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

You should be right. The rules kick in for 2022 and beyond so unless you’re in one of the unlucky states that had this rule before then you won’t see anything until 2023 unless your sales were over 20k.

In terms of when to expect a form in 2023, probably by mid February going off when I get 1099s from other places.

 

@vermaxen and @abs2891 - Oh, okay! That makes sense. I'll look up my state to see if it was counted for 2021.

 

I got mine this year as received email from PayPal that it was ready to download. I also downloaded my monthly statements so I could double check my math. Another year of losses, but don't want to mess up household taxes so going to make it so I broke even. I really wish they'd go after the rich and leave us all alone.

 

this will be for when you file in 2023 for 2022, afaik.

 

@Epona - Thank you! I'll remember this for next year then!

 

Yes be sure to keep receipts of everything you buy in case down the road you sell. Also keep a spreadsheet on when payments are made and what you paid in fees and shipping costs. Also I have learned double check each month your PayPal account to be sure you don't miss one. I got my PayPal k-1099 and saw they said Ivar received $250 more then my records showed. Saw I missed a couple, but what burned my biscuits was they also had the $75 payment I received but ended up refunding as I had size of doll wrong so I ended up paying tax on sale that didn't happen.

 

So this can get really complicated really quickly.

First: if you receive any form like a 1099-K or a 1099MISC, the IRS also received it. The IRS created the forms, and they require the forms be sent to you by a certain date. For 2022, you should receive your 1099-K by January 31, 2023 (scroll to the bottom).

How you report the amount on the 1099-K depends upon whether you are in the business of buying and selling dolls, or if this is just a hobby to you.

If you are in the business of buying and selling dolls - talk to your tax preparer. I'm not going to get into whether you are selling business assets or inventory, or depreciation, COGS, and all that.

If you are a hobbyist like me, here's what I suggest: Selling a doll is just like selling a piece of art. It's a collectible/capital asset, and that's how you report it. I recommend purchasing tax prep software from a company like Intuit, which offers free tax preparation advice from tax professionals as a service included with their software.

If you sold dolls or doll-related items, and you made a profit (you received more than what the item cost, aka basis), you report the sale on Schedule D, which is a summary schedule. You will need to fill out a Form 8949 listing each doll or doll item you sold. If you live in a state that requires income tax returns, you will have a state income tax return requirement. Same goes if you live in a town that imposes municipal taxes (yay, Ohio ). There's a lot more to it (28% collectibles tax for people who make over $164K individually or $325K married filing jointly) - this is just a general summary. You may also owe sales tax (because you were supposed to charge the buyer sales tax) - so that's fun.

If you sold dolls or doll-related items, and you did not make a profit (you received less than what the item cost you), you will still need to fill out Schedule D and Form 8949 listing each doll or doll item you sold. HOWEVER, because this is a hobby, there's a rule called the hobby loss rule, and you CANNOT claim a loss on your return. So you cannot claim a capital loss, and there should be no negative numbers on your 1040 from losses from doll sales. You also cannot claim a loss on your state or local return.

Note: Schedule D and Form 8949 do NOT take into account the costs of shipping or customs/sales taxes you paid: only what you paid and what you received for the item you sold. That has to be reported somewhere else (taxes), or not at all (shipping).

Source: am IRS-certified tax preparer.

Small request: please, for the love of dog, do not use Jackson Hewitt or H&R Block. Those people generally get paid slightly more than minimum wage, and they've had maybe two weeks of training.

 

One additional note: switching to Friends and Family via PayPal (or using a peer-to-peer service) to get paid is not only a bad business practice (and a violation of PayPal terms of service), it's tax evasion. And tax evasion is a crime.
Just throwing that out there.

 

If you do less that 600 in sales do you still get a form, or does no form get issued by Paypal?

 

no form

 

You do not get a form and PayPal won't issue one. But they expect you to check your account for any forms they will have sent.

 

Belated reply - yeah, the 2 out of 5 years loss/profit thing is for small businesses. If you do it for several years and don't show a profit, then they re-categorize it as a hobby, not a business. This is mostly for people who concurrently have been claiming every deduction they could possibly make, including "office" square footage in their homes, or car depreciation, etc.

Aside from dolls, where this gets hairy is selling off stuff you bought 20-30 years ago. Of course you spent a lot less to purchase it then than you would now. I have vintage glass beads - a package may have cost only $2 then; it would cost $4-$5 to buy the same thing now. I have to put some stuff on ebay soon - will make sure my listing template goes into the whole "from my own collection" condition, and save a copy of the page as documentation too.

 

IRS isn't going to do it this year 2022. There is a Santa Claus!
IRS announces delay for implementation of $600 reporting threshold for third-party payment platforms’ Forms 1099-K | Internal Revenue Service

 

I am still going to have to deal with it as Illinois made it a rule/law.

 

Huzzah!!!

 

Oh, this is FANTASTIC news! Thank you!

 

I would check your state's law first. If your state started in 2021 you might be getting this break, but if your state implemented this before 2021 then most likely not getting break. We'll know come January if PayPal sends you an email to get your form.

 

Latest information on irs threshold. I know some states have different requirements but I’m happy that I can sell a little more this year without reporting to the irs.

IRS announces another delay of the $600 reporting threshold for Form 1099-K

 

Ah ha ha ha ha ha ha. I'm sorry. The IRS has no idea what it's in for. PayPal and eBay keep trying to explain, but they're just not listening...

 

I still think if you have a business account on PayPal or you sell on Ebay you should then get the forms. But if you are not a business or the old rule do over $10,000 in a year then yes you get the form. I have lost selling a doll quite a few times because I won't take a regular payment. Thank God for friends.

 

The old threshold was $20,000 and they want it at $600 but for 2024 it’s $5,000. Some states are different though.

I’m happy to get this information at the beginning of the year instead of the end like they did the last two years, in ‘22 and ‘23 I kept my sales below $600 to make sure I would not have to report and then found out at the end of the year I didn’t have to.

 

I wish the information was easier to find. I don't care if each state has a limit but I would love if either PayPal or IRS would just let us know what limit is once and for all. If limit in Illinois is $5000 I can get sales at least a couple dolls gone and be happy. I just don't want to lose more then I have to.

 

This what I just found so doesn't look good to me.
Will PayPal report my sales to the IRS? | United States

 

Here it is from the IRS, PayPal must not have the updated information and that is one of the reasons that the IRS keeps delaying it
IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation | Internal Revenue Service

 

If you’re in a state where they previously had the rule for $600 threshold, nothing changes. To get specific requirements for your state you should talk to a tax preparer in your area. But if you have proof that you did not make a profit the income is not taxable.

 

If you're not a business, not filling as a business, I discovered through some tax info sites something interesting. If you're owned the items more than 1-2 years, and they are from your own possessions, there is an option to claim the sales as personally owned items under the capital gains/losses. Since capital gains has a much higher exclusion threshold, it's worth looking into if you're selling only your stuff to meet bills or make ends meet. Anyone else look into this?

 

@hobbywhelmed - it's a one-year threshold (exactly one year, as in 365 days, and yes, I've had to do the math before, lol). As far as the capital gains tax rate, start here.
Note: "taxable income" is the income after your adjustments and the standard (or itemized) deduction - the number right before you calculate your tax, which is line 15 on page 1 of the 2023 return form for individuals.
Summary of how to list capital assets in my comment here.

 

Anyone know the 2025 limit? Is it down to the 600 now?

I know 2024 was 5k.

 

I’m hearing that they’re raising it to 5,000

 

actually from what I read on their webisite, the IRS stated it was lowering to 2,500 in 2025 from the 5000 from 2024.

IRS provides transition relief for third-party settlement organizations; Form 1099-K threshold is $5,000 for calendar year 2024 | Internal Revenue Service

 

Since it's mainly sales tax, I think its a state matter so I would look into what your states says about what is really tax free.

 

As far as I know Massachusetts is still only 600! urgh been going on for many years now. I wish they would be reasonable.

 

I wish the states would all let up as many people only do selling online because the jobs they have just don't cover everything. The rich get richer.

 

I been hearing online that Ebay is telling it's sellers that the limit has been raised to $20,000 for 2025. eBay and Form 1099-K | eBay

Hoping to hear the same from PayPal.

 

That is great for some states but for mine it's $600. So not sure if son who lives in IL is safe or will still have to file.

 

I don't think my state (Wisconsin) has a specific reporting threshold (though I know Illinois is $600 regardless), but hopefully paypal will clarify what the expectations are for 2025 since it's gone from like... $600 to $2,500 to $5,000 to $20,000 and I really hate it keeps changing mid-year. I am not making a profit regardless on my secondhand sales to say that I am, but I'd like to know how long I aught to keep receipts.

 

That is what is so frustrating. Those who are making profits are those who either can make stuff cheap and sell at profit, or those who are going to garage sales and getting products cheap and reselling after cleaning and fixing. I have made profit on maybe 5 dolls in my life and that was only because I was able to get a doll that was hard to find a couple of years after it was sold out. Otherwise at least $50-200 loss.

 

That's the thing. Only way to pay people safely is Paypal so you have protection, so Ebay is cool with allowing the relief because they don't need to keep track. Paypal because they handle the money has to keep track as people are selling all over the world. But if they only have to keep track of USA then of course they are going to want to make it vague for us on weather we need to use their records of all our sales. My son is a Ebay seller and his tax time is very stressful. But he does well so he is willing as I am guessing one day this is what he will do when he retires.

 

IRS says the reporting threshold is $5,000 in 2024 and $2,500 in 2025. Then $600 in 2026 and beyond.
IRS provides transition relief for third-party settlement organizations; Form 1099-K threshold is $5,000 for calendar year 2024 | Internal Revenue Service

 

The article is from November 2024 so that's what it was prior to this July.

One Big Beautiful Bill Act Changes Form 1099 Reporting For Gig Workers And Those Who Use Payment Apps Like PayPal For Business

"The One Big Beautiful Bill Act (OBBBA) was signed into law by President Donald Trump on Thursday, July 4, 2025 [...] The old reporting threshold for Form 1099-K (you can read more about that below) is now new again. OBBBA reinstates the $20,000 and 200 transactions thresholds, retroactive to 2022 (or as if the reporting changes American Rescue Plan Act of 2021 had never happened). That means that the $20,000 and 200 transactions thresholds will apply to the tax year 2025."

Whether or not paypal automatically sends one may depend on your state requirements (some states are $600 regardless so the federal amount being higher doesn't matter in their case) or what paypal themselves decides to do (I think they could just choose to generate a form if they wanted to, but they probably won't unless they had to), but it is frustrating it keeps changing so often.

 

Might take a while for the IRS to update their website.

 

Thank you for posting that, I don’t sell enough to worry either way, but it’s nice to know.

 

i was so worried about this changing law but it seems like I do not need to worry if it's $20,000 and 200 transactions. Thank you for the information!