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1099 K From PayPal -
- Thread starter BostonJazz72
- Start date
Yes I believe so. I'm not an accountant, but I keep an eye on how Turbo Tax calculates things and what forms it creates. I don't think Schedule C income is treated different than wage income.
My state, Maryland, enacted this as of Jan 1 this year, so I'll have to deal with it next year.
Naive question here...but I’ll ask anyway...
if you have a garage sale and sell things for less than what you paid then....can you write off those losses? What about if I have gear no one wants...can I list it for $1 and then write off the difference from price paid or normal used value? What if I do this only as a hobby and playing bass or music is not an income generating thing for me? Does that make any of it irrelevant? I would think that with these rules a lot of people would take advantage of selling stuff they don’t want at giveaway prices and writing off the difference in price paid?
if you have a garage sale and sell things for less than what you paid then....can you write off those losses? What about if I have gear no one wants...can I list it for $1 and then write off the difference from price paid or normal used value? What if I do this only as a hobby and playing bass or music is not an income generating thing for me? Does that make any of it irrelevant? I would think that with these rules a lot of people would take advantage of selling stuff they don’t want at giveaway prices and writing off the difference in price paid?
My honest attempt at answering:
1) Yes, if you have gain to offset the loss. And if not, you can "carry over" some loss to the next year.
2) No, unless you are depreciating the gear, which is a different animal.
3+4) No, no difference- capital gain is gain, regardless of if you have a business or not. I pay CG tax on the $500 stock trade I executed and I'm not a stockbroker.
And re: "giveaway" prices - that's what happens a lot with non-cash donations. But the IRS also isn't stupid and if you abuse it, they can catch up to it, but, really, there isn't a lot to gain in the "loss" department unless you have CG to offset. But, like extra work income, you are better off paying the tax instead of taking less money. I mean, c'mon, that's cutting off your nose to avoid a few pennies in tax.
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I'm not an accountant, but I suspect the "business versus hobby" and "goods withdrawn for personal use" distinctions might be worth looking into here. If you buy a sofa and use it for 10 years until it wears out, then you're getting value out of it through its use, and it's not really a capital loss.
I think if we could write off our living expenses, most of us would pay a lot less taxes.
Music is just a weird thing because for many of us, it's a gray area between a hobby and a business.
I was planning to sell a significant amount of stuff this year. I think that's on hold and I'll wait to see how this works out before selling anything. Even if it's just gross receipts, the self-employment tax is 15.3%. And I don't have business records for what I paid originally because I'm not a business and can't instantly turn into one because Maryland says, "Make it so". Maybe I'll just trade for weed on the dark web. Only half joking.
I agree with you in that I don't have all of my receipts either. Just because Illinois says 'make it happen' has made me scramble to try to get this together for my tax accountant. Maybe in the future Venmo or Cashapp? But I would suspect that most buyers will not want to deal that way because there is no guarantee that you would receive your goods and are only relying on the good faith of the seller.
Also, what if you were paid as 'Family and Friends' in PayPal? Is that subject to gross income, too?
I don’t think that counts. As far as they’re concerned, it’s like sending money to your parents.
As Plain Old Barry posted, they don't need to know if they're taxable- the 1099 kicks in for incidental income that reaches a specific amount and it's up to the recipient of the income to deal with the matter.
If someone has a way to offset the incidental income, they should use it- the cost to ship it, materials for packing, driving to buy the materials or to the shipper (IRS mileage deduction), etc are all allowed.
If this becomes too intrusive, barter will become more common.
This thread is proof positive that the US Tax Code is overly complex.
If governments over-play their hand, they'll end up with less tax revenue as people disappear into the shadows. I had already started to slow my activity on Reverb.com on account of the newly-enforced sales tax thing (On used equipment? Give me a break) and increased fees.
yeah, I'm pretty much keeping things local or just on here. trading seems the way to go these days. tired of Reverb and very tired of paypal.
But if you now have a 1099-K and have to file a Schedule C (I think that's correct), will you need to pay self-employment tax on gross receipts. That's the snag that I'm most concerned about. My taxes have been pretty straight-forward. And the Fed cutoff is $20,000 and 200+ transactions. So is this 1099-K only reported on state returns or does its existence screw me on the federal level too? I'm going to have to go with trades only or local cash sales. Selling to Guitar Center seriously could be an even-steven situation with no risk versus selling online. As long as their check doesn't bounce.
My limited understanding of how PayPal grew is that non-interest-bearing accounts are not reported to the IRS. So they have been seeking other ways to tap the cash flow of hidden assets.
PayPal grew because you could send money to a stranger in a (mostly) safe manner. Prior to PayPal it was mostly checks or money order, and you wouldn't send those to someone you didn't know. States are getting most of what they want by charging sales tax on online sales now. The new 1099-K requirements in some states is the result of Uber, Lyft and others skirting tax laws by claiming that they're just a third party processor. So now the drivers get the 1099-K even if they just drive now and then and are under the previous federal cutoff of $20,000 and more than 200 transactions. We're caught in the crossfire. This will essentially kill the flippers that we see here and on craigslist. For most of us that aren't selling at t profit, it will just be an annoyance - as long as we don't have to pay self-employment tax on gross receipts. That would be 15% of what you sell which would basically kill selling anything. I'm trying to iron out that question. If that doesn't apply, then it's just some extra Turbo Tax time and you don't want to sell too much to trigger an audit.
I think you are making this more complicated than it really is. Capital gain is reported on (checks Google) Schedule D. It's straightforward. CG doesn't factor into self-employment tax. (The fed cutoff is not 20k/200 transactions- that, I understand, is just what triggers a 1099). Again, if you want to take less value for something to avoid paying taxes, well, that's one way to go... but I'd rather pay a tax on a gain than just give up all the gain.
