This requirement is the IRS's way of knowing the money transactions in the event the individual is not honest enough to claim the income on his own. IRS is requiring PP and not just the individual to report your income. Its part of their fight against the tax cheats.
As far as the 1099's PP is issuing on lower amounts, it must be a state requirement now. Keep in mind that state tax collectors want your income reported just as bad as the feds do. I'm in a no income tax state and have no experience with these lower threshold 1099s from PP.
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I did, for 9 transactions. What a load of crap. Most of this was not for coins, but for miscellaneous old stuff around the house. If you have a yard sale, do you keep records and report the proceeds as income? Of course not, no one does. That's not the intent of income tax. If this nonsense gets enforced, it could end eBay for casual sellers.
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