mam98031 • Volunteer Community Member • Buyer/Seller since 1999
ShipScript has been an eBay Community volunteer since 2003, specializing in HTML, CSS, Scripts, Photos, Active Content, Technical Solutions, and online Seller Tools.
There was a wonderful Podcast earlier today on the subject of 1099Ks. I would encourage sellers to take the time to go and listen to it or read the transcript, whichever is best for you. It is worth the time. Even if you think that you have a handle on the subject, it might just clarify something for you.
There was just a few things I'd like to clarify that come up in the Podcast.
There was discussion of what a SSN, TIN and EIN are. EIN is for Corporations and/or LLC. SSN & TIN is for individuals and sole proprietorships. A TIN is NOT exactly like an SSN. It is another number you can apply for from the IRS in order for you to help protect giving out your SSN. You can apply for the use of a TIN.
Throughout the Podcast Manish refers to Sales as to what the dollar figure reported on the 1099Ks and it is NOT sales. As many of us know, if we have a sale, sometimes the buyer simply doesn't ever pay. These non paid sales do NOT ever appear on a 1099K. 1099K's are reporting TOTAL MONEY received.
The $$ represented on a 1099K by Ebay or any other money processor is for how much MONEY was received into your account BEFORE any type of deduction to include refunds. 1099K represent your GROSS RECEIPTS before refunds of any kind for any reasons.
So in the Podcast, keep that in mind. Your 1099K is NOT reporting your Sales nor is it totally about your sales. It is all about the MONEY you received and was processed by the Money Processor, in this case Ebay.
This statement was made in the Podcast, while not wrong, I just thought a little more clarity was needed. "So you won't owe any taxes on something you sell for less than what you paid for it." This is specifically regarding those that sell only there personal stuff. I know for some that may have been crystal clear but others it may not have been and this is such an important point for MANY Casual Sellers.
"I'll add one final note on this subject of $600 threshold. It is calculated based on the date on which your item sold and not the date on which you received money in your account which may sometimes be different." First I don't think anyone is getting their money the same day a buyer pays, not in MP anyway. Second, the amount that appears as your Net Receipts on your Ebay 1099K is NOT based on your sale date / transaction date. That is incorrect. It is based on the Payout / Settlement date. The date MP releases your Payout to you. That is the date Ebay uses to calculate the Gross Receipts for each seller.
So this means if you are a seller that gets a Weekly Payout. In 2021 your last Payout was 12/28/21. So the remaining sales you had in 2021 will appear on your 2022 1099K.
In the Podcast they refer to the Ebay FAQs on the 1099K, here is the link.
https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html
Because I am in California, I find this state-website ambiguity most disturbing. Either eBay has reviewed the actual law and is ignoring the "typos" in the state, or else eBay has missed the mark on this one.
We've asked eBay for clarification of both missing 1099s, for those who do qualify, and this strange situation that is not listed on eBay pages. Staff says they are collecting names of those affected.
@mod-designs4u wrote:Thank you for your reply! The payment for the sale was made on 12-30-21 and the "Payout initiated, In progress and Funds sent" happened on 1-2-21. Are you saying that the "payout released" date is 1-2-21? According to eBay we're having to report late year sales according to "when" the funds were "initiated" into our bank accounts instead of when the sale actually happened. As I stated before the eBay financial statements don't include this 12-30-21 sale for my 2022 sales. Some eBay sellers who only use this sales platform want an easy way to correlate the annual 1099-K to their actual sales volume.
It goes by the DATE of the Payout. So yes your December 30, 2020 sale would be part of your 2021 1099K because the Payout was released January 2, 2021.
You are correct, for those sellers that get a Month financial statement that is based on the Calendar month, it would not appear on your 2021 Financial reports as this report goes by the date of the transaction.
My Monthly Financials have always been on a fiscal month, so they are useless to me and so many other sellers that got them this way. FINALLY Ebay is changing this and we will all be getting them based on the Calendar Month very soon. For this reason I've never compared the sales reported on the Monthly report to what was actual.
IDK if the Monthly financial reports by the transaction date or the date that the buyer pays. The two aren't always the same.
@shellistoys wrote:It seems that the amount appears higher because it isn't the amount you received in your payout. It's the original amount the buyer(s) paid BEFORE you paid for shipping and eBay fees.
For example - I sold an item for $200 with $29.61 shipping. The entire $229.61 is included in my 1099-K, even though I only received $168.50 from that item in my payout:
$229.61 (amount received from buyer)-$29.61 (shipping label purchased from eBay)
-$31.50 (ebay transaction fee paid out of my balance)
Cost of shipping, transaction fees, and original cost of the item are all things that can be deducted as business expenses on Schedule C when you do your taxes (I'm not a tax professional, but the IRS instructions are here https://www.irs.gov/pub/irs-pdf/i1040sc.pdf)
Yes that is correct, however the numbers on your 1099K are representing all the transactions that appear on your Payouts in the 2021 year. That doesn't mean that your numbers on your 1099K will match your Payout numbers. As you noted the numbers are the total amount of money you received BEFORE any kind of deduction is made which is why it is called Gross Receipts.
Your expenses are reported on Schedule C, to ultimately arrive at your taxable income from selling on Ebay.
Keep in mind you have MORE expenses to deduct that just your shipping charges and fees.
You may disagree with that being the reason that Ebay released 1099Ks to California sellers at a $600 threshold, but whatever reason there was they did it. Ebay has verified this and are looking into it. I don't know how important it is to find out why they did it.
But even though they did, it really should not be a big deal. Even money made on Ebay less than $600 is suppose to be reported on our Federal income tax reports.
@coolections wrote:@shellistoys wrote:Cost of shipping, transaction fees, and original cost of the item are all things that can be deducted as business expenses on Schedule C when you do your taxes
Are you registered as a business?
Please chime in for help.
What do you mean by "registered as a business"? That means different things to different people, so I'm just asking.
With that said, you can use the Schedule C if you are operating as a Sole proprietorship which doesn't necessarily require any special registration or paperwork to be filed with anyone. But you should be registered with your state.
@tealt wrote:
@shipscript wrote:Because I am in California, I find this state-website ambiguity most disturbing. Either eBay has reviewed the actual law and is ignoring the "typos" in the state, or else eBay has missed the mark on this one.
We've asked eBay for clarification of both missing 1099s, for those who do qualify, and this strange situation that is not listed on eBay pages. Staff says they are collecting names of those affected.
Thank you for posting this.
How do I get my name on the list of those who shouldn't (as far as I can tell) have gotten a 1099K until next year?
Why do you need to be on the list? What impact is the 1099K having on you?
@coolections wrote:
@mam98031 wrote:
Your expenses are reported on Schedule C, to ultimately arrive at your taxable income from selling on Ebay.
Keep in mind you have MORE expenses to deduct that just your shipping charges and fees.
Are you registered as a business?
Please chime in for help.
I am still confused as to what it takes to be able to deduct the cost you paid for an item. Waiting for chapeau-noir to chime in because the person continuously says you cannot deduct anything and must pay taxes on the full $120 sale as income.
The way I see it if true, a person selling an item they bought for $100 actually sells it for $120: (approximate number for conversation only)
They pay:
$21 federal income tax
$ 7 state income tax
$16 ebay fees
$44 payout
$120
- $ 44
$76 net meaning they lost $24 on their $100 investment.
If you CAN deduct the cost of your item by doing a business account why wouldn't every 3 million sellers not go for the business account instead of taking a loss on everything they sell ?
I think there is a misunderstanding as @chapeau-noir is far more experienced in this and offers great advice. So I think there is some miscommunication here.
If you are buyer stuff to sell on Ebay or in any other place. Your income is taxable and you CAN deduct your legit expenses using the Schedule C of your Federal tax return.
OMG you are in an 18% federal tax bracket?? OUCH!
I can't address your State income tax as most states don't have those, so sorry you are in a state that does, well unless you save by not having sales tax as that can sure add up to some serious saving.
More than that would go out of business because they would be able to just limit that to internet sellers. There are other ways to sell stuff.
You do NOT have to have a Business account on Ebay to be able to deduct your expenses from your sales on your Federal Tax Report.
@itiswhatitis wrote:What is wrong with ebay's MP processing the sales like this is that it goes against everything when it comes to the IRS and bookkeeping. The IRS enforces the rules of ..... you get to choose 1 method of accounting, and you must stick with it through your yearly taxes unless you get the IRS's permission to switch methods (which you must apply for, and it does not mean you will be granted it).
So then, unless you are huge business that also sells here on ebay, you are using the 'cash method' of accounting. If you are that huge business, you are using an accrual method. Ebay, if using their MP system instead of when the sale actually took place, is trying to force an accrual system on you, which is both a bad idea, and illegal. For someone such as myself that has been reporting all their ebay sales income forever using the cash method, ebay needs to do better because they are trying to force me into something that technically I have contracted between myself and the IRS.
Bottom line..... ebay's accounting system leaves far too muchh to be desired and they will have to make changes to it in order to make it legal.
No they aren't. You are trying to make it more complicated than it is. I too use Cash accounting too. It is just not that difficult to reconcile the 1099K because they use Payout dates.
All you have to do is reconcile your 1099K, you will NEVER have to claim that the total on your 1099 is your gross income you are claiming because that is NOT what is represented on your 1099, it is GROSS RECEIPTS which is different.
You don't like it that they go by Payout dates, the just adjust your worksheet. Meaning AFTER you balance your 1099K, then go back and take out any 2020 sales added into 2021 and add in the few days at the end of the year that wasn't represented in your 1099K number. So that you are completely on a calendar year.
You will be fine. You just keep your supporting worksheets for any audit that may happen in the future. As long as your numbers are reasonable, you'll be fine.
Don't over think it. Ebay is NOT trying to get you to change your accounting system. FYI Ebay is NOT the only site that does this. Amazon and Etsy do too, and probably others.
