1099

[jda06121]

I have never gotten a 1099 from eBay before and have done the paperwork for my taxes for sales manually. This year looks like I will get one. A couple of questions so I can start reconciling now in case I need to prepay some taxes in order not to get a penalty:

1. Will the 1099 include the sale amount and shipping without sales taxes?

2. Will I get a separate 1099 from MP and Paypal depending on when I was switched

over?

Thanks for the assist.....

[luckythewinner]

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@jda06121 wrote:

I have never gotten a 1099 from eBay before and have done the paperwork for my taxes for sales manually. This year looks like I will get one. A couple of questions so I can start reconciling now in case I need to prepay some taxes in order not to get a penalty:

1. Will the 1099 include the sale amount and shipping without sales taxes?

2. Will I get a separate 1099 from MP and Paypal depending on when I was switched

over?

Thanks for the assist.....

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1) see "What’s included in Form 1099-K" on this page: 

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

2) Payment processors are the entity required to report payments. So Managed Payments will send you a 1099 for payments that were processed by Managed Payments, and PayPal will send you a 1099 for payments that were processed by PayPal. 

[eleanor*rigby]

@jda06121 

Answers to both of your questions (and more) can be found by reading this eBay help page on the topic of 1099-Ks:

Form 1099-K 

Congrats on hitting 200 transactions and $20,000 in 2021!

[caldreamer]

All sales must be reported to IRS and State (sales tax board) whether you get a "1099 or not".   I don't know if you will get separate 1099 for both PayPal and EBAY.    Did your PayPal sales meet $$ threshold for 1099?   Always a good idea to keep "your own records" of all your expenses and every sale you made (so you know what to expect).

EBAY policy on 1099 says GROSS SALES (does NOT say whether "sales tax" is included).   If you have never done "business taxes" before I strongly urge you to get a CPA (they will make sure you get every legal business deduction).  

[redmodelt]

While I am not an expert, once you file federal taxes with a 1099, paying SSI may come into play and other federal business related taxes, because you might now be considered a business not hobbiest. So do some checking, and keep records of your items.

[eleanor*rigby]

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@caldreamer wrote:

EBAY policy on 1099 says GROSS SALES (does NOT say whether "sales tax" is included). 

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@caldreamer 

Just for future reference . . . from the page I linked in Message #3 above:

@jda06121 

Again, I urge you to read the page I linked in Message #3 in order to confirm that you're receiving the most reliable information on eBay's issuance of a 1099-K.

[katzrul15]

@jda06121 

A couple of questions so I can start reconciling now in case I need to prepay some taxes in order not to get a penalty

We pay quarterly to the IRS, but you can make a payment towards your anticipated 2021 taxes due in 2022 at any time in 2021.

Estimated Taxes | Internal Revenue Service (irs.gov)

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

• You had no tax liability for the prior year
• You were a U.S. citizen or resident for the whole year
• Your prior tax year covered a 12-month period

You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return.

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If you know you will receive the 1099 this year, remember the gross sales needed to be reported and are subject to potential taxation (federal and state) regardless of the 1099 criteria.

Good luck - a consult with a CPA which is usually not too salty for a small business will help you sort all this out.  Good that you are working to tackle it early.  Our CPA created a burden rate that we use for our sales each month to estimate the amount of tax that we will owe for the year.  It comes pretty close.  

[iart]

I'm not sure of the answer but you bring up an important point.

At a certain level, sellers are required to pay taxes in advance. Not allowed to wait until April.

We pay quarterly (an estimate). If we don't, we get fined.

[dbfolks166mt]

     You may or may not get a 1099 this year. If you exceed the current federal threshold of 200 transactions and $20,000 in 2021 then you will get one based on the change to the federal limits. If you are under that threshold during 2021 you may not get one based on the federal law but you may get one based on the state laws. A lot of states have passed their own laws pertaining to the 1099 threshold. I live in Virginia where the state threshold is $600 and 0 transactions. I did not convert to MP until January 2021 so I did not get a 1099 however I got several from other 3rd party financial processors, PayPal, Venmo..... and none of those were even close to exceeding the $20K, 600 transaction threshold but they did exceed the state one. This year I should get one from eBay, PayPal, Venmo and a couple of others. 

     The 1099 only shows the gross amount of the funding transfers. It does not show all of the deductions. There are several reports you can run that will give you every detail you want/need regarding your payments over a period of time which you can specify. The report needs to be cleaned up a bit since there is an excess of information but it should serve you well in getting to your net revenue. 

[kalyoth]

May want to look as it is below $20,000 now...

[nobody*s_perfect]

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@kalyoth wrote:

May want to look as it is below $20,000 now...

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As noted in one of the posts above, several states have already set thresholds far lower than $20K, mostly $600 or $1000. However, the OP is in Minnesota, which is not one of the states that have a lower threshold.

The federal threshold will be $600 starting in 2022.

[eleanor*rigby]

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@kalyoth wrote:

May want to look as it is below $20,000 now...

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@kalyoth 

That is correct; however, the change in this law will become effective in 2022 and will impact the January 2023 filings. The OP is asking about the current tax-year (2021).

You may want to look to confirm that my comment is correct. 

[dbfolks166mt]

     Lucky for the OP they are in Minnesota and hope they make it through the rest of 2021 without the state changing the law. Virginia changed theirs in October of 2020 and it became effective immediately. In some respects it helped me validate/verify the manual records I keep to make sure the numbers agreed.