PayPal and 1099

[JSK]

Starting this year, any transaction over 20k in a year, paypal will send a 1099 to IRS.

I wonder if you are trading gear few times a year and it would easily go over 20k, you would need to pay taxes on any money coming in? Even if you are not making profit?

Any thoughts on this? If you are a professional and making a living through photography (part time, full time or supplemental), it would make sense as you can write off your gear as capital investment but what about hobby folks? How would explain you sold 20k worth of equipment here and there, and taxation on this?

 

[stephengilbert]

Income from the sale of something is the selling price less its cost basis, i.e., what you paid for it. If you buy something for $10,000 and sell it for $12,000, your income on the sale would be $2000.

When you sell stocks or bonds, your broker files a 1099 listing what you sold, the sale date, and the selling price. Starting this year, they also have to list the purchase price.

 

[Don Libby]

Hobbyist can write off only to the extent that it covers your hobby income. Expenses that are more than income you made from your hobby are nondeductible personal losses.

Don't trust what I saw consult an accountant.

 

[stephengilbert]

I wasn't suggesting that losses could be written off, just that the sales price isn't what you look to to calculate income.

Also, according to the Paypal site:

What is Internal Revenue Code (IRC) Section 6050W?

"Under the new 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:

$20,000 USD in gross payment volume from sales of goods or services in a single year

200 payments for goods or services in the same year."

 

[Don Libby]

Stephen - Totally agree with your other post.

Regarding the other information - it appears that PayPal is doing a CYA of their own. Not certain of the other types of accounts they offer however our account is a business and as such subject to all the normal reporting requirements.

 

[bradhusick]

IRS rules require BOTH $20,000 AND 200 incoming transactions. Paypal is NOT entitled to your ID until you meet BOTH requirements.