eBay

b86fiero · ‎02-01-2018

One of my concerns during the roll out of this new in-house eBay Payment Processing in the latter part of this year is how IRS 1099 forms will be handled.

Paypal currently generates 1099's for sellers to use when filing federal taxes and provides that information to the IRS. Some states use this 1099 info for state income tax purposes. I believe the protocol for the 1099 through Paypal is $20,000 per year in sales or 2,000 transactions. If that is incorrect please feel free to provide the up to date amounts.

For those sellers who are drafted into the roll out later this year, how will IRS reporting and 1099 generation be handled for sales made during 2018 and reported on 2019 filing forms? Will some sellers receive reports from both Paypal and eBay the payment processor? Will those sellers have to basically do double bookwork to sort out selling price, sales tax collected, shipping costs, etc? Merge reports, update accounting processes.

Can some sellers conceivably have just under the IRS 1099 reportable amount pass through both Paypal and eBay Payment Processing and be left with no 1099's for filing purposes?

I believe most sellers are honest and would report all sales income as required but may have to spend more time compiling and documenting. I would hope no sellers think it's okay not to report income just because no 1099 is generated.

I am assuming eBay Payment Processing will be held to the same federal statutes as Paypal, Amazon, Etsy, etc. regarding the collection and disbursement of private funds and performing their fiduciary duties.

Currently Amazon and Etsy, as payment processors, are charging, collecting and remitting Washington state sales taxes to its taxing authority now, will eBay follow suit?

I believe eBay will have to based upon the Washington state legislation requiring such collection and remittance of sales taxes for any online sales to its residents. We all know Amazon does sell its own products but, as far as I know, Etsy does not. Yet Etsy is collecting and remitting this sales tax.

Similar legislation is drafted and being advanced in numerous state legislatures and is once again making its way to the US Supreme Court.

States have for years pushed for a national sales tax for online sales to help replace lost revenue due to business closings and relocation's. I believe it is just a matter of time before online sales are taxed in some manner. I also believe it will be much easier if the online payment processors do the collecting and remitting instead of us sellers trying to deal with annual sales tax forms and payments to the 5,500+ taxing authorities currently in the US.

I am sure there is a whole lot more to come as we integrate into eBay Payment Processing. For those familiar with the big A and Etsy systems this may be an easy step. For those who have made eBay their sole selling home it might be a bit stressful.

I understand eBay's need not to overwhelm the masses with too much obfuscated information at one time. The not so good will probably be doled out in bits and pieces as issues arise.

Not that it matters but I was employed by the Treasurer Of The State Of Ohio for years and involved in the legislative process for more years than that.

*eponymous* · ‎02-01-2018

Great questions.

$20,000 per year in sales or 2,000 transactions.

and

Life shrinks or expands in proportion to one’s courage. ~ Anais Nin

partial*eclipse · ‎02-01-2018

The thresholds of $20K and 200 transactions would apply to each of the two processors separately. So sellers might get one 1099-K, or two or none. But all of your income and expenses will go together for your 1040 (which would be Schedule C for most sellers).

thatsallfolks · ‎02-01-2018

wrote:
Great questions.

$20,000 per year in sales or 2,000 transactions.

and

$20k And 200 transactions, not 2,000.

A seller who uses more than one payment processor in a single year would obviously have to do the work of breaking out expenses, etc separately for each. That’s no different than a seller ho uses PayPal and a merchant account now.

b86fiero · ‎02-01-2018

Thanks to both of you for the correct Paypal transaction number amount.

As soon as I posted I remembered that it was $20,000 AND 200 transactions.

Please excuse my ooops.

BJ

fern*wood · ‎02-01-2018

wrote:

I would hope no sellers think it's okay not to report income just because no 1099 is generated.

I think many do this now so it will probably continue.

muttlymob · ‎02-01-2018

Can some sellers conceivably have just under the IRS 1099 reportable amount pass through both Paypal and eBay Payment Processing and be left with no 1099's for filing purposes?

I believe most sellers are honest and would report all sales income as required but may have to spend more time compiling and documenting. I would hope no sellers think it's okay not to report income just because no 1099 is generated.

I would hope no sellers think it's okay not to report income just because they don't meet PayPal's standards for generating a 1099.

$20,000 and 200 sales per year are only the standards for PayPal to generate a 1099, not the IRS limit for reporting income. If a seller sells less than that they still must report the income.

b86fiero · ‎02-02-2018

You are correct.

The IRS considers income from all sources as income to be reported on your federal tax forms. That includes so-called hobby sellers, income from garage sales, flea markets, craft sales, etc. While most people get away with not reporting small amounts earned from the occasional sale, the advent of so many online sellers not reporting income earned is getting more scrutiny. If you're selling more than a handful of used items from your own household monthly you may be considered to be operating a business. The common misconception that under $500 is exempt is false. Contact the IRS for the truth about selling income and reporting requirements.

States have different laws about income tax or no income tax to be levied. So do individual taxing authorities such as cities, counties, townships, overlay districts, etc. Many have regulations about operating a business from a residential home.

Very easy for the big online venues to send your selling income info to the IRS. Just because you don't receive a 1099-K from Paypal does not mean that money passing through your Paypal account is invisible.

It is always in a seller's best interest to know which laws apply to them and keep it legal.

pollmille-5 · ‎02-02-2018

I take it that the number of the 1099 is total money brought in, including shipping. Is this right? Do we have to go through each month and subtract the shipping ammount from the total?

partial*eclipse · ‎02-02-2018

The 1099-K will include all payments received.

Your total expenditures for postage will be entered as a deductible expense on Schedule C in Section II, line 18.

scottiepup · ‎11-21-2018

softersilk · ‎11-21-2018

@pollmille-5 wrote:
I take it that the number of the 1099 is total money brought in, including shipping. Is this right? Do we have to go through each month and subtract the shipping ammount from the total?

Everyone who sells online should be familiar with this: https://www.irs.gov/businesses/small-businesses-self-employed/online-auction-sellers-tax-center

YES, the amount you receive = "Gross Sales".

And no, you don't need to itemize shipping for every single item, but you do subtract the total cost of postage i one line.

So much is deductible. Do it right and it's not painful. Besides, the "cost" of filing honestly is always going to less than getting caught by the IRS later and having them go back and calculate what should have been paid - plus penalties.

You buy something for $10 and sell it for $20 and $5 postage. You don't pay tax on the $25. $25 is your gross sale. But you deduct your $10 purchase price, the $4.99 postage, the eBay listing fee and FVF, the Paypal fee, your shipping materials.. could be more, too depending on the business. Folks who are going out to garage sales every week to source can deduct their mileage if they keep logs.

These business/tax basics are the same whether eBay is Paypal is your payment processor. BTW, keep separate checking, Paypal and credit card accounts to make it easier.