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

Feb 4, 2018

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    1. 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!
       
      #21 CloakedSchemer, Feb 19, 2018
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    2. --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.
       
      #22 AirimirOfGondor, Feb 19, 2018
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    3. 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.
       
      #23 animemom, Feb 12, 2021
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    4. #24 ginarolo, Feb 12, 2021
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    5. #25 animemom, Feb 12, 2021
    6. Oof, I knew this would expand to other states!

      For the record, the first time I got a 1099 from Paypal (for 2017), I put it all on my taxes to make sure they didn't think I was doing anything suspicious. But it was really stressful and time consuming, so every year after that, I haven't included it. I only reported the Paypal sales that were for my small business. So the Vermont Tax Department has received these 1099s with numbers that don't match what I reported on my taxes, and so far nothing has come of it. I'm hoping that since I did report some of it, they'll give me the benefit of the doubt and assume the rest was non-taxable. So far so good, but I'm still a little worried they'll ask about it in a few years. :horror:

      Animemom, I had the same problem because buyers don't always write what they bought in the Paypal notes. I'm not sure how long you keep your PMs on DoA, but I used dates to match up my sales. In your Paypal activity you can filter it to show you only the money coming in during a date range, and then compare the dates on the sales with dates on your DoA messages, since most people will PM you to say they sent a payment. I ended up making a spreadsheet just to keep organized. Don't forget to note down your Paypal fees and how much you paid to ship stuff, because you can deduct that out of your "profits".
       
      #26 overlordu, Feb 16, 2021
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    7. 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.
       
      #27 animemom, Feb 16, 2021
    8. 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.
       
      #28 animemom, Mar 12, 2021
    9. #29 animemom, Mar 12, 2021
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    10. 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.
       
      #30 JinCIncy, Mar 13, 2021
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    11. Wow, maybe I should change the title of the thread to be inclusive of the whole USA :eek: There's gonna be so many confused people in the next year.

      Yeah this whole thing has me thinking differently about doll purchases. As if the slow secondhand market wasn't enough, I think this will cause many people to just hoard their old dolls in storage rather than sell them and have to deal with the IRS breathing down their necks about their "online garage sales". :|

      An interesting quote from the article @animemom linked:
      That makes me feel more confident about just omitting all my dolls sales from my tax return. There's still a chance they'll come after people and ask about that income, but maybe the chance is smaller than I thought. :)
       
      #31 overlordu, Mar 13, 2021
      Last edited: Mar 13, 2021
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    12. 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.
       
      #32 animemom, Mar 14, 2021
      • x 1
    13. I think it's fine if all your sales are at a loss because you do it as a hobby, not as a business. If you were reporting the doll sales as your side business, and it always showed a loss, I think that's when bells go off. (My small art business has been at a loss for four years in a row and nothing has come of it yet, though ahaha. Maybe they let it slide because I have a regular job where most of my income comes from).

      I do wish they'd make a new tax form for this type of situation. With the huge influx of 1099s tax departments will be receiving from Paypal (and other services), it must be a lot more work for them as well comparing the 1099s against tax returns, and possibly wasting their own time bothering people about it only to have it be untaxable income. :| There should be a new form for reporting income made through payment processors that isn't taxable.
       
      #33 overlordu, Mar 14, 2021
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    14. 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.
       
      #34 animemom, Mar 14, 2021
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    15. 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...) :sorry
       
      #35 Epona, Mar 18, 2021
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    16. 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.
       
      #36 Xxluckyf8xx, Mar 18, 2021
      Last edited: Mar 18, 2021
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    17. 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.
       
      #37 animemom, Mar 18, 2021
    18. 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.
       
      #38 Epona, Mar 18, 2021
      • x 2
    19. Oh interesting, I always assumed the purpose of this was to nail tax evaders. I'm glad somebody's benefiting from this!

      Fullset splits shouldn't be a problem (at least, not more of a problem than regular sales). Presumably, the person who is ordering the fullset is not selling the unwanted parts for a profit- at least, all the splits I've ever participated in publicly shared the breakdown of how all the parts were valued, and it all added up exactly to the fullset price. The only downside is that the person running the split would be considered the original owner, and all the parts they didn't keep would be considered sales. But they're in the same boat as any other seller. If you ran a split and all you kept was, say, the head of the doll, which you later sold, you'd just have to keep a record of the split breakdown to show the value of that head when you first acquired it.

      As for hobby vs business, I don't fully understand it either. It doesn't seem like there are any hard and fast rules about it. There's an IRS page about it somewhere and it's vaguely like, if you're doing what you're doing for fun then it's a hobby! If you're trying to make money, it's a business! But if you file as a business and fail to make money for too many years in a row, they'll ask you to file as a hobby. I'm not sure if it goes the other way too, like if you make too much money as a hobby will they ask you to file as a business? Not sure. I think it would have to be a LOT of profit for them to do that- and frankly if you're just reselling your old doll stuff, you probably aren't going to make enough of a profit, if any at all, for the IRS to tell you it's a business. Scalpers might be in trouble, though. :lol:

      I think the big takeaway here is that we all need to make sure to keep receipts, including every single email that pertains to doll related purchases and sales, just in case you get audited... :eek:
       
      #39 overlordu, Mar 18, 2021
      Last edited: Mar 18, 2021
      • x 1
    20. 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.
       
      #40 aireoko, Mar 18, 2021
      • x 1
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