1099-K

[benn46]

Beginning in the year 2022, ebay will issue 1099-k forms to sellers who accumulate more than 600.00 worth of sales for the year 2022.  So here's my question:

If I list an item on ebay that sells for $1,000.00 and is paid for by the buyer on December 26, 2021, but is delivered and received in January of 2022 so that the funds from the sale are not deposited into my account until January of 2022, -- is that sale charged to my 2021 sales or to my 2022 sales?

No guesses, no matter how educated or reasonable.  I'm looking for the right answer.

Thanks in advance.

[tsme35]

Was a huge mess last year, no better this year. When I was on PP, I did quarterly estimations for my CPA and could do a year to date of income that matched the 1099. NOW with MP I do guesstimations for quarterly and yearly taxes until I get MP 1099, then my CPA files my taxes, you also have to figure it refunds and returns(the last half of Dec.), not only pay out date.  I have my own records of business expenses and inventory so not worried about that. The other headache if audited would be explaining the extra fees claim that ebay charged me for taxes collected yet no services provided.  I've ran sales reports on the 1st of a month and again on the 10th, they never match.

 Better have deep pockets if you want a CPA to investigate, mine charges $100 an hour, they'd have to have access to your ebay account, run all the sales reports, refunds, fee's and what nots plus figure out why ebay isn't following the IRS rules.

 I ran a year to date sales report last year, I was off by less then $300, sales report compare to ebay's 1099, so if they want to spend a ton of money to audit me then actually have to pay because I had over reported, but then again its the government.

[genv]

@benn46 

A SALE isn't a SALE until you are PAID.

UNTIL you are PAID, it's an ORDER.

In your example, you state 'paid December 26'.

That means it is a REPORTABLE SALE in 2021.

Delivery date is irrelevant.

[mam98031]

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@dbfolks166mt wrote:

     A lot of this will depend on how you keep and manage your books. For example if you use an accrual accounting method, the only one approved under generally accepted accounting principles (GAAP), you recognize and report revenues when earned and expenses when incurred, regardless of the effect on cash. So in your example you would recognize the revenue as earned on 26 December regardless of when you receive the cash. The same would apply to anything you purchased on, lets say 28 December, but did not actually pay for on your CC statement until January. 

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There are two methods of accounting.  Cash Accounting and Accrual Accounting.  Either is fine, you just aren't suppose to bounce back and forth.  Pick one and stick with it.

You are correct that Cash Accounting is not supported by GAAP, but it is by IRS, so it is fine to report in this manner and long as you are consistent.

https://www.irs.gov/pub/irs-pdf/p538.pdf

[divwido]

That's even something they ask you on schedule C, so make sure you know which way you've chosen.

[mam98031]

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@genv wrote:

@benn46 

A SALE isn't a SALE until you are PAID.

UNTIL you are PAID, it's an ORDER.

In your example, you state 'paid December 26'.

That means it is a REPORTABLE SALE in 2021.

Delivery date is irrelevant.

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In Ebay you are considered paid the moment the buyer submits payment.  The same was true in PP.  

Accessing your money is a completely different subject.

[genv]

@mam98031 

Until Payment is made, by the Buyer, it is merely an "Order".

[mam98031]

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@genv wrote:

@mam98031 

Until Payment is made, by the Buyer, it is merely an "Order".

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True, but then it would never show up on a 1099K from Ebay if it weren't paid for, it would be in your items awaiting payment.

But once the buyer pays it moves to Paid and available for shipment.  The money in the MP account belongs to the seller and never Ebay.  

I know for those sellers that have only ever sold on Ebay this is all a very different kind of thing.  But for those of us that sell on multiple sites, we can see the difference.  Ebay is the ONLY site that is going by Payout date.  

There is nothing in the IRS rules that requires the money to be in your bank account before it should be included on your 1099K or on it's way in the banking system.

@genv 

[mankind65]

The IRS looking back 10 yrs i think might be a bit far fetched cause anyone can say it was there own personal property they already pd taxes on. You can use something and sell it after you use it and not have an issue according to my accountant. Dont think the IRS will get into all of that from small time sellers, otherwise ebay could lose thousands, upon thousands of sellers.

[mam98031]

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@mankind65 wrote:

The IRS looking back 10 yrs i think might be a bit far fetched cause anyone can say it was there own personal property they already pd taxes on. You can use something and sell it after you use it and not have an issue according to my accountant. Dont think the IRS will get into all of that from small time sellers, otherwise ebay could lose thousands, upon thousands of sellers.

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Unlikely that the IRS would go back that far on anyone, I agree.

The IRS also has rules for sellers just selling stuff from around their house.  As long as they are ONLY selling their own used stuff.  Not stuff for friends or buying from second hand stores, garage sales, ect. and selling those used items.  IRS has consideration for the sellers in which you seem to be worried about.

Now that does NOT mean they don't need to report their income on their Federal tax return.  They might need to do that, but it doesn't mean they will be paying additional taxes due to the income.  

Each seller needs to LEARN the IRS rules regarding this.  And make sure you track all your expenses too.  Don't assume you don't need to tell IRS about internet income just because you don't get a 1099K, nothing could be further from the truth.

Do your homework.  And if it gets too overwhelming for you, seek the advice of a Tax Accountant that is EXPERIENCED in internet sales.