Ebay, Paypal, & The IRS

[jumbojohnny]

How will you be effected by the new law that started on Jan. 1, 2011?

Personally I am not a powerseller. I do not use Ebay for generating profits. I am a hobbyist, and Ebay is another way for me to expand my collections (cards & video games).

I do not generate mass amounts of profits, and whatever I make selling, I typically spend on more hobby stuff. I do usually have more than 200 transactions per year though, and since a vast portion of my games, and some cards, are cash transactions I have no paper trail to indicate what my expenses are in total. To sum it up, if I use Ebay for any more sales, then my hobby is now interfering with my actual and legitimate income.

The other issue is that no matter where the payment comes from, it will be added into the 200 transactions that the IRS has set as a standard. So the low quota is quickly filled.

Some people think that in order for the IRS to expect taxes, that you will need to meet
$20,000 annually AND 200+ Transactions...In truth its actually either or. This I was told by an IRS official and by Paypal officials. So

200 payments recieved @ $1 per = $200 you get taxed for the total year

5 payments @ $4,000 per = $20,000 you get taxed for the year

 

[ballerskrip]

jj,

i personally hope that you are wrong. Everything that i have read indicated that it was BOTH 200 + $20,000.

skrip

 

[gvsu96]

Ebay, Paypal, & The IRS

https://cms.paypal.com/us/cgi-bin/marke ... s/IRS6050W

 

[blazers091]

i wont be. not even close to the 20000

 

[maxpower]

This is not legal advice, but my understanding is that the new regulation has no effect on your tax obligation.

That is to say, you have always been obligated to pay taxes on your profits (and no taxes if you have no profits). All that has changed is that if you reach the sales thresholds, Paypal will send your payments information to the IRS. If they send that document and you haven't accounted for your profit/loss on your tax return, it'll raise a red flag on your account.

Again though, whether or not you reach those transaction levels does not impact whether you're taxed... you are either way. If you only had one sale, and it was for a profit of $10, you are obligated by law to report it and pay the appropriate tax on it.

The practical effect of the legislation is that in the past, people could more easily skirt their tax filing obligations because there would be no paper trail to hold them accountable. Now there will be.

 

[boomo]

This is not legal advice, but my understanding is that the new regulation has no effect on your tax obligation.

That is to say, you have always been obligated to pay taxes on your profits (and no taxes if you have no profits). All that has changed is that if you reach the sales thresholds, Paypal will send your payments information to the IRS. If they send that document and you haven't accounted for your profit/loss on your tax return, it'll raise a red flag on your account.

Again though, whether or not you reach those transaction levels does not impact whether you're taxed... you are either way If you only had one sale, and it was for a profit of $10, you are obligated by law to report it and pay the appropriate tax on it.

The practical effect of the legislation is that in the past, people could more easily skirt their tax filing obligations because there would be no paper trail to hold them accountable. Now there will be.

all of this is correct, basically they will have an idea what you are doing, and you might be able to file taxes for years without an issue, or perhaps there will be one right away. But if everything is paid thru paypal and you have record of your payments, anyone who is break even will be fine. im disabled and pay no income tax on my check, and will just file my taxes as i always would while keeping track of all buys and sells, so if the IRS wants to send a guy and waste a day with me, ill be happy to oblige.

 

[A_Pharis]

I agree with Max, too.

You've always been obligated to report these sales. I am amazed at how many people act surprised that this was put into effect.

 

[PeteD]

Hopefully this will jump start a movement back to more local shows, where you're out of the reach of the IRS/CRS.

 

[gogosox40]

jj,

i personally hope that you are wrong. Everything that i have read indicated that it was BOTH 200 + $20,000.

skrip

Skrip you are right. This is what is posted on Paypal's Website:

Under the new legislation, PayPal will be required to report to the IRS the total payment volume received by PayPal customers in the US who:

* Receive more than $20,000 in gross payment volume from sales of goods or services in a single year, AND
* Receive over 200 payments in a single year.

The IRS changes will apply to all payment providers, including PayPal. They will take effect for sales that occur on or after January 1, 2011, with the first reports going to the IRS in early 2012. Our goal is to help PayPal sellers understand and comply with the new requirements.

Before your payment volume exceeds the reporting thresholds, you will be required to verify your identity by adding a Tax Identification Number,such as a,Social Security Number (SSN), or Employer Identification Number (EIN), to your existing account(s

If it was one or the other it should say: $20,000 OR 200 payments, not And

 

[jumbojohnny]

I understand how it reads, and I can link a dozen more articles and posts about it. I called the IRS office and I sat on hold for a WHILE just to ask about the manner in which the articles all read. The agent was good enough to say that meeting EITHER of those two requirements constitute Paypal reportings.

Example he gave me:
"Could all of the people in this room that have Brown hair and all the people that have Red hair please leave." - "It simply means BOTH classifications are to be included, not just the combination of both."

Paypal rep. confirmed what the IRS guy said. And Paypal is going to have one of their accounting people call me either Monday or Tuesday to discuss more in detail.

My intention are not to debate any persons, itisto sharethe information that I was given on Friday. I am all for hoping that both requirements are needed,but I cant seem to make head or tails simply because of the clever wording of the legistature.

 

[gogosox40]

I understand how it reads, and I can link a dozen more articles and posts about it. I called the IRS office and I sat on hold for a WHILE just to ask about the manner in which the articles all read. The agent was good enough to say that meeting EITHER of those two requirements constitute Paypal reportings.

Example he gave me:
"Could all of the people in this room that have Brown hair and all the people that have Red hair please leave." - "It simply means BOTH classifications are to be included, not just the combination of both."

Paypal rep. confirmed what the IRS guy said. And Paypal is going to have one of their accounting people call me either Monday or Tuesday to discuss more in detail.

My intention are not to debate any persons, itisto sharethe information that I was given on Friday. I am all for hoping that both requirements are needed,but I cant seem to make head or tails simply because of the clever wording of the legistature.

Wow this is very interesting then. I hope it's Both not either or. Please let us know what what the Paypal accounting people say.

 

[maxpower]

I understand how it reads, and I can link a dozen more articles and posts about it. I called the IRS office and I sat on hold for a WHILE just to ask about the manner in which the articles all read. The agent was good enough to say that meeting EITHER of those two requirements constitute Paypal reportings.

Example he gave me:
"Could all of the people in this room that have Brown hair and all the people that have Red hair please leave." - "It simply means BOTH classifications are to be included, not just the combination of both."

Paypal rep. confirmed what the IRS guy said. And Paypal is going to have one of their accounting people call me either Monday or Tuesday to discuss more in detail.

My intention are not to debate any persons, itisto sharethe information that I was given on Friday. I am all for hoping that both requirements are needed,but I cant seem to make head or tails simply because of the clever wording of the legistature.

Very interesting. If there's any controversy, I assume Paypal will overreport in order to play it safe. There's little extra cost in the extra reporting (once the system is set up), and it's not like sellers can just go to a different payment vendor.

 

[rimcdonald]

Is it per household or per person? Let's say I sell cards online and my wife has a separate ebay account where she sells something else (makeup, hair accessories, etc). Does the 200 transactions count for the 2 combined since we file jointly or is it 400 for the 2 of us?

 

[maxpower]

Again, I think that people might be overworrying here.

For most of us, there will be no additional tax burden. Yes, we'll have to keep records (which may not be a bad idea anyhow), but if we're not turning a profit on this hobby, then we'll incur no additional tax.

For some, there is a tax burden, but it's not a new one. You're just now being held accountable for it. You've had what has been, practically speaking, a tax holiday for the past few years. Now, you have to pay the same tax on profits that any business does.

 

[gvsu96]

I understand how it reads, and I can link a dozen more articles and posts about it. I called the IRS office and I sat on hold for a WHILE just to ask about the manner in which the articles all read. The agent was good enough to say that meeting EITHER of those two requirements constitute Paypal reportings.

Example he gave me:
"Could all of the people in this room that have Brown hair and all the people that have Red hair please leave." - "It simply means BOTH classifications are to be included, not just the combination of both."

Paypal rep. confirmed what the IRS guy said. And Paypal is going to have one of their accounting people call me either Monday or Tuesday to discuss more in detail.

My intention are not to debate any persons, itisto sharethe information that I was given on Friday. I am all for hoping that both requirements are needed,but I cant seem to make head or tails simply because of the clever wording of the legistature.

Then according to who you talked to Paypal's web site is incorrect.

How will I know if IRC Section 6050W impacts me?
PayPal will track the payment volume of your account(s) and if your payment volume exceeds both thresholds by receiving over $20,000 in gross payment volume AND over 200 payments in a calendar year. If your account(s) exceed both thresholds, PayPal will send Form 1099-K electronically or by mail for the 2011 tax year in early 2012.

 

[MantMaris]

I guess you have to wonder if personal and gift payments will now count against the cap too. The "Understanding 6050W" page says they will not count but it looks like the rules may change as the game is being played.

 

[jumbojohnny]

Its because of Paypal's website and the information that they state which prompted me to call them. After they basically told me they dont know the difference and that an accounting rep would have to get back to me. Hence my decision to call the IRS via the (888) number on the website.

I am really hoping that I can still use Ebay. I honestly have built up so much stuff from trades, cash purchases, flea markets and small shows. If I cant get rid of the bulk on Ebay then I am stuck housing it all. And because a large portion of stuff came from cash purchases, there is no paper trail to prove my expenses..in turn I would need to pay tax on all sales. I would actually be dumping that money back into my collection afterward, and those expenses cannot be claimed unless there is a profit from said items. So no selling means no claim deductions. Its a fine line to walk on...I dont want to screw myself financially for collecting baseball cards.

 

[bja613]

If you look in the FAQ it says this:

# Will I be affected by the 2011 tax changes if I only meet one of the thresholds?

No. A seller has to exceed BOTH thresholds ($20,000 in gross payment volume and 200 transactions) in 2011 to be affected by the new requirements.

 

[boomo]

AS most of you know, i will be happy to sell all consignment for you and you will
be very pleased with my service. I can provide many references here, and ill deal with the tax mess.

 

[Pinbreaker]

From the FAQ..

Are personal payments that I receive counted in the total that will be reported to the IRS? No. Personal payments that are not payments for the sale of goods or services will not be counted in the total to be reported. However, all payments received for the sale of goods and services will be used to calculate the gross payment volume to be reported.