Paypal reporting Your Income to IRS

Randy Rooster · #1 03/13/12, 11:30 AM

I heard on Clark Howard that paypal will be sending 1099 forms to the IRS telling them of all your sales - has this happened to any of you yet? If so how do you manage your taxes- in particular how do you write off your expenses?

Ken Scharabok · #2 03/13/12, 11:53 AM

It is not sales, but dollar tranactions. For example I buy in bulk from one wholesaler. I request a PayPal invoice and, when received, pay for it through PayPal. What I purchase may not show up in eBay sales for several weeks.

I do admit, likely the higher your volume of PayPal transactions they more likely an IRS auditor would look at your tax report.

happychick · #3 03/13/12, 08:04 PM

Randy Rooster - we have already recieved our 1099K - and are in the process of trying to figure out what to do about it. (working on going to see a accountant within the month)...Wish I knew more, I think everyone's a little confused with the whole thing...

edcopp · #4 03/13/12, 08:20 PM

Eliminate the problem. Keep books and records just like any other business. Who knows you may be losing money and not know it.

ErinP · #5 03/14/12, 05:34 PM

Like anyone else, PP had to send them out by the beginning of Feb (end of Jan?)

But they only sent them if you made more than $20K worth of transactions. I think that's what the magic number was, anyway. Don't have mine handy at the moment to check.

It's no big deal, really. If you make enough money to trigger the release of the 1099, you're probably reporting it anyway. (Or at least you should be! lol)

Randy Rooster · #6 03/18/12, 07:36 AM

I was mainly inquiring as to how those affected did their taxes? did you have to hire a tax professional to do them or were you able to figure them out on your own? Did you set up a seperate business enity from your personal taxes?

ErinP · #7 03/18/12, 09:00 AM

Well it's just a business income, like any other that you would do OFFline. Most sole proprietors figure it on a schedule C. There is a place for the gross and then you basically follow the form, fill in expenses until you end up with your final net that you'll be taxed on.

My business is a sole proprietorship which means it's not a separate entity from personal taxes. There's really no reason to do that unless you're a very large company, or you have multiple parties involved in it (other than spouse, of course).

We've always done our own taxes, so when I started a business, the Schedule C was just one more form to muddle our way through. Really, if you've done your taxes, you probably won't have any trouble either. It's not hard, just very tedious.

Randy Rooster · #8 03/18/12, 05:30 PM

thank you for the advice

happychick · #9 03/19/12, 08:05 PM

Erin, you seem to have some knowledge in this department! We need claim and pay taxes for our income from our ebay business. We got the 1099K because we sold more then $20,000 through out ebay store in 1 year, (our very first year too) but because we sell for other people now (and take a percentage) our actual profit did not exceed a few thousand. We are trying to decide if we should do a sole proprietorship or a partnership (as all 4 of us as a family help run it). With us selling for others, maybe it would be more important to separate our taxes from the business taxes?
If you would be so kind as to offer any advice, I would great appreciate it!

Ken Scharabok · #10 03/20/12, 02:08 PM

Sounds like you need to talk with a professional tax preparer.

happychick · #11 03/21/12, 10:44 AM

Quote:

Originally Posted by Ken Scharabok

Sounds like you need to talk with a professional tax preparer.

Yep - making an appt. with one later this month to talk about it!