Paypal and the IRS

[tongueriver]

Paypal wants (and got) my SSN so they can process a 1099K regarding the few knives that I have sold. I do not have a business, and the aggregate of knives that I have sold are a net loss, although I have picked up a buck or two on a few knives. I have recently been interested in downsizing my collection, so I guess this is where this nonsense is coming from. I want to know if I am going to be required to give the IRS even more money than I already do. I do not have good records of the knives I have sold. I find the IRS info confusing.
https://www.irs.gov/businesses/understa ... orm-1099-k

[herbva]

Paypal wants (and got) my SSN so they can process a 1099K regarding the few knives that I have sold. I do not have a business, and the aggregate of knives that I have sold are a net loss, although I have picked up a buck or two on a few knives. I have recently been interested in downsizing my collection, so I guess this is where this nonsense is coming from. I want to know if I am going to be required to give the IRS even more money than I already do. I do not have good records of the knives I have sold. I find the IRS info confusing.
https://www.irs.gov/businesses/understa ... orm-1099-k

Cal, I had the same unpleasant surprise last year. Paypal 1099'd me because unbeknown to me, my home state of Virginia lowered the threshold to $600 and Paypal said they to issue a 1099 because of this. I was pretty upset because I worked pretty hard at staying under the federal threshold. It wasn't as bad as I thought it would be at first. I just had to fill out a Schedule C (Profit or Loss From Business). I had to go back and figure out how much I spent on knives and supplies and then net that against my receipts, which paypal nicely reported for me. All of the knifemaking supply vendors I deal with had an online record of all the purchases I made, and I was able to piece together a record of all my knife and knife related purchases. I'm keeping much better records this year!

[tongueriver]

I don't have a business. I just wanted to downsize my collection. I still don't know where I am at with this. Paypal did mention a $600 figure.

[Railsplitter]

I’m concerned about this too. I did a mass sell off in January and February and I know I sold more than $600 worth of knives.

I guess I’ll be more selective in what I buy from here on out. I’ll have to make sure that I’ll keep the knife before I make the decision to buy it. That’s not going to be easy for me as I’ve become accustomed to the buy, sell, and trade aspect of knife collecting.

[tongueriver]

Do these transactions bypass the IRS requirements using 'friends and family'?

[just bob]

Pretty sure if you're selling on Ebay this bypasses pay pal and goes directly into the bank account you specified when opening an account. Adyen processes the transaction and not pay pal. The only income from knives that will go through pay pal are knives you sell on this site or others like it. Unsure about friends/ family, but that is a more riskier undertaking.

[tongueriver]

Interesting. I have not sold on Ebay for maybe 3 years. Maybe I need to bite the bullet but I don't like selling there. Keep those cards and letters coming; I am sure there is more info on this subject out there! And thanks for what is appearing!

[just bob]

BTW. I agree with Herb and was sweating this but it is no big deal. I just look at the 1099 and see how much I have sold and then take a % as profit. I have never taken a loss. For instance if I have sold $15K for the year I claim about $1500 in profit. I have never kept any sort of record and never intend on it. If I were in 6 figures I would look at things much differently. I have friend whose sister is an overseer in the IRS Lexington office. It was arranged for me to speak with her and she told me the IRS would red flag Ebay businesses that take a huge loss and try to offset a tax bill from a primary job. For instance claim a $10K loss on ebay just to offset the tax bill you owe. They are looking for this type of activity. She told me with my income level and the small dollar amount I was selling so long as I claimed a profit no one would look twice. I have been on Ebay I think since 1998 and have never had an issue at all. This may change but so far so good. I'm getting more and more disgusted with ebay and may stop selling altogether on there soon. The sad fact is if they keep " improving " the system I may not be able to figure out how to sell on ebay in the near future.

[Meridian_Mike]

Pretty sure if you're selling on Ebay this bypasses pay pal and goes directly into the bank account you specified when opening an account. Adyen processes the transaction and not pay pal. The only income from knives that will go through pay pal are knives you sell on this site or others like it. Unsure about friends/ family, but that is a more riskier undertaking.

The IRS is on my last nerve ANYWAY.... BUT.... SURELY they won't try to tax $$ you receive through the friends / family avenue of paypal......

That just don't make sense by ANY stretch of the imagination.

That is one reason I try to send money to MY FRIENDS and FAMILY here.....

[tongueriver]

Send me some, Mike!

[jerryd6818]

I've got it knocked. I just don't sell. I hate selling.

[kennedy knives]

You can always just take checks or money orders

[bestgear]

Receiving or sending money to family and friends falls under the category of personal payment. Only the commercial transaction and any income that you make through the PayPal account are potentially taxable.

[1fartsmella]

Cal,
Check: Venmo
and Check: Zelle
these are two ways to send and receive money without triggering a taxable event.
All the details are on their websites.
Yes, its free.

[just bob]

Just reading through this. Copy & Paste from their web site.

Does PayPal report to the IRS on Friends and Family?
In theory, only commercial transactions will be reported to the IRS, so this shouldn’t happen with Friends and Family operations. However, as a payments processor, PayPal monitors all of its transactions in order to comply with government financial regulations, and it has the ability to determine if users are taking advantage of the PPFF option to circumvent required tax reporting obligations.

For buying goods and services, PayPal reports transactions from sellers who receive more than $20,000 in gross payments and more than 200 separate payments within the tax year⁴.


Is it possible to get scammed with PayPal Friends and Family?

Yes. As with any other payment processor, or anything else dealing with sending or receiving money, it is always important to be hyper-vigilant with the details when using PPFF. The service is safe, but there might be someone willing to try to take advantage of others. Learning to recognize and avoid them will make transactions with PayPal safer and more pleasant.

Sellers might ask consumers to choose the personal payment option when making a purchase online. This is because of the absence of fees, as well as the possibility of circumventing tax reporting guidelines. Apart from being in violation of PayPal’s Terms and Conditions, in such cases the seller might try to scam buyers too.

Are those transactions protected?

PPFF transactions aren’t inherently protected by PayPal (the option has to be chosen when sending money), therefore buyers do not have any recourse if something goes wrong when purchasing something using the PPFF option
PayPal’s Purchase Protection keeps most financial information private and prevents it from being shared with sellers. All transactions are encrypted and monitored, and are covered under this protection, regardless of the origin and destination of the goods being purchased. This protection is not a basic component of PPFF transactions, which means that unless you are sending to a verified and legitimate friend or family member, you won’t be covered if something goes wrong. PPFF is meant to be used for the user’s family and friends – not the family and friends of other PayPal users. There can be cases where a user makes contact with someone and asks that they use the PPFF option and request an item being purchased be sent to “a friend” at a different address as a gift. However, the buyer can submit a claim to PayPal saying that the item was never received and a refund can be provided.

[herbva]

Just reading through this. Copy & Paste from their web site.

Does PayPal report to the IRS on Friends and Family?
In theory, only commercial transactions will be reported to the IRS, so this shouldn’t happen with Friends and Family operations. However, as a payments processor, PayPal monitors all of its transactions in order to comply with government financial regulations, and it has the ability to determine if users are taking advantage of the PPFF option to circumvent required tax reporting obligations.

For buying goods and services, PayPal reports transactions from sellers who receive more than $20,000 in gross payments and more than 200 separate payments within the tax year⁴.


Is it possible to get scammed with PayPal Friends and Family?

Yes. As with any other payment processor, or anything else dealing with sending or receiving money, it is always important to be hyper-vigilant with the details when using PPFF. The service is safe, but there might be someone willing to try to take advantage of others. Learning to recognize and avoid them will make transactions with PayPal safer and more pleasant.

Sellers might ask consumers to choose the personal payment option when making a purchase online. This is because of the absence of fees, as well as the possibility of circumventing tax reporting guidelines. Apart from being in violation of PayPal’s Terms and Conditions, in such cases the seller might try to scam buyers too.

Are those transactions protected?

PPFF transactions aren’t inherently protected by PayPal (the option has to be chosen when sending money), therefore buyers do not have any recourse if something goes wrong when purchasing something using the PPFF option
PayPal’s Purchase Protection keeps most financial information private and prevents it from being shared with sellers. All transactions are encrypted and monitored, and are covered under this protection, regardless of the origin and destination of the goods being purchased. This protection is not a basic component of PPFF transactions, which means that unless you are sending to a verified and legitimate friend or family member, you won’t be covered if something goes wrong. PPFF is meant to be used for the user’s family and friends – not the family and friends of other PayPal users. There can be cases where a user makes contact with someone and asks that they use the PPFF option and request an item being purchased be sent to “a friend” at a different address as a gift. However, the buyer can submit a claim to PayPal saying that the item was never received and a refund can be provided.

Bob, what learned from my very unpleasant conversation with Paypal last year is the $20,000/200 transactions rule (federal guideline) only applies if your state doesn't have a lower threshold. Paypal told me that since Virginia lowered their threshold to $600 in receipts beginning in 2020, they would issue a 1099 if my receipts through paypal were $600 or higher for the year. However, I didn't get into a discussion with them about the "friends and family" question.