Tax consequences of paypal Options

[sixaddict]

Well we were all aware of this coming but just got my love letter 1099 from PP.
Trying to figure how to handle.
Anyone have legitimate advice?
Obviously the 1099 is gross income……but that would be if cost basis was zero and that is not the case. If you don’t itemize how do you get a fair assessment.
Wont get into political weeds but this is BS.

[windforfun]

Tax advice? AFAIK, you have to itemize. The ball's in your court. Try Google.

(IMG:style_emoticons/default/dry.gif) (IMG:style_emoticons/default/dry.gif) (IMG:style_emoticons/default/dry.gif)

[dug]

Simple version, I am not a tax accountant, please consult one or read the tax law.

If you know what you paid for the parts, you subtract that from the income.
Also subtract any shipping costs and other fees or expenses, you should have receipts from that if you use online postage services.
If you don't have a record of your original cost, it will be a problem if you are audited.

If you sold parts from a car you parted out, then track the total cost of the car as what you paid for "parts", subtract the parts you sold. Until it's a positive number, you have inventory. When the number goes positive, you made a profit and you're gonna pay taxes.

Again, not a tax accountant, please consult a professional.
cheers,
dug

[Patrick_139]

Well we were all aware of this coming but just got my love letter 1099 from PP.
Trying to figure how to handle.
Anyone have legitimate advice?
Obviously the 1099 is gross income……but that would be if cost basis was zero and that is not the case. If you don’t itemize how do you get a fair assessment.
Wont get into political weeds but this is BS.

Not ashamed to say I worked for and retired from the IRS. The links below are your best starting point as they are from the IRS. In this case do your best in calculating what you paid for the items so that you are only taxed on the gain. The big questions are going to be: Are you running a business or are you a sometime seller of old parts you no longer need? If you sold them for more than you paid for them are these capital gains or income? Obviously if you paid more for the items than you sold them for you are going to report no gain/income, but to keep the nasty letters from IRS arriving you will want to report something even if it is $0.00.

https://www.irs.gov/businesses/what-to-do-with-form-1099-k

https://www.irs.gov/businesses/understandin...our-form-1099-k

https://www.irs.gov/pub/irs-pdf/f8949.pdf

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Pretty sure the purpose of lowering the reporting requirements is too identify (catch?) the income of professional sellers operating on multiple platforms who have not been reporting their sales because there was no identifying their sales to the IRS in the way that one's employer reports employee's income. The law did not change just the reporting requirements, but sadly small sellers are going to get caught up in the requirements. One thing I do know is that the IRS has bigger fish to fry than someone who has a 1099K for thousands of dollars and reports something (anything?) for income/capital gain vs someone with 10s of thousands reported who reports nothing/ignores the 1099K.

Feel free to ask me anything more about this, but in general tax advice is usually worth about what you paid for it and I did not do auditing in my career so there is that.

[sixaddict]

Thanks for weighing in guys. Great info Patrick……See you can adjust 1099, but does that require itemizing. Retired so I just take standard deduction. I know that being mentally lazy but also trying to decide how to handle this going forward.
Thanks again.

[technicalninja]

From what I understand the point of reporting was over 2000 individual sales or $20,000.

The "reporting" threshold was moved down to $600 last year. I don't believe there was a listed number of sales.

This WAS ALWAYS the threshold for any business paying a contractor.

If a body shop paid me for $450 worth of work, they were allowed to include it in their costs without a 1099.

If they paid me ANYTHING over 600 (could be two jobs for more than 300) they would have to issue a 1099 to include it in their costs.

As a business I merely file it, and it actually does NOTHING to my taxes as I already pay them anyways on my total profit.

Works fine, no problem at all, as long as you have a real business.

Who this change screws are normal folks.

The Government will accept original receipts, and you can defray the amount of money you gained, but you cannot take a depreciation if you lost money.

You buy a couch for $2000 and sell it five years later for 700.
If you kept the receipt, you can avoid paying taxes but you cannot take a $1300 deduction for depreciation as you could if you're a business. This depreciation starts happening the first year on expensive shop equipment. A $2000 couch would be considered expensive.

If you are like 99% of the population and didn't keep the receipt, you get to pay FULL taxes again. This includes both your Federal taxes and the FULL amount of SS (12.4%)

So, A guy at the 30% tax rate would actually be paying 42.4% of the 700 couch "profit" or nearly $300...

You have just been taxed TWICE on $700 of the original money for the couch.
The second go round ALSO hit you for 6.2% MORE than the first time as non-business owners (employees) only pay 1/2 of SS.

Feels good don't it...

This is why I ALWAYS offer F&F PayPal to active menbers when buying used parts.

Losing nearly HALF is what I consider FRAUD by our government.


My mom is on her death bed tonight and she was a garage sale/thrift shop hoarder.
I have 50-100K worth of high-end household stuff (she DID hoard NICE stuff thank god).
When you inherit stuff (below 15m or so) you don't pay taxes anyway...

I'm planning on speaking with a Tax Attorney before I go hog wild selling stuff directly.

I hope the laws change back to the way they were before last year. They might.

I'm still "blown" by the amount of crap my mom has collected, and I don't want to space the selling out over multiple years.

If I simply consigned it all to an Estate sales company I'd have ZERO issue, but they take 50% too.

[sixaddict]

Thanks fir Another interesting take on collateral damage.
Always a tough time when you deal with an inevitable passing of a parent.
Blessings to you.

[technicalninja]

Mom passed last night at 1 am.

I wasn't aware funeral homes run 24-7.

Standard practice to pick up quickly.

She was picked up by 3 am.

We got home at 4:30 am.

I'm not running on all cylinders yet...

Have a 2500sq ft home packed to the gills with E-Bay stuff.

The BS tax shit just got REAL for me!
(IMG:style_emoticons/default/ninja.gif)

[mepstein]

I’m sorry for your loss.

I bet there are ways around it. We just can’t talk about them online.

[friethmiller]

Mom passed last night at 1 am.

I wasn't aware funeral homes run 24-7.

Standard practice to pick up quickly.

She was picked up by 3 am.

We got home at 4:30 am.

I'm not running on all cylinders yet...

Have a 2500sq ft home packed to the gills with E-Bay stuff.

The BS tax shit just got REAL for me!
(IMG:style_emoticons/default/ninja.gif)

My condolences, Rick. Prayers to you and your family. Losing both parents within a few months has got to be tough. (IMG:style_emoticons/default/unsure.gif) Hang in there.

[914Sixer]

Sorry to hear about your mom.

[Literati914]

Mom passed last night at 1 am...

Dang man, sorry to hear this - thoughts and prayers to you and your family.

[technicalninja]

Thanks for the words of condolences Gentlemen.

She had a double mastectomy 30+ years ago and it came back 3 years ago.

She tried chemo again and it made her SO sick she decided to let nature take its course.

She has been on Hospice for over two years.

This was EXPECTED. My dad going earlier than her was NOT.

I don't want to derail another's thread.

Let's get back to tax BS...

Rick

[sixaddict]

No worries…
Rule 1……life events trump car stuff.
May you find solace in the good memories.

[GregAmy]

Well we were all aware of this coming but just got my love letter 1099 from PP.
Trying to figure how to handle.

1099-K are reported to the IRS but the form is not submitted as part of the tax return (as a 1099-NEC would be). How to handle that information depends on its usage.

If you are selling parts or services for profit, you are running a business and must report that income on a Schedule C. For this type of business usage, the 1099-K amount should be reported as "gross receipts" in Schedule C. If it's a combination of business and personal, only the business portion of the receipts should be reported in Schedule C.

For personal use, such as reimbursements and sales of personal items at a loss, report that portion on the top of Schedule 1 which says "For 2024, enter the amount reported to you on Form(s) 1099-K that was included in error or for personal items sold at a loss". This acknowledges to the IRS that you received the transfers but you are declaring these funds as personal transfers, not subject to income tax.

The amounts added as gross receipts to Schedule C plus those reported on Schedule 1 as personal use should sum to the total reported on the 1099-K.

GA, IRS-certified tax preparer

Edit: unrelated PS: transfers via Zelle do not generate 1099-K, since that's a bank-to-bank transfer (whereas PayPal, Venmo, etc are third-parties). Zelle doesn't need to report 1099-K because the IRS can already get access to your bank records if need be (and large transfers are generally reported); not so easily with PayPal/Venmo.

[914rrr]

Is mileage and other associated expenses for a "business" of this type deductible? Like going out of state to buy parts, swap meets, booth fees, gas, lodging, food, etc.?

[GregAmy]

Is mileage and other associated expenses for a "business" of this type deductible? Like going out of state to buy parts, swap meets, booth fees, gas, lodging, food, etc.?

Yes, if it's related to pursuing this income.

My general rule of thumb is that any expenses/purchases that would not be incurred but for pursuit of this income are deductible. Any expenses/purchases that would have been done anyway (e.g., phone, internet, computer) are deductible up to the pro rata portion of its business use.

But as a business, you're far better off discussing with in person with a tax professional rather than some random guy on a car forum. - GA

[brant]

I too want to tell you that I'm sorry for your loss.
brant

[Cairo94507]

@technicalninja - Sorry for your loss; even when you know it is coming, it is still hard. May she rest in peace now.

[Jack Standz]

Mom passed last night at 1 am.

Rick,

You have my sincerest condolences. I know how much losing a parent (a mom) hurts.