The dreaded tax question...

[ace_corl]

Sorry if this is going to rehash old information, but I'm only finding bits and pieces of the information I'm looking for...

I'm going to start selling again, after not selling for a number of years. In the past, it was before PayPal was required and I accepted Postal Money Orders. At the time, people didn't seem to mind and I received just about 100% positive feedback on hundreds of items sold.

Now, I'm going to be opening a PayPal account for selling and I've been investigating the issue of taxes. In the past, it wasn't really an issue - I sold DVDs, Laser Discs, various toys and collectibles. They were all my personal possessions that I no longer wanted. None were purchased specifically for resale and, with the exception of a handful of Inforcom computer games, every item I sold was a loss compared to what I originally bought them for. For example, a collection of collector plates that cost me $280 originally sold for $120.

I anticipate this being the case this time around as well. I have a large collection of Star Wars, Star Trek and other collectibles I'll be selling - Toys, action figures, plates, etc. And I'm fairly sure that none of them are going to sell for more than what I originally paid for them and they have been my personal possessions for years.

I will not be selling more than $20,000 a year - This is going to take a while and I can't do a lot at a time. I'm in California, so as far as I can tell, I won't be receiving a 1099k form, nor will I be selling anything for more than what I originally paid for it. It would take some work, but I do have a huge file folder of almost every reciept for everthing I'll be selling that I've been holding on to for many years now. I'm an individual liquidating a collection that I've had for years. Not a business.

In the past, it didn't seem to be an issue when I sold similar items, but now with a PayPal account, what should I be concerned about with taxes? Everything, I'm sure, is going to be at a loss and I won't sell enough to receive a 1099k, but do I still have to report it and sort thru all of the receipts and worry about claiming anything on my taxes?

[vintagecraze50]

If you are selling something and it comes up as income of any sort it would be wise to file. 

[nobody*s_perfect]

Here's the IRS basic Help page for "online auction sellers", which says, "If you paid more for the items than you sell them for, the sales are not reportable."

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Tips-for-Online-Auction-Sellers

[myboardid]

First, just so you know, eBay will be taking over the tax reporting duties sometime in the next year or so, as they transition away from having Paypal as their sole payment processor. 

That said, the 1099 reporting perameters start at $20,000 OR 200 sales per year, so you might fall under that category.   In any case, you may very well be required to fill out the IRS Schedule C forms in order to prove that you are not making a profit on your items, so be prepared with the information you will need.  

Good luck on your sales, you may find that at least some of your collectibles will actually bring you a profit.   

[fern*wood]

I'm pretty sure it is $20,000.  and 200 sales---not or.

[nobody*s_perfect]

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@myboardid wrote:

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 ... the 1099 reporting perameters start at $20,000 OR 200 sales per year ....   

Sellers who get a 1099-K should definitely file a Schedule C, because otherwise the IRS will assume that all of the income is taxable. The Schedule C will allow the seller to deduct expenses such as postage, fees, and the original cost of the items.  

In some states, the threshold for requiring a 1099-K is as low as $600.  But  in most states, the federal thresholds still apply, and those are $20K AND 200 transactions. Sellers who pass just one of those thresholds will not get a 1099-K.

https://www.paypal.com/us/webapps/mpp/irs6050w

[myboardid]

Sorry, you guys are correct, I was wrong.  I apologise.  Not sure where I got that idea.  I'm so far over both that I don't even think about it.  I file a schedule C anyway because I have several businesses, eBay is just another one of them. 

[the*dog*ate*my*tablecloth]

For 2017 two States started requiring a 1099 for anything over $600 in sales. They didn't provide much warning. Most sellers didn't know until it showed up in their mail.

Report. Hopefully you have good records of what you paid.

[flipper2flipper]

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@myboardid wrote:

First, just so you know, eBay will be taking over the tax reporting duties sometime in the next year or so, as they transition away from having Paypal as their sole payment processor. 

That said, the 1099 reporting perameters start at $20,000 OR 200 sales per year, so you might fall under that category.   In any case, you may very well be required to fill out the IRS Schedule C forms in order to prove that you are not making a profit on your items, so be prepared with the information you will need.  

Good luck on your sales, you may find that at least some of your collectibles will actually bring you a profit.   

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@myboardi8d:

The Paypal reporting threshold that you indicated above is NOT correct.

The actual Paypal reporting threshold is:

"PayPal will track the payment volume of your account(s) to check whether your payment volume exceeds both of these levels in a calendar year:

• $20,000 USD in gross payment volume from sales of goods or services in a single calendar year
• 200 payments for goods or services in the same year* "

*Except in Vermont and Massachusetts where the threshold is lower irrespective of the number of transactions.

If you cross the IRS thresholds in a given calendar year, PayPal will send Form 1099K to you and the IRS for that year early in the following year.

SOURCE: https://www.paypal.com/us/smarthelp/article/how-does-paypal-report-my-sales-to-the-irs-will-i-receiv...

flipper

[nobody*s_perfect]

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@flipper2flipper That was acknowledged by @myboardid in post #7.

[flipper2flipper]

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@nobody*s_perfect wrote:

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@flipper2flipper That was acknowledged by @myboardid in post #7.

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@nobody's perfect

Sorry about that, I did not see that correction acknowledgement before I replied.

flipper

[luckythewinner]

OP,

If you get a 1099K that reports your gross receipts, you need to account for it on your tax return. That does not mean you have to pay taxes on your gross receipts - you just have to explain them. And if you have receipts and can show a loss on every item, that would be very staightforward.

That aside ...

Business vs. hobby: what the IRS really cares about is whether you behave like a business,  intend to make a profit, acquire items for the purpose of reselling them, or actually make a profit: 

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

But remember that even if you are doing this as a hobby and not as a business, if you make a profit then it is generally the "sale of an appreciated asset" and there still could be tax implications (capital gains).

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

[p7050]

Dont forget about the new online sales tax law that requires sellers to pay tax in other states if they sell over 200 items or 10,000 dollars, I have noticed some states are now are dropping the sales to 100 items this is a good site to go to AvaTax it tells you all you need to know about all of the new laws and also Taxjar I dont know if this is true but i read some states are contacting ebay and wanting all of the sellers names and addresses which amazon has already done

[the*dog*ate*my*tablecloth]

Dropping the level to 100 sales only will not pass the Supreme Court requirements. I'd be surprised if the 200 sales requirement alone will meet the requirements. It burdens far too many small sellers.

[ace_corl]

Thanks for the responses and the information. I appreciate it. 

I think i have a better understanding, but I just have a few more questions. 

As I understand it, the term ‘income’ would refer to any amount that I receive from a sale over the amount that I originally paid for the item..? If so, I honestly don’t think I’m going to have any income to report, as I don’t think anything I sell is going to sell for more than what I paid for it. I can certainly pull out the receipts and keep them with a copy of the auction just in case. At least for items that I purchased in a store. Items purchased at collectible and toy shows from vendors, I would not have receipts for and there’s nothing I can do about that. 

As I read thru the posted information from various sites, it strikes me that the first step in determining a hobby from a business is having sales of over $20,000 and over 200 individual sales in a year. If I don’t meet that first criteria, which I absolutely will not, then I’m not considered a business. If I won’t receive a 1099k, because I won’t pass that threshold, and there’s no income to report, then I can’t see that I have anything to report. I mean, all I would have to report is a loss on my auctions. Is this correct?