# It Happened! PayPal 1099K



## Ken Scharabok

Received an e-mail from PayPal saying starting this year they were required to submit a Form 1099K to the IRS if "...you have accepted merchant cards for payments, or because you received payments through a third party network that (1) exceeded $20,000 in gross total reportable payment transactions and (2) the total number of those transactions exceeded 200 for the calendar year."

Received my form today.

It includes the Gross amount of merchant card/third part network payments both annual (2011) and monthly.

As far as I know PayPal fees are fully deductible from the associated sale.

I suspect this is going to be an audit device - such as where is the matching income.

Thus, those who sell a lot (see above) and haven't been submitting an income from a business tax form might want to do a catch-up.

Now my gross eBay sales will me more than PayPal transactions since I do not count as reportable income sales of personal property.


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## Ken Scharabok

Added: Another eBay/PayPal disconnect is I purchase supplies for the shop and pay for them through PayPal. Works great. I send the wholesaler an e-mail asking for a PayPal invoice, they send me the invoice, I pay through PayPal. If we are both on line, transaction takes less than five minutes.

I haven't been keeping an eBay sales notice for personal sales, but I guess I'm going to have to start doing so.


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## ErinP

For my part it doesn't make any difference. I've always reported the same amount as PayPal shows.

I also just print out my shipping fees from PP too, since most of my shipping costs are straight out of that account, (though than my international shipping costs that are shown on traditional USPS receipts).


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## Plow Boy

Hi Ken,

I go through pay but have not received anything yet. The way I read your post, you have to make 20,000 a year or sell 200 items a year?
I just sell yard sale junk ( I mean Treasures) for $10 $20.... I really don't sell that much. Will they send me one also?


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## How Do I

Here is Paypal FAQ on the subject.

https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W


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## Charleen

I guess this is one time I'm glad I don't make a lot of money.


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## aunt fannie

Guess this answers the PM I sent you a couple of days ago.


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## edcopp

Anyone who is supposed to provide you with a form 1099 statement MUST do that by JAN. 31 (31 days after the end of the year being reported). Often they are slow, or do not do it at all.

Form 1099 just indicates that you handled the money, it is impossible to tell how much profit you made if any, from this reporting.

For those who just make a little, that is like being a little pregnant. If you made one dollar the IRS wants it, or at least part of it.

There are hundreds of thousands of ways to avoid paying taxes, legally. The congress makes these rules mostly for them, but we can use them too. We need to read and study the IRS Tax Code. This is extremely boring, and very profitable. 

The 1099 form is not required to be sent in with your tax return, and if you are keeping proper records should make no difference.:nono:


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## Belfrybat

As I read the rule, this only applies to those who receive BOTH $20,000+ AND over 200 transactions. I don't meet the first requirement, but do the second, so as I understand it, a 1099K won't be sent. Of course, the IRS could always change that rule in the future.


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## Ken Scharabok

I read it as an 'and-or'.


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## Belfrybat

Ken Scharabok said:


> I read it as an 'and-or'.


Hmm... I surely hope you are wrong. I haven't received a form yet, but if it came via e-mail I might have missed it. The website reference above reads:



> Under the new legislation, weâll report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:
> 
> $20,000 USD in gross payment volume from sales of goods or services in a single year
> 200 payments for goods or services in the same year


Which is why I thought both conditions had to exist. I guess I'll find out if I get a 1099 sent to me.


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## ErinP

It'll come snail mail in a plain envelope. 

and the form reads "you received payments through a third party network that 1. exceeded $20,000 in gross total reportable payment transactions *and* 2. the total number of those transactions exceeded 200 for the calendar year"
So I'm reading it as you must have 200 transactions AND the $20K to trigger a 1099. That doesn't mean the government doesn't care if it's less than that, just that PayPal isn't required to send you a 1099. 
I would still recommend reporting your income, even if it's "only" $10K.


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## Ken Scharabok

You really need to talk to a professional tax preparer. First consulation should be free.

I don't report as income sales of personal items. Its not something I bought for resale nor produced. Yard-sale concept. Just cleaning out closets or perional storage.

I don't report personal items someone has me list for them even if they pay my listing/sales cost and a bit more. This happens maybe once or twice a year and it isn't much. I doubt I'm going to be called on it.

I don't report shipping charges as income, not as expenses. It is basically a wash-post transaction. Just end-of-sale amount.

Purchased shipping supplies I do count as an expense against gross sales.

Occasionally someone brings by the shop something they need work done on. I have a note pad on which I record that income. (And there is no one as desperate as a farmer who has let a borken implement sit for the winter than then needs to use it TODAY. I charge accordingly.

I try to be as honest as I can with the IRS without keeping to the penny reocrds. Sort of a cost of living in the United States.


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## Belfrybat

OK, thanks for the info -- then I'm OK as far as the 1099 is concerned. As far as reporting income, yes, it all has to be reported. Even sale of personal items if that happens more than three times a year. Not sure if the latter is Fed or just a Texas law pertaining to sales tax, but at least here, a person can have three garage sales a year not lasting more than 2 days and not have to report the income. 

What is really going to burn me is when I have to start collecting out of state sales tax -- my recordkeeping will get crazy difficult at that point. Right now, my sales are marked as in state or out of state, and therefore easy to keep track of. Can you imagine the horror for a small business person of having to keep up with 50 different taxes? And the reporting and recordkeeping that will entail. It will put the small guys like me out of business.


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## ErinP

You'll have to collect out-of-state sales tax? Since when?? (I remember this being a discussion in the relatively recent past, but I thought it was dumped again).

So far as taxes, I seem to do things exactly the same as you Ken. Ignoring re-sale of personal items, shipping comes right off the top of transactions, etc. So I guess if you ever get nailed in an audit, let me know what, in particular, wasn't allowed.


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## Belfrybat

ErinP said:


> You'll have to collect out-of-state sales tax? Since when?? (I remember this being a discussion in the relatively recent past, but I thought it was dumped again).


We don't, YET. But mark my words, it is coming. Just too much potential revenue for the various States going down the tubes.


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## ErinP

Yeah, I think you're probably right. 
I was just thinking you meant I had missed something _already_! lol


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## happychick

This article "The PayPal 1099-K: Don't Fear It" is a must read - it should help answer some folks questions here! http://www.etsy.com/blog/en/2012/the-paypal-1099-k-dont-fear-it/


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## Ken Scharabok

When I purchase off of Amazon or through Dell I am charged state sales taxes. Far as I know Amazon doesn't have a distribution center in TN, but Dell does.

Would seem to be a fairly simple exercise for eBay to collect and then turn over a state sales tax to a state. However, some states, like TN, have a variety of sales taxes. For example, on groceries it is 6%. On most all other non-major items 9.75%. Sliding scale for items such as vehicles.


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## Ken Scharabok

Just retuned from having my taxes done by H&R. Agent initially insisted she had to report PayPal's 1099K total as income. After arguing a bit I let she complete the taxes. When I returned home she called and said she was, in fact, in error. It is just an informational filing between PayPal and the IRS.


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