How have you handled payments with the new PayPal rules?

[Old School]

Originally Posted by prototoast

He's probably not planning on being audited, because only an extremely small portion of taxpayers are audited, but assuming he were, if you buy and sell most things online, it's not terribly hard to come up with receipts.

No bias. Read the actual .pdf from the IRS.

(pro tip: Get ready to take a few days off from work and pay hourly to your accountant when you get audited)

[benb]

It'll be interesting to see just how many people get audited under the new plan and for how much money.

$600 is a ridiculous threshold. The IRS probably loses money if they audit someone for missing a few thousand dollars of online sales.

I have always read that new plan as being more likely to be targeted at ultra-high wealth individuals where the IRS can audit one wealthy person and perhaps recover millions in unpaid taxes, not going after somebody who misses a few thousand in unpaid taxes cause they sold $10k of stuff online.

A lot of this can be attributed to closing a "gap" that didn't exist till the last few administrations defunded/dismantled the portions of the IRS that were responsible for auditing ultra-high-wealth taxpayers.

[HenryA]

How a $600 threshold catches ultra high wealth folks who attempt to avoid taxes is quite the trick.

I mean I bought my last $50 million yacht by trading chicken eggs and selling used push mowers. There was also that slightly used goat, but that was a straight cash deal. They’ll never catch on.

OTOH, this might be just another way to eliminate individual initiative and throw a massive drag net over those criminal types who buy and sell hobby equipment.

[Ralph]

I really don't see the problem. If I get a 1099 from E Bay listing my sale proceeds from a few thousand dollars of stuff, it would take me about 15 minutes to figure out rough costs of those items. And my Turbo Tax would prompt me to deal with it. Another 5 minutes or so. Would give me a loss I can't deduct. The 1099 would force me to account for it. Wouldn't need to include paperwork for cost basis. (unless audited, and even then don't imagine any reasonable "guess" w/b challenged. (I've been audited before) Would only have to figure out cost basis for those things mentioned on the 1099, Works same as stock buy and sales.

[CAAD]

Carry on like normal, produce receipts or BS receipts to show a loss, and done.

[BRad704]

https://www.irs.gov/newsroom/irs-ann...s-forms-1099-kEDIT: I found it. IRS did delay the implementation until next tax filing period in Q1 2024.



I was reading the Paypal notes today and it SOUNDS like they're saying the 1099k only applies to transactions beginning on Jan 1, 2023.
I've pasted the entire text here and made the 2023/2024 part RED for visiblity, lest something important be left out.

I started looking because I never got any email from Paypal about having a 1099k available. And when looking in my account, it says I have no tax documents available.

__________________________________________________ ___________
Will PayPal report my sales to the IRS?
All US payment processors, including PayPal, are required to provide information to the US Internal Revenue Service (IRS) about customers who receive payments for the sale of goods and services above the reporting threshold in a calendar year.

Will I have to pay taxes when sending and receiving money on PayPal - what exactly is changing?

Beginning January 1, 2023, the Internal Revenue Service (IRS) implemented new reporting requirements for payments received for goods and services, which will lower the reporting threshold to $600 USD for the 2023 tax season, from 2022’s threshold of $20,000 USD and 200 transactions. Here’s some more detail:

1099-K Threshold Change:

This new Threshold Change is only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal for dinner, gifts, shared trips, etc.
This change was introduced in the American Rescue Plan Act of 2021, which amended some sections of the Internal Revenue Code to require Third-Party Settlement Organizations (TPSOs), like PayPal, to report goods and services transactions paid to customers with $600 USD or more in annual gross sales on 1099-K forms. Previously, a 1099-K is only required when a user receives more than $20,000 USD in goods and services transactions and more than 200 goods and services transactions in a calendar year.
PayPal is required to report payments that are identified by the sender as being for goods and services to the IRS, even if it was a mistake. This requirement applies once you receive $600 USD or more from this type of payment. Although this transaction is reportable by PayPal, it’s possible that the transaction is not taxable. It’s always best to speak with a tax professional for any specific concerns you may have.

Tax Year Year Form Available Federal Reporting Threshold
2022 2023 More than $20,000 USD in gross sales from goods or services AND more than 200 transactions in the calendar year.

2023 2024 $600 USD or more in gross sales from goods or services in the calendar year.



What is a Goods and Services payment with PayPal?

Both PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as either personal/friends and family or goods and services by choosing the appropriate category for each transaction. Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service. These transactions are also eligible for coverage under PayPal and Venmo’s Purchase Protection Program. Goods and services payments are designed to provide both buyers and sellers peace of mind knowing that they may be covered if the transaction doesn’t go as expected.

You can find out more on PayPal Goods and Services transactions here, and Venmo Goods and Services transactions here. Terms and conditions apply.

Will the updated 1099-K threshold change apply if I sell personal property, like a couch or an item at a garage sale, for $600 USD or more if it was sold for less than its original value? Will I be issued a Form 1099-K?

Form 1099-K is an IRS informational tax form that is used to report goods and services payments received by a business or individual in the calendar year. While payment service providers, like PayPal and Venmo, are required by the IRS to send customers a Form-1099K if they meet the $600 USD threshold amount, there are certain amounts included on the form that may not be taxable. PayPal is required to report the total gross amount of payments received for goods and services which can include:

Amounts from selling personal items at a loss
Refunded amounts
Processing fees
However, certain amounts may not be considered taxable income to you.

We encourage customers to speak with a tax professional when reviewing their 1099-Ks to determine whether specific amounts are classified as taxable income.

What is Form 1099-K?

Form 1099-K is an IRS informational tax form used to report payments received by a business or individual for the sale of goods and services that were paid via a third-party network, often referred to as a TPSO or credit/debit card transaction. The IRS requires TPSOs, such as PayPal and Venmo, to issue a Form 1099-K, which shows the total amount of payments received from a TPSO in the calendar year. Taxpayers should consider this amount with their tax advisor when calculating gross receipts for their income tax return. For more information, visit the IRS website here.

If you meet the IRS threshold in a given calendar year, PayPal will send you a Form 1099-K in January of the following year and file this form with the IRS by the required due date.

You can access your Form 1099-K from your PayPal account from January 31 and your Crypto gains and loss statement from February 15. Please go to the new PayPal Statements & Tax Center. Merchants, please go to your Tax Statement Page.

You can also view and download your Form 1099-K online by January 31st annually. You won’t receive a Form 1099-K if you didn’t meet the reporting requirement for the tax year.

What do I need to do when the 1099-K threshold change takes effect?

PayPal and Venmo will ask customers to provide tax information like an Employer Identification Number (EIN), Individual Tax ID Number (ITIN), or Social Security Number (SSN), if they haven’t already, as they approach the reporting threshold, so they may continue using their account to accept payments for the sale of goods and services without any issues.

If your TIN fails verification, you'll need to fill out an equivalent tax form W-9.

If there are any discrepancies between what is reported by the IRS for your TIN and name and what PayPal has on file and used for Form 1099-K, you may receive an IRS B-Notice.

How does this 1099-K threshold change impact how I use PayPal?

This change should not impact how you use PayPal and Venmo. You can continue to use the PayPal and Venmo platforms as you do right now, and the benefits that are offered by sending money via our goods and services P2P feature – including buyer and seller protections on eligible transactions for PayPal and Venmo.

[commandcomm]

You can request a USPS money order. Back in the 1990s when eBay first started, when I won an auction, I had to email the seller to get his or her address to send a money order.

[tellyho]

Suck it up, is what I've done. Extra couple thousand of income doesn't really change my tax scenario.

[raygunner]

Originally Posted by commandcomm

You can request a USPS money order. Back in the 1990s when eBay first started, when I won an auction, I had to email the seller to get his or her address to send a money order.

Oh yeah, that's how I used to receive payments for vinyl records I sold.

When PayPal came onto the scene many people didn't want to accept it at first.