Paypal sending 1099-Ks to USA sellers who received over $600

I'm not sure if it's the same in the USA, but here in Canada the sale of personal property does not count as income because it's transforming assets (items) you already own into another form (money). That might be something you can look into?

 

I'm an income tax preparer in California, so I may be able to help some! A 1099-K is just another form on income, nothing to be alarmed about. All 1099 forms are for income from business sales. In the US, even if you sell something that is your own property, it counts as income if the item is over a certain amount. Most people, however, do not use 1099 forms unless they are issued by a company, such as paypal. Example: someone having a yard sale isn't going to report their money made from the sales. You should still include it with your tax documents when filing, because it may affect your return/amount owed. If you're filing on your own, there should be a section that asks about other forms you may have and you would have to answer yes to the 1099-K section. If you don't even meet the standard deductible, this 1099-K won't even affect you. Also, even if you don't meet the standard deductible, you still most likely want to file to get back any withholding that was taken from your check. The only time you don't want to file is if you have only non-taxable income, such as only receiving disability or retirement.

Feel free to ask me any questions! I only really know California taxes, but many things are universal to other states and I'd be more than happy to look up info on taxes in other states.

Forgot to add in a bit! >.<

Being that a 1099 form is a business form, you are allowed to include expenses that will be deducted from this amount. Say you made $10k, but if that you had to pay $2k in expenses such as gas, shipping fees, etc. That means your profit is brought down to $8k. You would have to specify what those expenses are for. Also, if you have gas expenses, you can do it one of two ways. By the mile or by the gallon. You MUST pick one and once you do you have to keep using that one if you keep reporting business income.

 

What a pain in the butt. I got the form also.

 

Thank you for telling us! I have to check out my PayPal because I didn't got any of this

 

I got mine two days ago in the mail. Yours may be arriving...

 

Thank you so much! I will keep an eye on it I don't sell a lot but hm...

 

If you had 600.00 or more in payments, in your account as a none personal payment in the last year.

 

I think the problem is it is already reported that is why we have the paypal tax form! where that statement is if you are wondering IF you should report these things...

 

Ohhh, boy! You might have to amend. I'm sorry you're going through this.

I'd ask/pay a tax professional (quickly!) in your state before I'd ignore a government tax document. The IRS has great powers to come after people: freezing accounts while they investigate, etc. They can audit your tax returns for - what - 3 years? if they think you made an innocent mistake. Or audit the last 7 years if they think you're a tax scofflaw.

Please act on this quickly. As tax season heats up, some tax experts will refuse to take on new clients until after the deadline for filing taxes. If your tax return is even a little bit complicated, you might want a tax preparer to do your taxes every year.
(I pay a tax guy every year. It's worth the peace of mind.)

 

Yes, you'd be helping out a lot of people if you could report back on what you find out on these 1099-Ks.

I've used eBay as a garage sale and I'd be beyond appalled if I had to pay income taxes on things I sold at a loss!

 

Some of the things I have sold on ebay have been over ten years old and I don't have proof of original price. I wonder how that works. Can you imagine if you sold for example beads and lots of very low priced auctions having to account for every sale and have backup proof of the cost of the item. Or if you inherited the items. It's going to get stupid fast and who will be reading all this stuff!

 

THANK YOU VERY MUCH for your update! I appreciate it!
I would add your follow-up to this thread. You can ask a moderator if it's suitable for a tutorial. (I wouldn't know what to tell you.)
THANK YOU! Sorry you had to go through this!

 

YIkes and scary!!!!!

 

Uncle Sam loves his $$

 

Thank you to everyone giving info here! I don't live in a state that does this (yet), but I cannot imagine the nightmare of having that sprung on me suddenly. I have literally sold hundreds of used things online in the last year--dolls, doll parts, doll clothes, wigs, eyes, shoes, accessories, off topic hobby items--I couldn't even begin to figure out what was sold, on what date, when I originally bought it, the prices....I know I've lost money on almost everything I've sold, but I couldn't prove it, especially when a lot of it was stuff I got in trades or bought in person with cash and never had receipts!

 

--Mod node--

This information is super-helpful to have a heads-up on.

But, everyone should be aware that every state (and even counties within states), as well as non-US countries may all have different tax laws in effect. If anyone has any real concerns about their own taxes, please make sure to seek out the help of real tax law and/or accounting professionals in your area.

 

I am in Illinois and this happened for the 2020 tax year so I am in stress mode. I would have received my 1099-K if I made $1000 or more and the fact I had no warning this would happen has me scrambling for proof of what I paid for a doll or other items to show I don't really profit but I am lucky if I break even but most times at a loss. Trying to recall what I paid for a doll is difficult but do able, it's those buyers who didn't post in their PayPal payment what they bought that is stressing me out. I knew when they bought it, but now months later no clue. So now I have to get smart and not only ask people who I buy from for invoices I also need to send them. Thanks IRS for making 2020 even suckier.

 

This link from paypal is good to check to see if your State is on it.

how does-paypal-report-my-sales-to-the-irs-will-i-receive-a-1099-tax-statement

 

Be sure to log in first then go to the link.

 

Thank you, I have it all done and organized. Only glitch i9s one girl is still paying on her doll so I claimed it for last year since not much more to go. I also sell on Facebook so not everything is here. But I am already starting on 2021 so I am ready.
Thanks and I would suggest everyone keep better records if you sell a lot as you never know when state will add this new tax law,.
Good Luck.

 

Part of the stimulus package added in a bill that would soon make every state have this in their tax laws. So much for taxing the rich. If you sell stuff and use PayPal you may want to rethink that.

 

Stimulus Bill Requires Payment Processors (like Paypal) To Report Earnings of $600+ on 1099-K Tax Form - Doctor Of Credit

 

So the way this reads to me it would be for sales after Dec. 31, 2021, beginning in the 2022 tax year. That is rough for those of us that just want to think out our collections and sell maybe 1k worth of stuff a year. Sigh..............must be a lot more careful about what comes through the door.

 

Husband tells me I need to tweak what I say items I sell cost me so that I show a slight profit. If you show loss two years in a row the bells go off to IRS. Thing is I am trying to keep all my buying receipts so I can have proof what I paid for stuff in case I do sell. It's a pain. If I get sales from friends they will pay friends and family and so not reported. Thank God for my friends who bought from me that way last year or I would have a lot more paperwork to deal with. Husband is great about my hobby and willing to do whatever it takes to make me happy in it. I have had hobbies before and some were more stressful on him and family then dolls have ever been. All the other hobbies lasted maybe four years tops. I have been in this hobby for 14 years now and still find it fun, and unlike the other hobbies I have made true friends that have helped me so much especially this past year. Hugs to all the hobby people and please share this info with others. With it affecting all states next year hopefully the tax forms will be easier too, but get smarter so we don't suffer for something we love.

 

I consider selling dolls and their extras like a graage sale. I enjoyed them, tried them on for size and now I wish for them to move on so I can get another doll or outfit. I pay people in USA and in other countries so they can make a living creating works of art in either fabric or resin. I don't think my fellow collectors in this hobby is trying to rip anyone off, we simply want to have something that makes us happy in a crazy world, esp now. I don't drink, buy fancy clothes, or even make up. I do this and I love it. If the government want to get money from anyone how about the Gates, Trumps, Buffets, Bazzos and Zuckerburgs of the world and leave us alone.

 

The new 1099-K bill is so annoying. I had $3,000 in "sales" last year, but sure as heck not that much in profit, since it was just hobby sales... I am going to start to practice itemizing everything in preparation on if this bill goes through, but it's so frustrating. So many people have been hit hard by everything going on and I doubt things will be much better in 2022, especially from the debts that have been racked up by natural disasters (such as what's going on in Texas...)

 

I was just thinking....what if you were gifted a doll? Technically someone did spend money on it....how would you report that? Do I need to tell my bf to hang onto his receipts? This is so ridiculous.

 

Son sells on eBay and he confessed he did sell a couple of gifts on eBay and since no receipt he just put what the current retail price the item sold for. Not sure how that will work for him but he only sold around $3000 in stuff. Where as I did way more. Wish politicians wanted to so easily go after millionaires and billionaires like they do us.

 

I can't say for sure but I think things like an inheritance is treated as a "full profit" but if it's a gift, I'm not sure how it would work but I'd keep a hold of the receipt since if you ever get audited, you need to prove it wasn't x amount of profit since it was... technically bought as a couple? Then again, if you're not married, I don't know if you could do that...

It's ridiculous; if you sell enough to make $600, I would assume you'd have to keep receipts of everything for years as a hobby! If you don't, you have to treat the price sold as a profit... I believe if you make a little profit for so many tax years you have to become a business? Does this apply to "online garage sales" for hobbies too, unless you're regularly selling hundreds of items a year? Or just if you make the product (eg, selling sweaters you've knitted)? I suppose I'll have to ask a CPA or something if the bill goes through, since I want to be prepared for the 2022-2023 tax year and beyond... thankfully it won't affect 2021 for the whole US but this is all just a pain.

I think this would kill stuff like fullset splits, though. How do you prove the "purchase price" if you don't have an original purchase price if it's a essentially a lot you're splitting out? I have so many questions that I'll just have to talk to a CPA if it passes, I guess. I'm new to taxes since previously I was just in college and a dependent, so I never had to worry about filing as I never made enough to worry.

I've read a few different articles and it looks like this will potentially benefit some people (namely gig workers) to have clearer tax paperwork at the end of the year for when they file, but that seemed to be about it in terms of benefits for people specifically.

 

I guess for spliting gift event head/gift items, it will be considers full sales.... at least for Fairyland items because they are listed as $0 on the receipt. Which mean as a hoster will lose that in tax or have to also factor that into selling/splitting price. that's going to get complicated with different tax bracket.

 

I have to disagree about the scalper part, a little bit... I think it would help maybe with Volks lottery items... but even then, that's so much profit some scalpers make that the itemization and profit vs tax value might still be pennies to them, since I think the profit margin is often in the hundreds, if not more, of dollars per item. I'm not sure if that would dissuade them, unless it would put them into an income bracket with higher taxes or something.

Most BJD companies make it intentionally cheaper parts-wise to buy a full doll over parts. A full Doll Leaves is like $159 for a MSD, the heads are like $48, but the body alone is worth around $128. Even if I offer someone a good deal without Doll Leaves' long waiting time, it would be easy to see me making a "profit" if I sold a doll head for $40 that I bought as a full doll, I think?

The way I interpret it, if you receive in $600 in any payments that's not F&F, you'll have to itemize everything and keep those receipts for a few years. So that one minifee fullset split and a couple of other sales could put someone right into that territory, and make them consider: a) what they split and if they'd rather just pay extra to join someone else's split or b) breaking paypal's ToS and requiring F&F payments, otherwise that split and a few sales could make them have to put a lot more work into itemizing everything, keeping receipts, etc. and then storing this information for at least a few years. I know you're suppose to pay tax on hobby stuff already when you meet certain thresholds, so I guess this holds more people to be accountable, but it's not a hard threshold to hit and then have to prove you didn't make a profit... Like I had $3,000 in "sales" from buying and then selling a doll I didn't jive with since I am a bit of a rotating door, but I'd be surprised if I made 10% or more of than - eg, $300 - in actual profit throughout the whole year, since I generally try to either break even or make a tiny profit when I can.

Hobbies cannot have deductions for materials anymore (since 2018), from my understanding, either, so you cannot deduct for shipping supplies either. When you have to buy them, shipping supplies add up, too - I had to buy $50 worth of ULINE boxes for when I sell most MSD dolls, since I paid basically $2.11 per box when it would otherwise cost me $8+ per box if I bought it from UPS, and at least those boxes should theoretically last me a few years. I just spent $30 or so at Walmart for a big roll of bubblewrap and a sizeable roll of packing paper. That's already $80 worth of shipping supplies there, and that's not including all of the tape I use too, which adds up since I tape the crap out of everything I sell, but I just eat that cost from whatever "profits" I make from the hobby. (or... that's what I mentally tell myself, though it may very well be coming out of my pocket directly)

I am a secretary's assistant so filing receipts is nothing new to me, but yeesh. The hobby vs business is really confusing to me, too - I believe if your hobby makes profits for so many tax years, you have to file as a business. If your business makes a loss for so many tax years, you have to file as a hobby. You could make a pitiful profit on selling some bjd stuff and potentially have to file as a business, if I understand correctly...? It's weird. I may be overthinking it though. ^^;

I am most familiar with Fairyland sales too and that's what I was thinking... if we just take a doll doll price - body retail price, a minifee head is theoretically only worth $32...

 

I talked about this on another doll forum I belong too and if you have sold on eBay over $600 using a third party service (PayPal *&^&%$) you get that 1099 form in the mail and they report it to the IRS as well. So yeah I was not only mad, but I broke even and did not owe the government anything. I won't be selling my fashion dolls on eBay again cause I don't want PayPal to send me another form in the mail again. I had to also list how much each doll was originally and what it sold for. So that was a pain in the ass! Also I am in Virginia so us Commonwealth got it too.

 

I went to Jackson Hewiit and they did my taxes and they entered everything for me, sad cause the guy had to call his manager to find out about the PayPal 1099 and they had no clue as to what to put it under. I spent 2 hrs at that place with my husband cause we don't file jointly. I get my money he gets his and we are both happy cause my bank is different from his. Anyway, the CPA had to ask me what each doll cost and how much I sold it for or if someone did a Buy It Now how much the final cost was. Where you enter that info I don't know I could not see the screen. I do know one thing, it was a trying time for me to sit there and think quickly cause all my sales were not saved until I checked my seller feedback on eBay to see what dolls I sold within 1 year. I sold a lot of my Fashion Royalty dolls ( still have a lot of them along with Tonner dolls too)

 

@overlordu & @derilan85 I hear you on all you have said. Thing is I did over $10,000 in sales that were to people who didn't know me well enough to pay me as F&F so it was a mess. I did an excel spreadsheet using the statements from Paypal and deleted all the donations to charity, all the buying I did and all the gift payments friends sent. I then had the amount PP said I recieved. From that I added colums and said what the person bought from me What I paid in fees to PP, to Ebay too as well as a column to what I paid for item. The tricky part was when people did layaway as I couldn't add shipping or what item(s) cost me until final payment. Since I do not sell to make a propfit, but just hoping not to loose to much I was shown I lost around $1500. Which is fine, but since hubby says the tax laws are not updated to what is going to soon happen in all states it had to be done as a business. So for us states that are the odd fellows just a warning to those in 2022 are going to be doing all this too. Sell now if you plan to as come 2022 you will have better forms hopefully, but also you get a free pass in 2021, something we missed out on.

 

I'm so glad I found this thread. I've actually been freaking out about it for next years tax filing season because I've been selling old figures and handmade doll's clothes this year. There were a lot of helpful tips in here and it was nice to know that I wasn't the only person freaking out about this.

 

The last relief package we got due to Covid had this new tax law put in so now every state will have this pain in the butt.

Just wanted to warn people about this bit of bad news.
A provision in the American Rescue Plan Act of 2021 (aka the COVID relief bill) would put some people's online-selling activity in the crosshairs of the IRS.
Some might say rightly so, but even people who sell their old stuff when cleaning out their basements and garages should sit up and take notice.
If you use PayPal, eBay, Etsy, or any electronic form of payment processing to collect money from buyers, you will be impacted if the amount a single entity processes on your behalf exceeds $600.
Many online sellers are familiar with IRS Form 1099K, which marketplaces and payment processors send out each January to sellers who've exceeded $20,000 in gross receipts when collected in over 200 transactions. (For example, if you process $21,000 in 199 different transactions in a single tax year, the payment processor is not required to file Form 1099K, though what thresholds each company employs in practice we don't know and may vary.)
A provision the 2021 Rescue Plan Act would lower the threshold considerably - it would require companies to send a 1099K to sellers for whom they've processed over $600, period. In our reading of the bill's language, it appears if you sell $601 worth of items, even in a single transaction, the payment processor is required to file Form 1099K.
The provision amends Section 6050W of the IRS tax code - the relevant language is contained in Section E:
SEC. 9674. MODIFICATION OF EXCEPTIONS FOR REPORTING OF THIRD PARTY NETWORK TRANSACTIONS.
(a) In General. - Section 6050W(e) of the Internal Revenue Code of 1986 is amended to read as follows:
"(e) De Minimis Exception For Third Party Settlement Organizations. - A third party settlement organization shall not be required to report any information under subsection (a) with respect to third party network transactions of any participating payee if the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions does not exceed $600.".
It also states, "The amendment made by subsection (a) shall apply to returns for calendar years beginning after December 31, 2021." (We think that means it won't apply to transactions processed in 2021 - stay tuned.)
It might catch "consumer sellers" by surprise and, once understood, might discourage them from listing on sites like eBay, Etsy, Poshmark, and Mercari, and encourage them instead to seek out classifieds-style sites like Craigslist and Facebook Marketplace, where transactions are often handled in-person with cash payments.
But the new provision may also impact casual sellers who do more than clean out their basements - even though they are supposed to report their earnings to the IRS whether they consider themselves "hobbyists" or not.
IRS Form 1099K first applied to payment processing in tax year 2011 - it was crafted as part of the Housing and Economic Recovery Act of 2008, which included the provision as a mechanism to achieve a more precise tally of electronic transactions.
Seven years later in 2018, some sellers got a big surprise when they received 1099Ks, even though they were under the 1099K threshold. It occurred after Massachusetts and Vermont had retroactively passed new laws requiring payment processors to file 1099Ks for sellers who processed at least $600 in 2017, and no matter how few the number of transactions they processed.
Other states may have hopped on the bandwagon since then, and it comes as little surprise that a few years later the Feds may be joining the party.
While Form 1099K isn't new, we published a refresher last month by tax guru Barbara Weltman: "What You Need to Know About 1099-K."
With all the provisions of the new bill, this particular one has flown under the radar - we began hearing reports this weekend, including an article in Politico on how it may impact gig workers like Uber drivers.
Note that freelancers have always had payments over $600 reported to the IRS from the companies hiring them via Form 1099-MISC.
The House of Representatives passed the American Rescue Plan Act of 2021 legislation on February 27, 2021 and the Senate passed a revised version on March 6, 2021. (We believe the provision impacting 1099Ks remained intact in the Senate version.) The bill goes back to the House, which must approve Senate changes before the legislation can be signed into law by President Biden.
According to CNN, the bill includes some good news for small businesses such as funding for small-business loans and grants, as well as many other provisions, including aid to states and municipalities.

 

Yeah I assume this will have a chilling effect on used sales of all sort of things, not just dolls. If you do a personal payment on paypal do you know if it bypasses the 1099K?

 

It did for me last year. I am hoping it continues even though messages people leave sound like items being sold. I prefer to just have them say, here is what I owe you for lunch or that tab we split. But it's also better when they say have a good day or hope this helps.

 

I reported a loss last year and will break even or make a small profit this year. If you can show a loss for three years in a row then the IRS will say you are a hobby. But not sure if that ends the 1099K business or what.

 

Right now, the 1099K would stick around because ebay/PayPal etc. won’t know that you are aren’t making a profit.

I’m actually interested to see if they add a code to the 1099-K so people can indicate to eBay etc. that it’s a second hand/garage sale transaction that didn’t make money because working through every discrepancy is going to be a lot of paperwork. At least if they are getting a 1099-K with that explanation, they can decide whether to go ask for more documents or not while knowing what the taxpayer’s explanation is but guess we will see.

 

Some people do sell dolls and other dolls related things for twice their value so, just because it's ebay and it's doll related it doesn't make it necessarily a loss. There's more big businesses now days than what was generally the yard sales, personal owner seller, or smaller business of years passed.

What ever amount you decide to put down, if you get a 1099 you better put it as income then you minus thecost of the goods, and expenses and then you will be able to see if profit or not. But if you get audited, you better be able to back it up Paper wise, the amounts you have there. Because no matter what their rep says on the phone, An auditor ( which is the one that truly counts) will only take what you can prove and in their eyes they are always right and you will need to prove them wrong if they disallow some expenses/things.

 

For sure you’d still need to back up any declarations should they come knocking. They just haven’t given us a good form for reporting losses on sales of personal property that get on this 1099. It’d be nice if they did but I probably shouldn’t hold my breath haha

 

I am hoping as soon as the whole USA has to deal with this the form will get better. I for one have never profited much from a sale, on rare occasions I have been able to make back the face up costs. But I would say 95% of my sales is priced at a used price as if I tried to just break even most people I feel would think, then why don't I just buy a new one? Of course with the pandemic and certain companies taking a year or more, buying used saves a person a long wait, but is it worth the extra $$ I am asking?

 

Thanks for this thread - I returned to DoA with the intention of selling my bjds, and didn’t know about this. I really appreciate the time everyone’s taken to share info.

 

Reminding US sellers that this went into effect this January for states that were not previously impacted. So if you sell over 600 dollars in goods this year or beyond, and those transactions are through an online service, you will get a 1099K you'll need to reconcile with your 2022 taxes etc.

 

@vermaxen - do you know how long it takes to get the 1099K from PayPal?

I sold about $900 worth of dolls/doll parts (all at a loss so I won't owe anything for sure) this year, and I usually like to do my taxes early, so don't want to wait until April to receive the paper in the mail. These were purely PayPal transactions between me and the buyer - no Ebay in the middle, etc.

Thank you!

Edited to add: apparently you can access the information on your PayPal account but so far mine hasn't shown up yet. I'll keep an eye out for it!

 

@StellaMarigold according to my poking around various documents this is impacting the 2022 tax year so sales made in 2021 shouldn't matter if your state was not already using a similar tax law.

So you probably wouldn't see anything until 2023 so that you can complete your 2022 taxes.

Anyone else with more knowledge in this area feel free to correct me!