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The Magic Cafe Forum Index » » Tricky business » » Update on PayPay 1099-K for Virginia (2 Likes) Printer Friendly Version

magringo
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Hi all ... a few weeks ago I wrote on this thread about PayPal sending out 1099-Ks for people who use their service to get paid for selling items. The federal government wants people who earn $20,000 or more to report that in their tax filing. For Virginia, Maryland and a few other states - it's $600(or more)in sales that triggers a 1099-K.... I wrote to my VA state senator and here's the response I got today.

"After you sent the first email to our office, we reached out to the Department of Taxation for assistance. After a follow-up email, they informed us that their policy department is working on a response, as many constituents have contacted their respective legislators about this same issue. We were assured they would send us a response as soon as their policy staff had one."

Evidently it's being looked at... so stay tuned.
rowdymagi5
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Virginia
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I hope they do something about this. Most of us buy magic and if it does not fit our style or if we rotate it out of our show, then we sell it at a considerable loss. Not selling to make a profit, yet we will be paying double taxes on it.
magringo
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Absolutely... I can understand the federal limit ... $20,000 and more triggers a 1099-K - but at that volume.... you're a business... Most of us are not that...
Harry Murphy
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It is not about knowing profit it is about knowing and reporting income. You can keep books showing what you paid for an item and what you received for that time on resale. If you show a loss it may end up a tax deduction. Otherwise you have raw income. The reason most small sellers ask for a check over PayPal.
The artist formally known as Mumblepeas!
JSBLOOM
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Last year, we had over $200,000 ( other business, not magic) go through paypal no 1099-K, since it was not more than 200 transactions, but I claimed it anyways.....
This year we get a 1099-K
It is true, unless broken down, all they will see is PROFIT.
Luckily, there is an easy report you can run to do this
Payner44
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Quote:
On Feb 4, 2021, Harry Murphy wrote:
It is not about knowing profit it is about knowing and reporting income. You can keep books showing what you paid for an item and what you received for that time on resale. If you show a loss it may end up a tax deduction. Otherwise you have raw income. The reason most small sellers ask for a check over PayPal.


If I sell something for the same amount I bought it for, that is NOT income! Without a profit, there is NO income!!
"I'm not arguing with you, I'm just explaining why you're wrong!"
Harry Murphy
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No one cares (but you) what you paid for a product you sold. PayPal is only reporting the money made through them. they are required to do so. It is up to you to convince the IRS that you made no profit or indeed had a loss from any sale.

On paper you sell and item for $1.00 and that $1.00 is indeed income to the casual observer. it cost you $1.25 to make that $1.00 so in your books (in your mind) you have a loss. Until you demonstrate that loss to IRS you have income. No one has any knowledge of how much you paid for an item but you.

Keep good books.
The artist formally known as Mumblepeas!
inigmntoya
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Where on your 1040 (or other form) would you declare the cost of items sold?
If you're self employed you already have a schedule C where it could be listed as a business expense, but if not, then where?
Harry Murphy
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I'm a schedule C kinda guy.
The artist formally known as Mumblepeas!
rowdymagi5
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Virginia
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Over a 12 month period, it is really easy to sell over $600.00 worth of magic. Actually, one Magic Wagon item could bring that. Now, those of us who sell a lot but had NO idea that the IRS was going to start including that as income, are in for a big financial headache. What are they gonna do next, raise taxes on businesses? Oh yea, they are going to do that!
davidpaul$
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I know living in Pennsylvania, if I BUY something from out of state, I am to report and pay Pa. sales tax. Wouldn't PayPal need a tax I.D EIN or SS # ?? Just wondering. With the millions of transactions that go through PayPal that are not business related (that don't supply the EIN or SS) how could they report non-official business transactions. What about "Friending money" is that taxable?
What about PayPal fees. Is that tax deductible? So many questions. Sounds to complicated to me.
If you can't help worrying, remember worrying can't help you!
TomBoleware
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Quote:
On Feb 4, 2021, inigmntoya wrote:
Where on your 1040 (or other form) would you declare the cost of items sold?
If you're self employed you already have a schedule C where it could be listed as a business expense, but if not, then where?


Selling items is considered doing business, so you can report any business-related income on a schedule c or C-EZ with your 1040.

Tom
"Entrepreneurs are willing to work 80 hours a week to avoid working 40 hours a week"--Lori Greiner

www.tomboleware.com
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