Another kick in the junk for US based PayPal users

Rasputin · Jan 24, 2021

blueteg
Strange. I logged into my Paypal account to check to see if I had one waiting for me in the 'statements' tab and it said I did not have one available. (I suppose they still have another week to issue mine, so I'm not out of the woods yet)

Their tax page still has the $20k/year verbiage on it. This is the first I have heard of them hitting everyone with a 1099 who received any $ via goods and service.
"Only those customers that meet the 1099-K eligibility requirements will see the 1099-K available for download in their account."
https://www.paypal.com/us/smarthelp...e-irs-will-i-receive-a-tax-form-1099-k-faq729

Per the above link:

"Some US States require merchant reporting at a lower threshold:

Vermont, Massachusetts, Virginia, Maryland: $600 USD in gross payment volume from sales of goods or services in a single calendar year regardless of the number of transactions;
Illinois: $1,000 USD in gross payment volume from sales of goods or services in a single calendar year with at least 3 payment processed"

😵‍💫😵‍💫😵‍💫

gatorcpa · Jan 24, 2021

OllieOnTheRocks
I should imagine this must be the same is USA? There must be thresholds you have to breach in order to have to declare it on a tax return?

For income taxes (federal and state), the answer is no. All sales are subject to income tax on the excess of selling price over the cost plus expenses of sale.

In fact, the tax rate on sales of collectible items held more than one year is subject to a higher tax rate (31.8% maximum) than sales of securities (23.8% maximum). Flippers have to pay tax at higher ordinary income tax rates.

For sales taxes, most states have threshold of sales requirements. If you are under the threshold, you do not have to register and collect sales tax on sales to people residing in that state. However, these thresholds vary based on your state of residence. EBay is now treated as a seller and now collects sales taxes in all the states that have sales tax except Florida and Missouri.

We also have use taxes on items shipped into a state for which sales was not required to be collected (international or from other states).

You folks in the UK and EU have higher tax rates, but the administration of taxes is generally done at the national level and is far more orderly than here in the US.
gatorcpa

Donn Chambers · Jan 24, 2021

The IRS covers potential taxes on sales of items in Publication 525: "if you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain."

key word here is gain. I don’t know about you, but I’ve never actually sold a watch (or a car) for more than I paid for it. So I don’t think I have anything to worry about.

But if you are buying watches to turn around and sell as a business, then it’s more complicated.

it does seem that PayPal is lumping everyone using their service for payments into a business, though, and issuing a 1099-k (intended for credit card payments for a business) to everyone using it seems a bit extreme.

think this ends my use of PayPal for selling unwanted watches without using “friends and family”. My taxes are complicated enough.

Spacefruit · Jan 24, 2021

Bitcoin anyone?

Redwes25 · Jan 24, 2021

asrnj77
It’s not eBay it’s PayPal. So if you sold your old watch you bought in high school on Omegaforums, it’ll now be counted as income for you.

If you sell for a gain it always been income to you. PayPal is not changing/making the rules.

My guess is that IRS is making them report this info. They are not taking on extra reporting just out of spite to you. They are doing it to avoid fines penalties that the govt would impose on them.

Tony C. · Jan 24, 2021

I'm not advocating tax evasion, but would argue that these kind of issues pale in comparison to the concerted push by Governments around the world towards the abolition of cash. That should be of overarching concern to anyone who values what's left of our privacy.

Evitzee · Jan 24, 2021

Dan S
The holier-than-thou know-it-all replies in this thread are just annoying. As if you all pay income tax on every little thing you sell online, or keep documentation of everything you buy from someone else (or for service/repair costs). I'm sure you all have bills of sale for the watches you have bought using wire transfer, Transferwise, etc. 🙄 I can absolutely empathize with the OP, being taken by surprise.

And the same members will soon be urging newbies to refuse to pay for watches via PP F&F.

Sorry you are annoyed....It's not being 'holier than thou' to advise anyone to avoid paying any unnecessary tax. I've got some watches that I've had for over 30 years, with receipts never received, in a foreign currency or lost in many moves over the years. If I sell a watch I will subtract the initial cost and report the difference. I'm not concerned with not having a proper receipt, I'll take my chance. The IRS audits damn few returns unless you have some deductions way out of whack for your income, or if you get tagged for a 'compliance audit' where they want to see every document for every item of income or deduction. Have done over 49 years of tax returns, many odd ones that included all kinds of company supplied housing, cars, travel that added over $200k to my 'income' in some years and have never had a whiff of a question from the IRS. Spent four years in Saudi Arabia and was advised by the visiting IRS people to document the housing, car and travel costs provided by my Saudi employer on a piece of paper and attach it to my return, never a peep about my self reporting. Keep your return in-bounds and they won't bother you.

And most sales for the average person are at a loss. Buy a watch for $6k, use it a couple of years and sell it for $5k. Ditto for things like jewelry, stereo equipment and any household goods, you don't make money selling your old audio equipment. You owe nothing in taxes for these sales. Unless you are running a business the 1099-k thing is just a hassle for regular people who want to liquidate some of their belongings. PayPal has taken the lazy way out and assumes every user is a business making a profit on each sale.

dougwhiz · Jan 24, 2021

Dan S
Were you upgraded to a business account by any chance? The policy also has the following caveats. Do any apply to you?

I just went looking through this today, since this is the first year I've received this from Paypal, and was shocked too at first. I'm nowhere close to the amounts listed, but live in Illinois where the threshold is set very low. Luckily(?) my few flips have been for a loss, and this is just a small hobby for me. But I've got to sort out whether a watch purchased from Kabaclyde in the UK needs to have sales tax paid to my state for example. Just one more question I need to run past the accountant (when the wife isn't on the line!).

CajunTiger · Jan 24, 2021

asrnj77
It’s not eBay it’s PayPal. So if you sold your old watch you bought in high school on Omegaforums, it’ll now be counted as income for you.

thats correct, thats how it works. PayPal has a legal obligation to file these...they aren't doing it for fun.

Nobel Prize · Jan 24, 2021

Dan S
Good that you did that, but I would be really hard-pressed to find receipts for most of the vintage watches I purchased from other collectors. 😲

Unless you paid cash it’s pretty easy to track purchases. You most likely have email communication and you either transferred ni ey or wrote a check or... used PayPal. So you can find the records. I went through this a couple of years ago because I sold a lot of stuff, not just watches hut camera equipment. At the end my accountant did work the original purchase against the resale and it was pretty much a wash ( camera equipment depreciates)

Nobel Prize · Jan 24, 2021

Dan S
The holier-than-thou know-it-all replies in this thread are just annoying. As if you all pay income tax on every little thing you sell online, or keep documentation of everything you buy from someone else (or for service/repair costs). I'm sure you all have bills of sale for the watches you have bought using wire transfer, Transferwise, etc. 🙄 I can absolutely empathize with the OP, being taken by surprise.

And the same members will soon be urging newbies to refuse to pay for watches via PP F&F.

I agree that a lot of people , me included, will default to off the record transactions. That said I don’t read the same as you. I think what people are stating is that PayPal has no choice but to comply with whatever law is being applied to them.

kkt · Jan 25, 2021

Evitzee
Sorry you are annoyed....It's not being 'holier than thou' to advise anyone to avoid paying any unnecessary tax. I've got some watches that I've had for over 30 years, with receipts never received, in a foreign currency or lost in many moves over the years. If I sell a watch I will subtract the initial cost and report the difference. I'm not concerned with not having a proper receipt, I'll take my chance. The IRS audits damn few returns unless you have some deductions way out of whack for your income, or if you get tagged for a 'compliance audit' where they want to see every document for every item of income or deduction. Have done over 49 years of tax returns, many odd ones that included all kinds of company supplied housing, cars, travel that added over $200k to my 'income' in some years and have never had a whiff of a question from the IRS. Spent four years in Saudi Arabia and was advised by the visiting IRS people to document the housing, car and travel costs provided by my Saudi employer on a piece of paper and attach it to my return, never a peep about my self reporting. Keep your return in-bounds and they won't bother you.

And most sales for the average person are at a loss. Buy a watch for $6k, use it a couple of years and sell it for $5k. Ditto for things like jewelry, stereo equipment and any household goods, you don't make money selling your old audio equipment. You owe nothing in taxes for these sales. Unless you are running a business the 1099-k thing is just a hassle for regular people who want to liquidate some of their belongings. PayPal has taken the lazy way out and assumes every user is a business making a profit on each sale.

If you sell several watches and have losses from the sale of some of them, do those losses offset the gains you made on others?

Dries · Jan 25, 2021

If you are not a business, they look at individual transactions for capital gains, so probably no offset between transactions

cristos71 · Jan 25, 2021

Dries
If you are not a business, they look at individual transactions for capital gains, so probably no offset between transactions

Ah, the old, " Heads I win, tails you lose " scenario....gotta love their way of thinking! 🫨

Nobel Prize · Jan 25, 2021

kkt
If you sell several watches and have losses from the sale of some of them, do those losses offset the gains you made on others?

Yes,

The 1099 gives the sum of your sales income, let’s say 20,000. So the sum of your items sold will then work as a one figure against it. Of course you should have a ledger with the itemized data in case you get audited.

In other words this is not a sales tax, it’s an income tax, and the original value is not “cost of sales” but rather a deduction.

Now if PayPal was managing this at the transaction point then you would not be able to and it would all be by individual transaction. But note the net result to your profit/loss balance would be the same.

asrnj77 · Jan 25, 2021

Nobel Prize
Yes,

The 1099 gives the sum of your sales income, let’s say 20,000. So the sum of your items sold will then work as a one figure against it. Of course you should have a ledger with the itemized data in case you get audited.

In other words this is not a sales tax, it’s an income tax, and the original value is not “cost of sales” but rather a deduction.

Now if PayPal was managing this at the transaction point then you would not be able to and it would all be by individual transaction. But note the net result to your profit/loss balance would be the same.

Yes, but now you’ll need to itemize your return when you otherwise might not have needed to. In my case I took a FOIS on a trade. I have some WhatsApp messages regarding the trade but nothing else. The watch was later sold at $3600 so that’s less than the purchase price. In the end it likely won’t result in me paying more taxes but will require additional time and potential expense if you pay somebody to prepare a return for you.

As Dan mentioned before if everybody thinks it’s just the normal way of doing business (for websites and money exchangers to file income on your behalf), perhaps we should have Omegaforums send notification to every seller’s home country tax authority that an item that was listed for sale is now marked as “sold”. Omegaforums is now a business itself with the Google ads, no?

cvalue13 · Jan 25, 2021

Seems to be conflicting information on thread as to whether sales losses offset gains. Morbidly curious to know.

Also curious to know what criteria are used to classify a “collectible” for these tax purposes. A 50yr old watch seems a more obvious inclusion than say a brand new watch, etc.

Dan S · Jan 25, 2021

In the US, losses from the sale of personal-use property are apparently not tax deductible. Profits are taxed as capital gains. So you can't just use the total amount of sales in a given year and subtract the total cost basis. You have to break out the items where you had a net profit (if any). Personal-use property is treated differently from other assets.

See that last sentence of the first paragraph in this document.
https://www.irs.gov/taxtopics/tc409

gatorcpa · Jan 25, 2021

Dan S
In the US, losses from the sale of personal-use property are apparently not tax deductible. Profits are taxed as capital gains. So you can't just use the total amount of sales in a given year and subtract the total cost basis. You have to break out the items where you had a net profit (if any). Personal-use property is treated differently from other assets.
https://www.irs.gov/taxtopics/tc409

Yes and no. Each transaction (sale less cost) stands on its own. Loss transactions may offset gain transactions, provided that there is an overall net gain from all transactions.

In other words, Uncle Sam is your partner when you make money, but not when you lose.
gatorcpa

Dan S · Jan 25, 2021

Nobel Prize
Unless you paid cash it’s pretty easy to track purchases. You most likely have email communication and you either transferred ni ey or wrote a check or... used PayPal. So you can find the records. I went through this a couple of years ago because I sold a lot of stuff, not just watches hut camera equipment. At the end my accountant did work the original purchase against the resale and it was pretty much a wash ( camera equipment depreciates)

I'm glad you were able to track your purchases, but it would certainly not be "easy" for me. Firstly, I have bought several high value watches for cash. I have also made a number of trades for high value watches, both in person and at a distance. For the trades done remotely, I would have to find forum messages or emails, which might or might not have been deleted. The same would apparently be true for watches that I bought using bank transfer, Transferwise, PP F&F, etc. We are talking about many dozens of watches. OF messages are saved, but on other forums, I frequently delete messages because my mailbox fills up. Finding emails from 15 years ago might also not be easy. For the in-person trades, obviously I have no records at all. I do keep a spreadsheet for my own records, so I can certainly put a reasonable value on what I "paid" for each watch, but documenting them would not be easy in many cases.

Moreover, some watches have been upgraded and/or restored, at significant cost. I suppose that cost might be included in the cost basis, although routine maintenance (like a watch service) would not. Good luck separating all that out. Then you also need to document the eBay fees, which have traditionally been billed separately at the end of each month. It's a lot of trouble to go through just to show that you took a small loss.

Another kick in the junk for US based PayPal users

Rasputin

gatorcpa

Donn Chambers

Spacefruit

Redwes25

Tony C.

Evitzee

dougwhiz

CajunTiger

Nobel Prize

Nobel Prize

kkt

Dries

cristos71

Nobel Prize

asrnj77

cvalue13

Dan S

gatorcpa

Dan S

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