Payout and 1099-K
I recently sold an item that barely put me over the $600 threshold for a 1099-K reporting to the IRS. When I say "barely" I mean just that: A few dollars. I was blindsided by this, because I thought that, even with my most recent sale, I was below the threshold. Apparently, the gross amount of a transaction, including sales tax, is tallied in the total. I have been notified by eBay that I must provide my social security number so that they can proceed with the payout on this recent transaction.
I would like to have the payout deferred until Jan. 1, 2024. That way, there should be no need for a 1099-K reporting, as I will be below the $600.00 threshold for the 2023 calendar year. Is this possible? I don't plan on selling anything on eBay for the rest of the year. EBay may freeze my account altogether. But at this point, I am inclined to let them do that. I realize that the 1099-K filing requirement is an IRS issue and that eBay is opposed to it. My gripe with eBay is not that, but rather its lack of accessibility and customer support.
What repercussions am I looking at if I let eBay hold onto my money until 2024?
Unavailable member
·3 years agoYou can delay the payout by switching to spendable funds - then you can take the payout whenever you want. But, eBay will still issue a 1099 for the 2023 revenue.
kensgiftshop
·3 years agoIt doesn't matter if you could defer the payment, you already earned that money and it'll be reported this year.
ms.rodriguez*
·3 years agoGive ebay your social security number and ID if they ask. It's the law. The alternative is to get the funds from your state after ebay forwards it to them. Ebay cannot keep this money. And then you will have to crack your head getting from the state. You will have to give them your social security number and guess what , you still have a 1099.
Even if you cancel the sale and refund the money, you still get the 1099 form. I will be extra nice and tell you that you still declare the 600 as income received and the deduction will be 600 since you refunded. So your earned income is 0. No taxes due. So give ebay the social security number and ID. I hope that you set up your Managed payments account with a bank account too.
Finally, almost everyone here sells with different IDS. We have all given ebay the Social security # and we continue to sell. Goodluck.
And of course, you can NOT delay your tax obligation. How much freaking taxes can you owe by earning an additional 600.oo. We are talking 600 dollars not millions of dollars in sales.
ms.rodriguez*
·3 years agoYou sold an item for 600.oo . Your fees were at least 13.25% of the 600.00 PLUS 30 cents. You deduct the cost of the shipping. That # is 79.80 is deducted from the 600.oo. That # is 520.20. Let's say that shipping is 20.oo dollars. 520.20- 20.oo= 500.20 . How much did the item cost? Let's say that it cost 200.oo . You deduct that. So profit is 300.20. You can deduct a few dollars for the box, packing materials, etc. So let's say 3 for the that. 300.20- 3.00= 297.20. This would be the profit and this # gets added to your other income.
In reality you might have other costs too. A portion of your internet for example.
It's not so bad and to stop selling before reaching 600.oo is stupid. That is like getting a job and you quit before you hit 600.oo. If you need money , you keep working and pay your taxes. If you need to unload merchandise and raise cash, you keep listing on ebay and pay taxes if there is earned income.
In my above example, I said let's put the item cost at 200.oo . But let's say that was a 1,000 dollar gold watch bought years ago, there would be NO profit since 600- 1000 is -400 (negative 400). NO earned income in this example means no taxes paid.
It's foolish to not list here for this reason. Foolish.
soh.maryl
·3 years agoThis is nitpicking, but did you notice you deducted the shipping cost twice?
fab_finds4u
·3 years agoWhy fight it? You're right.
Quit trying to dodge taxes. All your sales are supposed to be reported whether eBay rats you out or not.
classicalguy
OP3 years agoNot trying to dodge taxes. The 1099-K reported earnings could put me in a different income bracket and that will create complications. Additionally, I believe that eBay might be faulty in its accounting, and if I do receive a 1099-K form from the IRS, I will contest it.
monroe67
·3 years ago"The 1099-K reported earnings could put me in a different income bracket and that will create complications.
Additionally, I believe that eBay might be faulty in its accounting, and if I do receive a 1099-K form from the IRS, I will contest it."
Yes, of course, it is possible that your earnings from eBay sales might put you into a different income bracket. But that fact alone -- "You are now in a new tax bracket!" -- I don't think that should create any severe complications. If you have been consulting the Tax Tables (in the instruction booklet(s) for the 1040 forms), I think you'd just want to find your taxable income in those charts, and they will tell you what your tax liability is. But of course, nobody here knows what your other sources of income are and whether they are taxable or not. And we don't need to know. (If anybody wants to know, they're just being nosy, and you don't have to answer them.) It is possible that your other sources of income are super complicated.
If being in a higher tax bracket, as a result of selling things on eBay, would result in severe disruption to your lifestyle and a hardship to your finances, then selling on eBay might not be for you.
Here's one possibility to soften that blow, though: IF you are also working a "regular" job, from which estimated income taxes are withheld from every paycheck, perhaps you could increase your withholding from those regular paychecks -- again, IF that would not create a financial hardship for you. Then, when you work on your tax return(s) after the beginning of the year, that withheld money can be applied toward any taxes you might owe due to your eBay sales.
IF eBay needs to send you a 1099-K for your 2023 sales, you won't receive it for another six months, roughly.
If you do find it necessary to contest any 1099-K that eBay might send to you, I'm kind of hoping you will come back to this community forum and tell us how that worked out for you.
agemelee
·3 years agoI don’t think you understand how our tax system works. If you are in a bracket it isn’t backlogged, we have a progressive tax system:
Meaning:
There are seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
If you make $44,000 the entire 44,000 isnt taxed at 12%
the first 11,000 is taxed at 10% (1,100)
the other 33,000 is then taxed at 12%.
***
if you make 95,325
the first 11,000 is taxed at 10%, 1100
the next 33,725 is taxed at 12% 4047
the next 50649 is taxed at 22%
Unavailable member
·3 years agoGoing into a new bracket doesn’t mean you pay more taxes under that milestone amount. Going into a new bracket does not lower your net after taxes. Ever.
lacemaker3
·3 years ago@classicalguy,
You can't defer the payouts, and it wouldn't help anyway.
The rules for 1099-K processing, require that the 1099-K be issued based on the payments that are processed on your behalf, into your managed payments account. It's not based on the payouts that are sent to your checking account, it's how much was processed into the managed payments account that belongs to you.
However, you're mistaken on one thing, which may rescue(?) you.
Sales tax is not included in the total for the 1099-K threshold, because sales tax is not processed into your managed payments account, it is sent to the buyers' states. It was not processed on your behalf, but because eBay is required to collect it for the states.
So you may still be below the threshold, BUT, you still have to provide your SSN in order to receive the next payout. The 1099-K rules require that, if eBay doesn't have your SSN, then they have to withhold a percentage of the payout for all your payouts, and eBay hasn't done that. So they have to have your SSN BEFORE you reach the threshold. The eBay documentation is misleading on that point.
classicalguy
OP3 years agoThank you for this detailed explanation.
stainlessenginecovers
·3 years agoThere is no 'deferring' payment.
But, you won't receive the payment and eventually won't be able to 'list' anything else until you give up what they need.
As stated by @mtgraves7984 - if you don't follow through, the money will wind up in your States 'unclaimed $$ which usually takes upwards of 2 years to 'appear' with/by your state.
Lastly, you will NOT get a 1099 for the Taxes included, so if the 'purchase plus shipping' still exceeds, just means you will need to 'report' the $600 income and can then write off the original purchase price, shipping and fee costs, which could mean you would owe $0.00 in taxes.
classicalguy
OP3 years agoThanks all for responding. I will update my account accordingly. Not happy about it. But why fight it?
lacemaker3
·3 years ago@classicalguy,
With such a low sales volume, it would appear that you are not selling on eBay as a business.
It's not a major difficulty to report the 1099-K income on your personal tax return.
https://www.irs.gov/businesses/understanding-your-form-1099-k#do
kensgiftshop
·3 years agoLooks like you've been selling awhile, so you've been reporting your income like you're required to do, right?
mtgraves7984
·3 years agoI would like to have the payout deferred until Jan. 1, 2024.
@classicalguy
Admittedly, I've never seen this 'want'... but I don't think you can defer payments. Quite possibly, if you don't give the info, maybe the payment will eventually make it to your state's Unclaimed Property Dept. Anyone??? 🤔