SCHEDULE C - What if I have no Receipt for something I bought ?

[moeyt2010]

Everything I sell are things I initially bought for myself.

But time passes, I buy new electronic stuff, I grow out of clothes, tire of movies, so I like to eBay them and make some money back (NOTE: I DID NOT SAY PROFIT).

Anyhow, I've been told to keep everything on the up-and-up, I need to file a Schedule C.

My Gross Sales were $962.27 on eBay in 2017, but PayPal is sending out 1099-K to everyone in my state that grosses over $600, so I'm done for. I'm quitting eBay as soon as I can.

I know I lost money on everything, but I sure did not save the Receipt from a DVD I bought five years ago. I have a good idea how much I paid, but did I buy it at Walmart or Target ? I don't know.

Is the IRS going to assume I got everything for FREE ?

[wamegun]

So here is what MA says: 

Where amounts paid in settlement in a calendar year to a payee meet the Massachusetts threshold but not the IRS threshold, a TPSO should submit Form 1099-K to the Department directly using MassTaxConnect (MTC).

https://www.mass.gov/service-details/new-massachusetts-reporting-requirements-for-third-party-settle...

I am checking on Vermont.

[wamegun]

Oh you are in MA! SO I wont look for Vermont. THe link I provided will take you to the MA department of revenue/taxation/ or whatever vairant they use and take you through the proces of getting that 1099 filed. It directly mentions to use them when you are not reporting on the fed and only need to report on the state due to their requirements.

[ozarkjoe]

Regarding the 20K limit, was it not necessary for me to file Schedule C all of these past years?  I have never gone over 9K in sales in one year.  I was under the assumption that PP automatically reported your data to the IRS.   

Regarding the missing receipt of the OP, I suppose that if asked about the purchase price you could document the market price from a catalog or online seller.

[wamegun]

So, our lovely friend the IRS, says we need to report all income. In theory PayPal is not sending them our info. I say in theory cause, well it is the IRS and they get what they want. 

This is on PayPals website:

nternal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.

PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year. In order to help you understand these information reporting obligations, we have prepared the following FAQs. After reviewing the following FAQs, we recommend you consult your tax advisor to asses tax implications of Form 1099-K reporting.

If you have been reporting a Schedule C in years past, I personally wouldn't stop now. When you submit a Schedule C, they do ask if you no longer operate the businesssold the business. (A least the programs I am familiar with.) The IRS may question why you stopped filing a Schedule C all of a sudden. As a receiver of their love letters in the past, they are not very fun to deal with.

[wamegun]

Maybe calling MA would clarify this. The IRS also has this resource for online selling. It says selling of personal property at a loss is not reportable. SInce MA is starting this new requirement, I think they would best beable to answer.

https://www.irs.gov/businesses/small-businesses-self-employed/tax-tips-for-online-auction-sellers

[7606dennis]

If you are attempting to earn income through your selling activities on eBay, you are operating a business and will therefor be required to pay income tax on that revenue.  If you are a sole proprietor you will probably be required to file a Schedule C as part of your Income Tax Return to account for the income (Profit or Loss) from that business.  I would recommend discussing the matter with your tax professional.

Frankly, you should have been keeping accurate books from the time you opened your business.  Gross income minus your expenses gives you the net income that you will need for completing the Schedule C which you will need to complete your 1040 Income Tax Return.  

[7606dennis]

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wrote:

1099's are federal, I don't see how any state can require it.  However, I've no proof of that, just an opinion.  I'm in MA too, but I am way over the threshhold and would receive one no matter where I am. 

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I believe that states that have a state income tax can and do require copies of 1099's.  In fact, I believe that some cities and other municipalities that have an income tax can require copies as well.  I would advise consulting one's tax professional.

[katzenfreund]

Same here. I received a 1099 K and had no clue this was coming. I only sold personal items at a loss, especially considering ebay fees and paypal fees. I did not keep any receipts and now am royally srewed.

[luckythewinner]

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wrote:

My Gross Sales were $962.27 on eBay in 2017, but PayPal is sending out 1099-K to everyone in my state that grosses over $600, so I'm done for.

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"Done for"? That's a bit melodramatic.  

You got a 1099 for $962. If you are a typical eBay seller then  10% of that went to eBay fees which you can easily document - so now you're down to $866. Also, 2.9% of that probably went to PayPal fees, which you can also easily document - now you're down to $838.  And about 10% likely went to postage costs, which you can also easily document. Now you're down to $741. 

So now you've got to account for about $741 as additional income. But remember, the effective tax rate the average American pays to the IRS ia under 15%. So if you are an average taxpayer, then in the worst case the additional taxes you will pay to the IRS will be about $111. 

But be aware there is no law that says you have to provide a receipt to the IRS to document an expense. What you have to do provide sufficient supporting information to the revenue agent in the unlikely case that you get audited. 

[ted_200]

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wrote:

Regarding the 20K limit, was it not necessary for me to file Schedule C all of these past years?  I have never gone over 9K in sales in one year.  I was under the assumption that PP automatically reported your data to the IRS.   

Regarding the missing receipt of the OP, I suppose that if asked about the purchase price you could document the market price from a catalog or online seller.

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The law says you have to report income and pay taxes, whether you got a 1099 for it or not.

In OP's case, he's not required to report the income to the Feds, as explained in my earlier post.  He's not engaged in any Schedule C activity, and online yard sale is specifically exempt from reporting.

[ted_200]

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wrote:

Here's the email that was received. I got an email later saying I got this in error. But Massachusetts and Vermont have lovely new reporting requirements for tax year 17.

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Since PayPal is specifically saying they are NOT reporting that 1099K income to the IRS, I'd ignore it on my federal tax forms.   Caveat:  That's for a "online garage sale" situation only.  If one were actually making money (engaged in a Sch. C activity), I'd be sure to report it to the Feds too.  

You'll have to figure out what to do with it for the MA tax return though, I've never filed a MA return and have no idea what sort of crazy provisions might be in MA tax code. 

[ted_200]

If you are attempting to earn income through your selling activities on eBay, you are operating a business and will therefor be required to pay income tax on that revenue.

He clearly states he's selling personal household goods, at prices below what he paid for them.  He's not running a business, he's not a "hobby seller" either. 

If you have been reporting a Schedule C in years past, I personally wouldn't stop now. When you submit a Schedule C, they do ask if you no longer operate the businesssold the business. (A least the programs I am familiar with.) The IRS may question why you stopped filing a Schedule C all of a sudden. As a receiver of their love letters in the past, they are not very fun to deal with.

If the person is under "online garage sale" provisions (not making any money, not trying to make any money, selling personal household goods), they might want to file amended returns for past years and reclaim any taxes they paid (although if they did it right, they shouldn't have paid any, since they sold personal items at a loss).  Alternatively, if they filed Sch. C and showed a loss, and used that loss to offset any income on their 1040, then that's a problem, because you can't run (claim) a business for the purpose of creating losses to reduce taxes.   

I would recommend discussing the matter with your tax professional.

I certainly agree with that.  But many "tax professionals" I've dealt with know less about this area of the tax code than I do, the OP may have to bring them up to speed a bit to get the correct answer... sad but true...

[itsroo2]

Massachusetts and Vermont have a lower threshold than the rest of the country. $600.