Paypal taxes

[rodneya]

I've been buying stuff off various facebook groups for years now and never had any issues. Bike specific groups are a great way to find specific hard to find old bits or performance parts. But now with the new tax reporting rules for paypal and other payment processors everybody wants payment friends and family.  No way am I sending hundreds of dollars to some random dude in the hopes he actually follows through with the sale.  Looks it like its back to Ebay again.   

[RDFL]

You can pay extra to cover the fee for seller.

[rodneya]

You can pay extra to cover the fee for seller.

Sellers dont want you to pay the fee and get the buyer protection as then paypal reports the sales to the IRS and it gets added to their income at tax time.

[Striker1423]

I've rarely ever been burned by a parts purchase. In fact the only spot I ever got burned was Ebay. Facebook, craigslist, etc never an issue, with all kinds of sellers wanting Friends and Family.

Most regular people offloading parts aren't out to dick with anyone and don't need or want harassment after something gets shipped.

[RDryan]

OK what I don't get about these paranoid sellers is who cares about the IRS anyways. I dunno maybe they're doing a multi several thousand dollar a year business buying and selling bike stuff online however I feel like the IRS has their hands full just processing tax returns in a timely manner never mind audits.  They're honestly understaffed and with a starting pay of 25k they really have a hard time filling positions in places of the country where it's hard to entice folks to come and work. Of course I got this bit of info from watching a QandA segment of Washington Journal where the guest was a member of the IRS. She fielded tax related questions for over an hour after explaining to us viewers why it's taking so long to process tax returns. She pleaded with the public to file online and not do a traditional paper return.

So the more I think about it. It's interesting how folks selling stuff are too cheap to pay a few bucks in taxes for selling some stuff and that's if they even get a 1099. So of course by rights if you sell thru friends and family you bypass a record/1099 of all that selling activity. Yeah I don't know what the answer is but I'm with you rodneya, I'd be a bit leery of just sending the money that way to a stranger. I guess if you really need a hard to find part and that's the way they wanna deal with payment you just gotta have faith they won't screw ya.   

[RDryan]

sorry duplicate post

[m in sc]

I almost got burned a few times but was able to dodge it buying, a few weeks ago on a rack for the CB1100. I refused to do a transaction as f/f and offered to pay 20 bucks more tp cover fees and they wouldn't take it. found out later a few others were also 'targeted' in that group.

[sav0r (CL MotoTech)]

This is the third time I have seen a thread like this in the last few days. Odd...

Never send money for free unless unless you aren't expecting product in return. That is why that system is designed like that. A gift being a gift.

If you earn money you are supposed to report it as "income." It's not that hard. If PayPal reports your income (which they have done for income over 10k for years) the IRS knows it immediately. If you stayed under 10k you were safe to cheat. That said, every bank is required to report large single point income sources. So if you sell a car or bike and it is a decent sum it gets reported. PayPal is no different.

Cheating on your taxes assuming you are in the middle class is nearly pointless anyways. There are plenty of legal ways to erase your tax burden. This is why accountants exist.

[1976RD400C]

So if paypal reports you had $5000 income, a business would subtract expenses. So, $5000-cost of the parts sold-internet service-vehicle expenses-utilities-office supplies-lunch with a customer-petty cash-etc.    =    I did not earn a damn thing.

[rodneya]

So if paypal reports you had $5000 income, a business would subtract expenses. So, $5000-cost of the parts sold-internet service-vehicle expenses-utilities-office supplies-lunch with a customer-petty cash-etc.    =    I did not a damn thing.

This is not a thing for businesses, they have always been subject to taxes. This is for average Joe Blow who sells stuff online. What you sell for is considered income. Its not a business so you cant claim deductions or expenses.

[jradnich]

Another thing to consider is PayPay does not charge the party receiving money in a "friends and family" transaction. On a sale they charge 2.9% + $0.30 on the entire amount of the transaction. So lets say I sell you a part for your RD for $5 but shipping is $20. 2.9% of $25 is $0.73 + the $0.30 is $1.03. That's 1/5th of the actual sale.I think this i more the reason then the tax reporting.

[sav0r (CL MotoTech)]

Income is income. It doesn't matter if it is a business or not. For a sole proprietor, aka anybody that has a social security number, if you earn money that isn't reported on a standard W2 (or other reported statement) you are expected to report that income via other means. You can claim expenses, for example shipping or internet service if used for the sales, they are claimable expenses. That expense goes against your income, effectively negating that amount of money. This gets filled out in schedule C. If the IRS comes knocking, they will want you to prove your expenses though, so just making things up to negate income is not a good idea. I keep my receipts for five years in case of an audit. The hard part for me is tracking R&D time and expense, which is a big part of my business. A lot of companies throw gobs of money at R&D as a write off.

If you charge $20 but only get $17 from PayPal after fees, then you only earned $17. It doesn't matter what you charge, it matters what you receive.

[RustyRD]

The notice I received from eBay stated that as of  Jan.1 2022 Federal law would require full 9 digit ss# after 600$ of sales were reached , so a 1099- K would be filed before pay outs would be paid. I hate the idea of putting my info out any more than I have to.

[rodneya]

Another thing to consider is PayPay does not charge the party receiving money in a "friends and family" transaction. On a sale they charge 2.9% + $0.30 on the entire amount of the transaction. So lets say I sell you a part for your RD for $5 but shipping is $20. 2.9% of $25 is $0.73 + the $0.30 is $1.03. That's 1/5th of the actual sale.I think this i more the reason then the tax reporting.

The buyer always pays the additional fees. If you want the buyer protection you have to pay for it.

[irk_miller]

So many people put the effort out there to avoid the taxes up front, but not nearly the effort to avoid them on the back end.  It's not hard to blend enough cash income to earn good net without taxes.  I learned a great lesson in college working at a record store. I made $110/wk (this was the 90s) in claimed income for 8 years.  The rest was cash.  I wonder if those FB sellers are putting too much reliance on their internet sales and not mixing it in with enough cash sales to offset.  Unless you do it full time, it's really not hard to offset claimed income with expenses.

note:  I wasn't in college for 8 years.  LOL.  I realize how that looks after I typed it.  HAHA