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HomeAircraftHelicopterHelicopter Main Discussion › Paypal sent me a 1099!!!!
02-07-2018 11:22 PM  10 months agoPost 1
KingCobra Heli

rrApprentice

MA-USA

My Posts: All  Forum  Topic

As title says.

Got home from work and got a 1099 from Paypal on all funds received as income to be taxed on!

I haven't called them yet but a friend said he called and they told him MA and VT both leaned on them to send them out. They caved and never informed anyone this was gonna happen!

This is total BS!

This is payment for items I've sold and lost money on.... not income!
Now the Communist of Assachusetts wants 33% of something that's non of their F-en business! After PP already made their 4%!

I am DONE with Paypal!!!!!!!!!!! Calling tomorrow and bitching them out and closing the account!!!

I am DONE with this Communist state!!!!!!!!

I'll be selling everything I own CASH or Postal money order ONLY and moving!!!!!

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02-08-2018 03:38 AM  10 months agoPost 2
Gearhead

rrMaster

Vt

My Posts: All  Forum  Topic

wow, nothing like taxing you 2 times for the money you worked for, personally I don't think it would stand up in court for Ma & Vt

some 20 years ago Vt threatened to tax Lawn Sales, it was in the news paper, nothing became of it

Jim
Buzz Buzz Buzz

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02-08-2018 04:24 AM  10 months agoPost 3
ticedoff8

rrKey Veteran

Morgan Hill, CA. USA

My Posts: All  Forum  Topic

You were paid through PayPal for "Goods and Services", which are taxable as income by the state and the federal government as an Independent Contractor.

The only way to avoid it is to have people buy your stuff and pay as "Gift".

Of course, if they do that, and you screw them, they have no recourse to recover their payment.
I guess its a "trust thing"

Believe 1/2 of what you see and none of what you hear.
Fake News will be the downfall of our Republic!

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02-08-2018 05:36 AM  10 months agoPost 4
TMoore

rrMaster

Cookeville, TN

My Posts: All  Forum  Topic

They can send you a 1099 all they want but if you sold used items it's not taxable in most states. In fact Paypal isn't technically a merchant nor a seller or buyer, technically they are a bank of sorts. I take Credit Cards on PP but they've never sent me a 1099.

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02-08-2018 10:24 AM  10 months agoPost 5
Russell Bear

rrApprentice

League City, Texas USA

My Posts: All  Forum  Topic

We routinely get sent 1099’s from PayPal every year with using it for a home business. Except this year, the business has declined. I believe the amount is either $20K or $25K total “sales” they report this to the feds.

Team USA Bavarian Demon
Citizen #705

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02-08-2018 11:39 AM  10 months agoPost 6
KingCobra Heli

rrApprentice

MA-USA

My Posts: All  Forum  Topic

I am not a business! I sold a few toys no differed from a yard sale.
PayPal is only the bank in the middle and has no business sending a 1099 to me!
Has anyone else received one from them for their person item sales?
Where to go from here? Any accountants out there? Do I start a business on paper that obviously doesn't really exist and show initial investment and losses from the sales?
I'm gonna probably call PP today already knowing they don't care.

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02-08-2018 11:42 AM  10 months agoPost 7
Russell Bear

rrApprentice

League City, Texas USA

My Posts: All  Forum  Topic

Was just stating that with a small business our sales reached the threshold (20-25K) several years. Don't think Paypal cares if your a business or not. You reach that amount and they report it.

Team USA Bavarian Demon
Citizen #705

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02-08-2018 04:24 PM  10 months agoPost 8
ticedoff8

rrKey Veteran

Morgan Hill, CA. USA

My Posts: All  Forum  Topic

KingCobra Heli
I am not a business! I sold a few toys no differed from a yard sale.
PayPal is only the bank in the middle and has no business sending a 1099 to me!
Has anyone else received one from them for their person item sales?
Where to go from here? Any accountants out there? Do I start a business on paper that obviously doesn't really exist and show initial investment and losses from the sales?
I'm gonna probably call PP today already knowing they don't care.
Yes, you are a business if you got paid for "Good and Services"
Don't blame PP.

Believe 1/2 of what you see and none of what you hear.
Fake News will be the downfall of our Republic!

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02-08-2018 04:34 PM  10 months agoPost 9
Mark Ryder

Administrator

Ann Arbor, Michigan

My Posts: All  Forum  Topic

Hobby sales must be reported
If you and the IRS classify your eBay sales as a hobby, you'll have to report the income. Your income is reported on Form 1040 and your expenses are an itemize deduction on Schedule A.

However, you won't be able to use a loss from hobby sales to reduce other income. This can be important if you make money in other activities. For example, let’s say that you have:

A net loss of $5,000 from your eBay sales operation.
A taxable income of $15,000 from a gardening business.
If your eBay activities are considered a business, you can use your loss as a deduction to reduce your gardening income, so:

$15,000 (income) - $5,000 (deduction) = $10,000 (gardening income).
If your eBay activities are a hobby, you cannot use a loss to reduce your gardening income. Distinguishing between a hobby and a business is not an exact science. The IRS looks to many factors including:

Frequency of your eBay sales
How much you earn
How much time you spend working on the hobby
If you make more than $20,000 in gross sales and have 200 or more transactions on eBay, you should receive a 1099-K form reporting this income to the IRS.
https://turbotax.intuit.com/tax-tip...llers/L7h6uJr0i
https://www.google.com/search?q=Pay...+Personal+Sales

Ebay is not relevant but enhances the search results.

Mark Ryder

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02-08-2018 05:33 PM  10 months agoPost 10
TMoore

rrMaster

Cookeville, TN

My Posts: All  Forum  Topic

Paypal is not a reporting service but in this case the State guv has enacted laws making them one. Everything that Mark posted is true but PP is nothing more than an extension of your bank. I don't get a 1099 from my bank for transacting business whether I have a business account or a personal account. This is nothing more than state governments strong arming PP to track your financials. Ebay is essentially like marketing through Amazon or any other internet outlet and as Mark said when you have a number of transactions on Ebay you are a business.

If you get a 1099 for selling used goods you can zero out any gains from reselling that item because you are buying at retail and selling at less than wholesale which would be a loss. These states that do this are so hard up for taxes and this is their answer to finding anyone that is transacting business. If you are a legitimate business owner you are tracking income from all your sources, reporting it to the IRS on your tax returns when you file and you may be paying quarterly estimated taxes along the way.

In some municipalities you may need a Tax ID, business license or other documentation as the state or county sees fit. You may also do business under your SS which is perfectly acceptable.

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02-08-2018 07:52 PM  10 months agoPost 11
cudaboy_71

rrElite Veteran

sacramento, ca, u.s.

My Posts: All  Forum  Topic

INAL, but, I've done my own taxes for years.

You are under no obligation to pay capital gains tax on items when none exist. All you need to do is keep physical documentation of the purchase price and sale price on Schedule A. If as you say, all of your paypal income is against items you originally purchased at a higher price then every penny on the 1099 will be written off. It's not a big deal. Just a little more paperwork to manage every April.

here are some relevant links:

https://www.irs.gov/newsroom/five-b...s-about-hobbies

https://www.irs.gov/pub/irs-pdf/p535.pdf

https://www.irs.gov/pub/irs-pdf/i1040sca.pdf

if it ain't broke, break it.

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02-08-2018 10:46 PM  10 months agoPost 12
helitom

rrApprentice

Pine Grove, Calif, USA

My Posts: All  Forum  Topic

Don't let Geraldine Brown hear that some states have figured out how to extract more money from their citizens............

The older I get, the fewer things seem worth waiting in line for.

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02-09-2018 12:00 AM  10 months agoPost 13
TMoore

rrMaster

Cookeville, TN

My Posts: All  Forum  Topic

Search results: As a general rule, you must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards, or other income payments. You don't need to issue 1099s for payments made for personal purposes.

Since when did PP start paying people for goods and services when they use them as a bank? If you buy materials at Lowes and Home Depot you certainly don't issue them a 1099 if the bill is over $600.00 and if that transaction is for a business related purpose. If I buy a truck for business I'm not going to issue a 1099 to the car dealer. A talk with PP might be in order as well.

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02-09-2018 12:13 AM  10 months agoPost 14
cudaboy_71

rrElite Veteran

sacramento, ca, u.s.

My Posts: All  Forum  Topic

TMoore
Since when did PP start paying people for goods and services when they use them as a bank?
The 1099 is for funds received (aka income), not paid.

if it ain't broke, break it.

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02-09-2018 01:09 AM  10 months agoPost 15
jharkin

rrApprentice

Holliston, MA - USA

My Posts: All  Forum  Topic

KingCobra Heli
Now the Communist of Assachusetts wants 33% of something that's non of their F-en business! After PP already made their 4%!
Sorry to bust your conspiracy bubble but it was our Republican Governor Charlie Baker who proposed this new law .

And he did sign it into law so Paypal had no choice.

Here is the deal. 1099-Ks are "informational" notices that the IRS requires for anyone who does more than $20k or 200 transactions of online credit card payments. The intent is to catch people running businesses on eBay, Amazon etc. Assuming you are operating a business, you are supposed to include it in the total revenue line item of schedule C and reconcile it with expenses to figure the net profit - and its only the profit that is taxable.

Now Baker lowered it to $600 because he wants to go after small sellers. Its a paperwork nightmare for non-business sellers (I got one too), and was done right before the holidays so its caught everyone off guard. Paypal is using Federal forms for state reporting because there was no time to make a new form, and some MA DOR employees haven't even heard of the new rule.

Regardless of all the confusion, The IRS is quite clear that when you are just casually reselling used personal property for lessthan you paid there is no gain and thus no tax. This is referred to by tax professionals as the "electronic garage sale rule"

See IRS publication 525 - pg 33 bottom of the first column: https://www.irs.gov/pub/irs-pdf/p525.pdf

Things get even messier for independent contractors who bill though these payment services (note this effects Paypal, Square Trade, and any other service that handles payments) as they will sometime get double reporting of income - a 1099-K from paypal and a 1099-MISC from the client. But thatch another story not related to our prblem....

The problem for us is: do we have to report it, and if so how? I have been discussing this for a week on a finance board and a bunch of us have received varying guidance from MA DOR and the IRS about what to do. Some where told by a CPA if you dont report it somewhere you will get an automated audit letter. Others have been told to just ignore it since its an informational statement and is not matched directly with any one line of the return. Still others have been told to use a schedule C and just set the expenses equal to the sales with a comment that its a garage sale (you cannot claim a deductible loss on personal property unless its an investment like rare art).

One person posted this email they got back from MA DOR which seem fairly clear it can be ignored:

But on the other hand, my wife is a Girl Scout volunteer and they got nailed with these on cookie fundraisers and received this email from their state council:
From: XXXXXXXXX, GSEMA
Sent: Tuesday, February 6, 2018 2:01 PM
To: XXXXXXXXXXXX
Subject: URGENT: Information Regarding the Square 1099-K Email

Some Troop Cookie Coordinators recently notified us that they received a 1099-K form from their credit card processor, for December 2017 credit card cookie transactions. This is due to a November 29, 2017 change in legislation in MA, TIR-17-11: New Massachusetts Reporting Requirements for Third Party Settlement Organizations, which requires a 1099-K to be sent to any account holder processing $600 or more in credit card transactions through credit card processor devices in 2017. If your troop did not take credit cards, or processed less than $600, this does not apply to you at this time.

XXXXXXXXXXXX

Note: the processing of transactions in excess of $600 is generating the 1099-K income reporting statement which is tied to the person whose SSN is on the Square account, regardless of the fact that the money is being deposited into the troop bank account and not your personal account.

XXXXXXXXXXXXX

Our Chief Financial Officer (CFO) has spoken with our accounting firm and the MA Department of Revenue to learn more information about the requirements and the procedure that our volunteers should follow to process 1099-K forms. Although GSEMA does not provide tax advice, our CFO confirmed with the MA Department of Revenue that MA individual tax return filers or preparers should do the following to process the 1099-K and by doing so will zero out the amount and remove any tax impact:

* Input the amount from the 1099-K as revenue on a Schedule C - Profit or Loss from Business - on their personal MA tax return. This is a form used when someone has their own business or is a sole proprietor.
* The tax filer or tax preparer should fill out the top with the tax client name (volunteer who purchased the device) and the description "troop cookie coordinator - Girl Scouts of Eastern Massachusetts Troop XXXXX."
* In the "other deductions" section, enter the exact amount of deductions (reported as full cost of cookies @ $5/package) and write a statement such as "amounts collected for cookie sales on credit cards and paid to Girl Scouts of Eastern MA Tax ID XXXXXXXXX."
* Please be sure to save all related supporting documentation as required by the MA government for reported income and deductions for the state tax return filing(s). Please note that unless credit card sales exceed $20,000 there is no need to report any activity on federal tax forms.

The information above is background information only and we recommend you to seek tax advice from the MA Department of Revenue and/or a tax professional should you have further questions/concerns. If there are additional costs related to tax preparation that volunteers incur, GSEMA is prepared to reimburse those additional costs once we receive the appropriate documentation from the tax preparer.

XXXXXXXXXXXXX
Ultimately you need to decide what you are comfortable doing.

-Jeremy
Whiplash-G
Helix 700G
T-Rex 450 fbl conversion
alot of planks

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02-09-2018 12:14 PM  10 months agoPost 16
jharkin

rrApprentice

Holliston, MA - USA

My Posts: All  Forum  Topic

Mark Ryder
Hobby sales must be reported
If you and the IRS classify your eBay sales as a hobby, you'll have to report the income. Your income is reported on Form 1040 and your expenses are an itemize deduction on Schedule A.

However, you won't be able to use a loss from hobby sales to reduce other income. This can be important if you make money in other activities. For example, let’s say that you have:

A net loss of $5,000 from your eBay sales operation.
A taxable income of $15,000 from a gardening business.
If your eBay activities are considered a business, you can use your loss as a deduction to reduce your gardening income, so:

$15,000 (income) - $5,000 (deduction) = $10,000 (gardening income).
If your eBay activities are a hobby, you cannot use a loss to reduce your gardening income. Distinguishing between a hobby and a business is not an exact science. The IRS looks to many factors including:

Frequency of your eBay sales
How much you earn
How much time you spend working on the hobby
If you make more than $20,000 in gross sales and have 200 or more transactions on eBay, you should receive a 1099-K form reporting this income to the IRS.
https://turbotax.intuit.com/tax-tip...llers/L7h6uJr0i
https://www.google.com/search?q=Pay...+Personal+Sales

Ebay is not relevant but enhances the search results.
That eBay page is leaving out some very important details... the hobby loss rule is complicated and is something you want to avoid like the plague if you are actually trying to run a side business that earns income.

Let me explain:

Say you have a full time job as a corporate America drone somewhere, but want to run a side business in your garage selling upgrade parts for heli kits on RR classifieds.

Great. Now you file a schedule C, and put all your sales in gross receipts and add up all your costs - materials, time, overhead, depreciation, shipping, payment processing fees, etc and deduct that from your sales. If you run a net profit that gets added to income and taxed (fine). But if you spend more than you earned you calculate a loss, and that loss can carry over and be deducted from your regular work income and further lower your tax bill (not bad).

The loss part is key because not every business makes money every year, and especially start ups tend to loose money at the beginning.

The catch is that reporting losses can easily be abused by people reporting any type of sales as a business as an excuse to start deducting all kinds of personal stuff as business losses. So the IRS instituted the hobby loss rule which basically says "if you side business does not show a net profit in 3 out of every 5 tax years its a hobby, not a business." And once its a hobby, gains remain taxable, but your deductions cannot exceed total receipts (i.e. you cannot claim a delectable loss).

And it gets more complicated - as soon as you are categorized as a hobby you cannot put any business expenses on Schedule C. Now you have to itemize hobby expenses on Schedule A and they are misc deductions that fall under the 2% AGI floor rule. So most taxpayers end up not being able to claim hobby expenses at all making more of those hobby sales taxable.

https://www.irs.gov/newsroom/is-you...profit-endeavor

https://www.nolo.com/legal-encyclop...-taxpayers.html

https://www.hrblock.com/tax-center/...bby-loss-rules/

-Jeremy
Whiplash-G
Helix 700G
T-Rex 450 fbl conversion
alot of planks

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02-09-2018 02:22 PM  10 months agoPost 17
RM3

rrElite Veteran

Killeen, Texas - USA

My Posts: All  Forum  Topic

Taxes... the fine that reminds you that your not in control. I did a fair amount of business on Paypal last few years... but not enough to warrant a 1099 I guess. half of the payments I received for the heli parts I made were money orders...

running a "hobby" for the intent of making any tangible money is a fools errand.... which is why I let it go.

but if you made enough to get the IRSs attention... guess your doing something right on your end and something wrong as far as they are concerned.

showing a preference will only get you into trouble, 90% of everything is crap...

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02-09-2018 04:59 PM  10 months agoPost 18
Heli Fanatix

rrVeteran

Fountain Valley, CA

My Posts: All  Forum  Topic

I had put up a post regarding an opportunity that will allow us to write off expenses from our hobby as well as a portion of our everyday expenses. So when PP sends a 1099.. won't be a shock and part the norm every year

This curse could be a gift if you can see it

Hint: This 1099 puts us an an independent contract

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02-09-2018 05:18 PM  10 months agoPost 19
Heli_Splatter

rrElite Veteran

USA

My Posts: All  Forum  Topic

This is why businesses have to add money for unseen expenses. I would suggest next year that you add the taxes to the price of items being sold. You really have no other choice.

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02-09-2018 09:41 PM  10 months agoPost 20
870heli

rrVeteran

Monson Ma. USA

My Posts: All  Forum  Topic

OK so now I just get low balled on everything. If I add a 20-30% tax that will help the sale. I don't think so.

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HomeAircraftHelicopterHelicopter Main Discussion › Paypal sent me a 1099!!!!
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