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Any CPA monkeys? 1099-k and paypal income question

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
Unfortunately I was unemployed for a chunk of the year and I used that time to clean house and make some money to pay bills. I essentially had a giant yard sale on the internet, old laptop, ipod, clothes, and a ton of bike parts. Because of this, I crossed the 20k threshold for Paypal and was asked for my tax ID number and with be getting a 1099-k and this income is going to be reported to the IRS. Do I need to report it on my tax returns if it was all personal items? Most of the stuff I sold I don't have any receipts for, most of it is over 1 year old and some of the stuff is 5-6 years old.

I know some of you are going to say take it to a Tax preparer, that's the next step, I'm trying to avoid paying 300 dollars first.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,519
7,066
Colorado
It might be worth having a CPA do your taxes. Because you aren't working as a reseller, you can probably argue that.
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
You sold 20k worth of personal items? You have too much sh*t.
Exactly. I was a bike part hoarder, I blame working in shops over the last 6-7 years and having a ton of friends that are in the industry. I still have about 4-5k in stuff I need to get rid of, I have about 30-40 tires sitting behind me right now. If I truly cleaned house and got rid of all of my riding and other hobby stuff I would probably have another 10-12k. I'm trying a minimalist approach in 2013.
 

bizutch

Delicate CUSTOM flower
Dec 11, 2001
15,928
24
Over your shoulder whispering
Exactly. I was a bike part hoarder, I blame working in shops over the last 6-7 years and having a ton of friends that are in the industry. I still have about 4-5k in stuff I need to get rid of, I have about 30-40 tires sitting behind me right now. If I truly cleaned house and got rid of all of my riding and other hobby stuff I would probably have another 10-12k. I'm trying a minimalist approach in 2013.
That or the Clemson DH podiums were shorted $15k in prizes. ;)
 

Beef Supreme

Turbo Monkey
Oct 29, 2010
1,434
73
Hiding from the stupid
I am not a CPA but I have some experience with 1099s and the IRS. You cant ignore it. They will basically revise your return and send it back with a tax bill. On one occasion, I tried to ignore one. Part of the payment was to cover expenses and I screwed myself out of several hundred dollars. I could have filed an amended return but that would have cost me as well. On another occasion, the IRS added a 1099 that I had properly claimed. That was was taken care of with a phone call so they are not completely unreasonable. At any rate, you are probably going to need some help.
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
That or the Clemson DH podiums were shorted $15k in prizes. ;)
That would be a lot of Price Point water bottles and random discontinued Maxxis tires.

I am not a CPA but I have some experience with 1099s and the IRS. You cant ignore it. They will basically revise your return and send it back with a tax bill. On one occasion, I tried to ignore one. Part of the payment was to cover expenses and I screwed myself out of several hundred dollars. I could have filed an amended return but that would have cost me as well. On another occasion, the IRS added a 1099 that I had properly claimed. That was was taken care of with a phone call so they are not completely unreasonable. At any rate, you are probably going to need some help.
Yea, I think I'm gonna have to bite the bullet and have someone prepare them to mitigate any liability of filing them incorrectly. If I actually treated the 1099 as if it were from a small business I would probably have 10k in losses since almost everything was sold for less than I paid.

My argument with someone from the IRS would be that I never filed for unemployment or used one cent of government assistance while I was unemployed. Instead I cleaned out my house, sold a ton of stuff I wasn't using, paid all of my bills and contributed to the economy. But that would probably fall on deaf ears...
 

Sandwich

Pig my fish!
Staff member
May 23, 2002
21,031
5,921
borcester rhymes
That doesn't matter to them, LOL.

I just went through something similar. Short answer: hire a CPA to do your taxes. It cost me $180 to have a local pro go through an old tax bill.

Long answer: I was paid on a 1099-misc by an employer trying to shirk the gubmint. I was young and therefore used turbotax to file. TT screwed it up and sure enough O'BAMA came after me and all my entitlements and asked for the tax that I should have owed...two years later the IRS sides with me that I should have been paid as an employee (and am therefore not responsible for the $1600 they originally said I owed). I went to this CPA lady and I should be getting back $1500 from John Boner for my troubles, and the burden should fall back on the douchey employer who laid me off twice.

With the risk of paying taxes that you don't owe, don't mess around...
 

bizutch

Delicate CUSTOM flower
Dec 11, 2001
15,928
24
Over your shoulder whispering
You can open up a State Farm deposit account and get Turbo Tax for free.

Or you can go on H & R Block's website, use their Deluxe version to do your entire return online without a software download up until the point you have to pay for it and if you like the answer submit it and pay the $40 for it. If not, just back out of the website and pay nothing.

H & R Block will provide you with worry free audit support.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,519
7,066
Colorado
You can open up a State Farm deposit account and get Turbo Tax for free.

Or you can go on H & R Block's website, use their Deluxe version to do your entire return online without a software download up until the point you have to pay for it and if you like the answer submit it and pay the $40 for it. If not, just back out of the website and pay nothing.

H & R Block will provide you with worry free audit support.
I've got a great CPA in Cali, if you want a reference. I think I paid him $200 last year to do mine. That is two states, moving, job searching expenses, small business, etc. I'm a big fan, as he got me back $6k when I was expecting to pay that amount.
 

JustMtnB44

Monkey
Sep 13, 2006
840
113
Pittsburgh, PA
When did PayPal ask for that information? I am curious because I must have done close to $20k in transactions via PayPal last year as well, but I haven't heard anything yet.
 

dan-o

Turbo Monkey
Jun 30, 2004
6,499
2,805
I'd take a bullet for my accountant and suggest hiring a local CPA who will be around in the future.
Once the IRS starts bird-dogging you FML will become your daily mantra, even if you're in the right.

Re: the 1099 questions, i've found the IRS staff pretty helpful when I've called them regarding that type of thing. Try them first and then bounce that info off your freshly hired CPA.
 

kazlx

Patches O'Houlihan
Aug 7, 2006
6,985
1,957
Tustin, CA
Never had personal experience with IRS, but from seeing friends go through it...a couple hundy for a CPA would be a bargain. I have mine prepared every year because I don't want to deal with it. I could probably do it myself, but I pay $300 and don't have to worry (as much) about something biting me in the a$$.

Plus, the first year I bought my house, I did them on TT just for fun to compare (without actually paying to submit) and the stuff I missed would have easily cost me a couple grand out of my pocket. So my tax guy easily secured my business for the foreseeable future.
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
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stevew

resident influencer
Sep 21, 2001
40,494
9,524
never give the IRS a reason to bend you over...once bent...they prefer you stay that way.
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
My dad has a CPA on retainer for his company, he's seeing if she'll cut me a break and do mine this year for a reduced fee since my dad gives so much business to her. Going to stop by her office tomorrow.
 

Full Trucker

Frikkin newb!!!
Feb 26, 2003
10,484
7,530
Exit, CO
I looked in here because I have started using PayPal as well as Square to accept payments from clients. Some things I noticed...

It's 20k or 200 transactions, but thank you for telling me everything I already know though.
Ahem...

PayPal said:
What is Internal Revenue Code (IRC) Section 6050W?
Under the legislation, we'll report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:

  • US$20,000 in gross payment volume from sales of goods or services in a single year
  • 200 separate payments for goods or services in the same year
IRC Section 6050W applies to all payment processors, including PayPal. Our goal is to help PayPal sellers understand and comply with the new requirements.
Also:

PayPal said:
Will I be affected by the 2011 tax changes if I only meet one of the thresholds?
No. A seller has to exceed both IRS thresholds ($20,000 in gross payment volume and 200 separate payments) in a calendar year before a Form 1099-K is required. We may require that you provide a tax identification number before you reach these thresholds however we will only report your payments if you exceed both thresholds.
mattmatt86, PayPal may not be reporting you to the IRS if you didn't meet both of the above requirements, but still have asked for your tax ID. And to echo what others have said: get a CPA and pay the dough. I started doing that years ago (after having not filed taxes in years) and have been astounded at the money I have saved by paying a little bit to someone to do it right. Good on ya for getting in touch with someone.




*emphasis mine
 
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I am a cpa as is Heidi.

The issue is: did you really make any money on it? IE all those parts you sold, did you buy them and sell them for less than you paid or were they free and you made money on them?

Like it or not, sounds like this was your business (according to the IRS).


Yea, I think I'm gonna have to bite the bullet and have someone prepare them to mitigate any liability of filing them incorrectly. If I actually treated the 1099 as if it were from a small business I would probably have 10k in losses since almost everything was sold for less than I paid.

My argument with someone from the IRS would be that I never filed for unemployment or used one cent of government assistance while I was unemployed. Instead I cleaned out my house, sold a ton of stuff I wasn't using, paid all of my bills and contributed to the economy. But that would probably fall on deaf ears...
It sounds like you answered your own question..........

And yeah, you're right, they don't care about what you did or did not do with unemployment.
 
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You can open up a State Farm deposit account and get Turbo Tax for free.

Or you can go on H & R Block's website, use their Deluxe version to do your entire return online without a software download up until the point you have to pay for it and if you like the answer submit it and pay the $40 for it. If not, just back out of the website and pay nothing.

H & R Block will provide you with worry free audit support.
Worst advice ever.
 

boogenman

Turbo Monkey
Nov 3, 2004
4,290
973
BUFFALO
A large chunk of my income is me tax free all year and arrives on a 1099 come January. It sucks teh balls big time! Prepare to owe 40-45% of that $20k
 
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stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,519
7,066
Colorado
It's not like a bonus. It's taxed as income, and if that's his sole income for the year, he shouldn't be too bad off. It's the 15% (iirc) for fica that's a bitch,
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
Ahhhhh so I might not get the 1099k. When I got the email from PayPal it said they needed my tax I'd for 20k or 200 transactions. I assumed if they ask for my tax ID they would be reporting to the IRS.

And as far as paying taxes on the 20k, I would only need to pay taxes on the profit. So if I went thought every item I sold and figured out how much it originally cost me then how much I sold it for less the PayPal fees and shipping (business expenses) I would most certainly be in the red. I might have made a few bucks here and there but the hundreds less I sold a couple frames for would trump any small profits I made.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,519
7,066
Colorado
Ahhhhh so I might not get the 1099k. When I got the email from PayPal it said they needed my tax I'd for 20k or 200 transactions. I assumed if they ask for my tax ID they would be reporting to the IRS.

And as far as paying taxes on the 20k, I would only need to pay taxes on the profit. So if I went thought every item I sold and figured out how much it originally cost me then how much I sold it for less the PayPal fees and shipping (business expenses) I would most certainly be in the red. I might have made a few bucks here and there but the hundreds less I sold a couple frames for would trump any small profits I made.
Reading comprehension > Mattmatt86
 
And as far as paying taxes on the 20k, I would only need to pay taxes on the profit. So if I went thought every item I sold and figured out how much it originally cost me then how much I sold it for less the PayPal fees and shipping (business expenses) I would most certainly be in the red. I might have made a few bucks here and there but the hundreds less I sold a couple frames for would trump any small profits I made.
:thumb:

If you do get the 1099, just report the gross and the expenses so the IRS can match it.
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
Dude, check out this link. You just had be taking a huge crap in the pants.

https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

You have to be over $20,000 AND 200 different payments. If you meet both of these, then I am afraid you are screwed.
Reading comprehension > Mattmatt86
It's not reading comprehension as much as it is not looking at that link that was posted. I was going by the email I directly received from PayPal which said 20k or 200.
 

kazlx

Patches O'Houlihan
Aug 7, 2006
6,985
1,957
Tustin, CA
Odd, my buddy got a statement posted to his account that also said was sent to the IRS, but it was only for $3300. I sold a couple grand worth of stuff last year through eBay, but didn't get anything.
 
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boostindoubles

Nacho Libre
Mar 16, 2004
7,839
6,145
Yakistan
off topic -

Speaking of CPA's, a trail building non-profit I am involved with is on the verge of obtaining a 501c3. If this happens we are going to start fun-raising money for tools and land, etc...

Are there CPA's who are 501c3 specific? Can any CPA tackle a 501c3 organization? Is it better to look for CPA A vs CPA B? We are newbies to this and have no clue what to look for or expect! :shocked:
 
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mantispf2000

Turbo Monkey
Aug 9, 2001
1,793
243
Nevada, 2 hours from Mammoth
I'd take a bullet for my accountant and suggest hiring a local CPA who will be around in the future.
Once the IRS starts bird-dogging you FML will become your daily mantra, even if you're in the right.

Re: the 1099 questions, i've found the IRS staff pretty helpful when I've called them regarding that type of thing. Try them first and then bounce that info off your freshly hired CPA.

Agreed about bullet, oh wait, my CPA is my dad, based in Cali (if you need another referral). As for calling the IRS, I've done that several times, and they do offer good support. They'll ask a few questions, and of course the answer is based on the info you provide. It does help you get started on the right track....
 

mattmatt86

Turbo Monkey
Feb 9, 2005
5,347
10
Bleedmore, Murderland
Update.

Filed yesterday, I used my Dad's CPA and she was very knowledgeable and helpful, I'll most likely use her from now on.

When I brought up the Paypal issue she said that the IRS doesn't have the capabilities/man-power/time to accurately keep track of or investigate individual transaction on paypal, so they are really only concerned with totals; gross sales for the year, COGS, profit etc. I got a printout of my calender year transactions for 2012, I had about 16k in sales and almost 14k in purchases, so we used these numbers for the Sales and COGS figures, we also used my paypal fees and shipping fees to lower the AGI. By the end of it I only showed about a 100 dollar profit so I payed about 25 dollars in taxes. I was already getting about a 2k refund so paying 25 bucks wasn't a big deal.