Venmo/Paypal reporting changes.

[unchaotic]

I tried searching for this in the forums with no luck so I'm sorry if this is already being discussed.

Apparently Venmo/Paypal/Zelle are all going to have to report any accounts that have over $600/year payed to them commercially. The article makes it sound like the only way to avoid this distinction is to use Friends and Family. As a buyer that needed purchase protection to get money back last summer this sounds like it could become an issue for the community. I'm sure plenty of sellers on here have already racked up more than that in sales this year.

So am I reading it wrong or is this going to be an issue for quite a few people on here?

https://www.nbcnews.com/news/venmo-paypal-zelle-must-report-600-transactions-irs-rcna11260

 

[Big Smelly fish]

Yeah , they have to find ways to pay for all the spending

 

[mfinn]

In an explanatory document on the new tax changes, the IRS said these changes also apply to people who sell items on internet auction sites like eBay and people who "have a holiday craft business"

so long as they accept credit card payments through these apps.


I think maybe this last line is key.

 

[Beau_B]

Reporting to the IRS, indeed. Which means when applicable, sales tax needs to be paid on goods, and income tax on services.

Taxes that would have been required to be paid historically, but have been largely overlooked.

Same as any online retailer now collecting state taxes because individuals were not paying.

This isn’t a comment on whether I agree with the policy… that’s a different can of worms.

 

[Eagle_Steve]

This does suck. I just feel for the person who is moving, sells their 1200 dollar couch for 800 that they bought with money that already had income tax taken out on it and then paid sales tax on it. Now it is considered income from selling it and then they have to pay taxes on it again.

I guess one will need to keep all of their receipts for all items they purchase, if they sell it for less than purchased, they can then claim it as a loss.

Shouldn't have to be this way, but to be a devils advocate, there are a ton of people selling a ton of things for profit that do not pay sales tax, or income tax. So, in a way, I see it.

Either point of view has issues. Just really sucks.

Guess I will do like I always do and just do cash locally.

 

[unchaotic]

This does suck. I just feel for the person who is moving, sells their 1200 dollar couch for 800 that they bought with money that already had income tax taken out on it and then paid sales tax on it. Now it is considered income from selling it and then they have to pay taxes on it again.

Well I would assume that with the couch example that would be an in-person transaction. You could still do it with Friends and Family since that's the equivalent of using cash.

But I also wonder if they'll be required to monitor accounts with large amounts of Friends and Family transactions. I know a dog breeder that takes payments that way ... super shady IMO.

 

[unchaotic]

In an explanatory document on the new tax changes, the IRS said these changes also apply to people who sell items on internet auction sites like eBay and people who "have a holiday craft business"

so long as they accept credit card payments through these apps.


I think maybe this last line is key.

This is also from that site, sounds like as long as you use these services they don't care about the original "form" of the money.

Effective for returns for calendar years beginning in 2022:
If you accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of the payments made to you through the use of a payment card during the calendar year. Further, if you accept payments from a third-party settlement organization, you will receive a Form 1099-K from that organization only if the aggregate amount of payments for goods and services exceeds $600 during the calendar year.

 

[a.t.t.r]

I tried searching for this in the forums with no luck so I'm sorry if this is already being discussed.

Apparently Venmo/Paypal/Zelle are all going to have to report any accounts that have over $600/year payed to them commercially. The article makes it sound like the only way to avoid this distinction is to use Friends and Family. As a buyer that needed purchase protection to get money back last summer this sounds like it could become an issue for the community. I'm sure plenty of sellers on here have already racked up more than that in sales this year.

So am I reading it wrong or is this going to be an issue for quite a few people on here?

https://www.nbcnews.com/news/venmo-paypal-zelle-must-report-600-transactions-irs-rcna11260

Oh no. People selling stuff need to keep track of cost of goods sold and file taxes on income.
While this might be annoying for hobbyist I think you underestimate the number of businesses who operate without paying taxes. (Or having proper licenses or insurance but that’s another story).

 

[CollectOyster04]

This is a big part on how we pay to build back America. If you're trying to sell for a profit, there are taxes associated as such. A $600 threshold seems a bit ridiculous, but thank people who think they're smarter than us for coming up with that number.
More vigilance will have to be given especially if more people ask to be paid via friends and family and give this as an excuse. Cheaters are going to cheat and it will open up a possibility for purchasers to get taken with no recourse by obliging the requests.
I think we'd all be surprised on how much money is not collected from unpaid tax obligations. Not just from selling under the table, but all of the self employed 1099 workers who don't ever file income taxes. That's a rampant problem imo in the construction trades. Many companies prefer paying on a 1099 structure to avoid payroll taxes and workers compensation insurance leaving the burden on the workers. A lot of these workers(self employed) cash those checks and never think or care about paying taxes due on those wages (especially when seeing that bill). Smart ones get creative with write offs to help offset.
I've had more than one person, balk at the proposed pay because of money "lost" to payroll taxes. Then they have a deer in headlights look when you explain that no matter what, those things need to be paid by someone.
Big brother makes it extremely difficult and expensive to run a business legitimately. This is why so many "go under the table". Now big brother is finding ways to peek under said table for better or worse. This is what happens when the masses believe(and vote as such) the government knows better than an individual. But that's a topic for another day. Just understand, the government never ever gives anything away for "free". Ever.

 

[Eagle_Steve]

Well I would assume that with the couch example that would be an in-person transaction. You could still do it with Friends and Family since that's the equivalent of using cash.

But I also wonder if they'll be required to monitor accounts with large amounts of Friends and Family transactions. I know a dog breeder that takes payments that way ... super shady IMO.

Not always. Some people like to do things not friends and family via paypal, as that is what they want to do. So if someone wants to sell a couch and that is the only way, they will.

ALthough couch may have been a bad example. Lets say someone selling their apex online for 60% of what they paid. Then it is not goin to be done by firends and family for buyer protection, but the seller is still taking a loss.

Maybe the above is a better fit than couch lol. Either way, would suck to pay taxes on something I paid income tax on the itme I bought and sales tax on that same item, just to pay all the taxes all over again. I get the sales tax part, but income tax on an item bought and then sold at loss would suck.

 

[unchaotic]

Oh no. People selling stuff need to keep track of cost of goods sold and file taxes on income.
While this might be annoying for hobbyist I think you underestimate the number of businesses who operate without paying taxes. (Or having proper licenses or insurance but that’s another story).

No, I 100% get what you're saying, in another comment I even referenced a shady dog breeder I know of that is obviosly trying to avoid Paypal seller fees and possibly reported income. But the $600 limit is really low. I live in Minot, North Dakota so my odds of selling a used piece of reefing equipment locally is not good. So even though I'm fairly new at this I still had several hundred in sales on our Marketplace this year.

I guess if you want to do a reef tear-down you should do it in December to split the sales between two years, lol.

 

[unchaotic]

@revhtree I've never used the Stripe payment system so I'm not sure how that works nor how it may be affected by this.

 

[Eagle_Steve]

No, I 100% get what you're saying, in another comment I even referenced a shady dog breeder I know of that is obviosly trying to avoid Paypal seller fees and possibly reported income. But the $600 limit is really low. I live in Minot, North Dakota so my odds of selling a used piece of reefing equipment locally is not good. So even though I'm fairly new at this I still had several hundred in sales on our Marketplace this year.

I guess if you want to do a reef tear-down you should do it in December to split the sales between two years, lol.

Or keep all of the receipts and then you can claim it as a loss, provided depreciation has not take too much off of the value. This may require that you itemize or have to file another form, but being as you have to file a 1099-k, what is another form lol.

ANd it is kind of a catch 22. There are a ton of people not paying taxes that should and it makes the burden on the actual tax payers more. But, there should be a better way to do this. I could think of a 100 better ways that would not take much effort from any selling/buying platform or the seller.

 

[WVNed]

Soon everyone will have to get rectal implants for 100% compliance with all rules.

 

[a.t.t.r]

No, I 100% get what you're saying, in another comment I even referenced a shady dog breeder I know of that is obviosly trying to avoid Paypal seller fees and possibly reported income. But the $600 limit is really low. I live in Minot, North Dakota so my odds of selling a used piece of reefing equipment locally is not good. So even though I'm fairly new at this I still had several hundred in sales on our Marketplace this year.

I guess if you want to do a reef tear-down you should do it in December to split the sales between two years, lol.

They are reporting income not profit. If you sell an $800 piece of equipment for $600. You have $600 income and $800 cost. You pay taxes on profit not income for these types of things.
In all reality you could also just leave it off your taxes as well. 1099 is to let them know money is being moved. The irs isn’t stupid and knows people sell used things for no profit all the time. What they are looking for is a pattern.

 

[Eagle_Steve]

Soon everyone will have to get rectal implants for 100% compliance with all rules.

You dont have one already? Man you do not know what you are missing!!!!!

 

[Eagle_Steve]

They are reporting income not profit. If you sell an $800 piece of equipment for $600. You have $600 income and $800 cost. You pay taxes on profit not income for these types of things.
In all reality you could also just leave it off your taxes as well. 1099 is to let them know money is being moved. The irs isn’t stupid and knows people sell used things for no profit all the time. What they are looking for is a pattern.

They are, but as we know, the IRS is not made up of the most competent people. Also, in order to show profit or loss, one must have the original invoice for the item on hand, if audited. Some keep records like that and some do not.

Either way, it could do damage to people who do not deserve it, but it can get people who avoid paying taxes to pay them. So as stated before, like everything in regards to taxes, there is always a catch 22.

 

[WVNed]

You dont have one already? Man you do not know what you are missing!!!!!

I removed it with pliers.

What the government is counting on is stupidity and a failure of record retention to prove costs. In the past it was simply the cost of tracking small sales was more than the possible gain from taxing them. Perhaps computers have changed that. But I doubt it once staff is hired.

 

[Eagle_Steve]

I removed it with pliers.

What the government is counting on is stupidity and a failure of record retention to prove costs. In the past it was simply the cost of tracking small sales was more than the possible gain from taxing them. Perhaps computers have changed that. But I doubt it once staff is hired.

I agree. I just see it being a headache for the average Joe. Or causing a ton of confusion when a 1099 is received by someone. I have been audited and it sucked. Did not result in anything but my time and the IRS time being wasted, as I keep solid records and everything lines up, but for the average person to get nailed over selling stereo equipment, an Apex or whatever, as they got tired of it and they do not have the original receipt to back up that they are taking a loss sucks.

Hopefully, this will do more good than bad, but who knows and only time will tell.

 

[WVNed]

Hopefully, this will do more good than bad, but who knows and only time will tell.

LOL
There used to be a lot of people that knew and these things didn't happen. It appears several generations of public education have fixed that though.
Unless you have a windfall or are extremely skilled, very few things, even crafted things are sold for a profit once you adequately report your time involved.