New PayPal IRS tax reporting requirements

[mysticstryk]

What’s the current status of this? What’s the limit and how do we report this without triggering an audit? Obviously I have no intention of giving the IRS a cut of my audio gear sales that I sell for a loss.

 

[thehutch]

What’s the current status of this? What’s the limit and how do we report this without triggering an audit? Obviously I have no intention of giving the IRS a cut of my audio gear sales that I sell for a loss.

So should be clear that the new 1099 threshold for payment processors has no bearing on whether you need to report these transactions on your taxes. Legally, you do, regardless of how much you sold.

That said, the last thing the IRS said was that it was likely to phase in the new lower threshold with a $5,000 trigger for 2024 tax year. They have not confirmed this. It’s possible the payment processors lobby them for more time. It’s also possible the IRS just decides to go ahead with the new threshold for this tax year. Hard to say and I’d guess they won’t give any clarity until fall given what they did last year.

So I think you have two options: 1. Claim this is a hobby and that everything you sold at a loss. 2. Just report it as income and write off your original purchase price.

From what I’ve read, it sounds like the second option is the safer one – especially if you only write off up the sale price of your items and don’t use the loss to reduce your other income. But I’m just guessing and am not an expert in any way, shape or form.

 

[Whitigir]

So should be clear that the new 1099 threshold for payment processors has no bearing on whether you need to report these transactions on your taxes. Legally, you do, regardless of how much you sold.

That said, the last thing the IRS said was that it was likely to phase in the new lower threshold with a $5,000 trigger for 2024 tax year. They have not confirmed this. It’s possible the payment processors lobby them for more time. It’s also possible the IRS just decides to go ahead with the new threshold for this tax year. Hard to say and I’d guess they won’t give any clarity until fall given what they did last year.

So I think you have two options: 1. Claim this is a hobby and that everything you sold at a loss. 2. Just report it as income and write off your original purchase price.

From what I’ve read, it sounds like the second option is the safer one – especially if you only write off up the sale price of your items and don’t use the loss to reduce your other income. But I’m just guessing and am not an expert in any way, shape or form.

I was told that the used price items have to satisfy the “fair market price” criterias. For example, if your car fair market price is $8000 while you bought it new 8 years ago for $24,000. But you just sold it off for $9,000. Now, you have gained $1,000 and that would be what you gotta pay for

 

[mysticstryk]

I was told that the used price items have to satisfy the “fair market price” criterias. For example, if your car fair market price is $8000 while you bought it new 8 years ago for $24,000. But you just sold it off for $9,000. Now, you have gained $1,000 and that would be what you gotta pay for

Billionaires are exploiting taxes yet this is what the IRS is worried about. Clowns.

 

[Co93]

Once again, an example of the Fed's trying to score a few bucks at the expense of one of the purest forms of a modern barter system. Silly for most hobbyists who generally lose money in this hobby because we don't have good records of our original purchases on the web

 

[sajesak]

PayPal has started collecting social security numbers or tax IDs from those who use goods and services to sell items in the U.S. This is part of a new federal requirement on such sites to report all sales income above $600 to the IRS. The previous threshold was $20,000 or 200 transaction per a year. PayPal users – and users of other sites like Etsy and eBay – will receive a 1099-k starting with the 2022 tax year (so you’ll get it in 2023). More on the requirement here.

I’m curious to hear from any accountants here about how best to minimize or eliminate any tax obligations when selling through the classified section on Head-Fi. Obviously this is a hobby and most of us aren’t making money buying and selling here. I depreciate just about every headphone or piece of gear I resell.

Will this requirement mean that anyone who sells more than $600 in items on PayPal will be forced to deal with it on their taxes? And what does this do to state sales tax obligations? Will states come after us if we don’t collect sales tax? Thanks. R&D Tax Credit with Artificial Intellengence

Yes, if you sell more than $600 on PayPal, you’ll receive a 1099-K and must report it to the IRS, even if you’re not making a profit. For personal items sold at a loss, it’s not taxable, but you should document the original purchase price. Regarding state sales tax, it depends on your state, but typically, occasional personal sales don’t trigger tax obligations unless you're crossing certain thresholds. Always keep good records and consult a tax professional for specifics.

 

[DenverW]

I was told that the used price items have to satisfy the “fair market price” criterias. For example, if your car fair market price is $8000 while you bought it new 8 years ago for $24,000. But you just sold it off for $9,000. Now, you have gained $1,000 and that would be what you gotta pay for

I think we're mixing in a few different items here. A car purchased for 24k and sold at 8k has no profit. You paid 24k and sold for well under that; there is no tax there.

I believe you are referring to items where the previous value cannot be determined. For example, if you inherited a car and then sold it. Then you would be taxed based on the current fair market value. Perhaps this is a state specific rule you were told?