s/o PayPal: PSA about Goods & Services

[regentrude]

The PayPal saga made me think of this. A quick PSA, because some folks may not be aware of this:

1. If you send money to somebody and check Goods & Services, the recipient is charged a fee. 

2. As of January 2022, PayPal has to report to the IRS all transactions of account holders whose commercial (i.e. Goods & Services)  transactions total $600 in a year. That is new; the limit used to be $20,000, or 200 transactions. This is a huge change and will affect many small businesses or casual sellers- just be aware.

 

Edited March 12, 2022 by regentrude

[scbusf]

Yes. From my understanding, if you are selling things at a loss, then paying taxes on it isn’t required. I’ve started an Excel spreadsheet where I record when I buy something and when I sell it. Although, I am selling MUCH less curriculum these days. It just isn’t worth the hassle dealing with scammers and the USPS. 

[mlktwins]

$600 was in place for 2021 in several states including mine (VA).

I am tracking what I initially paid for things, what they sold for, shipping cost, and the paypal fee.  

[JustEm]

It should not be a change for anyone's tax purposes other than Paypal sending you the form because they should be claiming ALL income.  It is far better to make payments via Good and Services as a seller because your money is not protected if you do it via friends and family.  Sellers should be taking that fee into account when charging for things.

[JumpyTheFrog]

I believe I heard Venmo also has to send a 1099 to anyone who receives $600 or more total, from all sources. This is yet another reason I am insisting that people pay me in cash for their jerseys for our sports team. I don't want it to look like I have a business when I don't.

Edited March 12, 2022 by JumpyTheFrog

[regentrude]

2 minutes ago, JumpyTheFrog said:

I believe I heard Venmo also has to send a 1099 to anyone who receives $600 or more total, from all sources. This is yet another reason I am insisting that people pay me in cash for their jerseys for our sports team.

AFAIK, Venmo has to report *commercial* transactions totaling 600 or more. Personal payments are excempt from this requirement. 

But yes, reimbursements can become a PITA.

Edited March 12, 2022 by regentrude

[regentrude]

5 hours ago, hjffkj said:

It should not be a change for anyone's tax purposes other than Paypal sending you the form because they should be claiming ALL income.  It is far better to make payments via Good and Services as a seller because your money is not protected if you do it via friends and family.  Sellers should be taking that fee into account when charging for things.

Sure, businesses should report all income.
But it becomes a pain for folks who are not actually "sellers". For example, people use PayPal to collect reimbursements for items they're distributing on behalf of a group.  Folks not familiar with how it works thinks, oh, this is money for item X, so I'll pick "goods" - or they aren't aware at all that there are different options and go with whatever PayPal offers as default.
The "seller" who is just distributing the stuff and isn't actually making money will now be charged the fee and in addition will now have to provide their tax info to PayPal because they are suddenly considered a commercial seller. 

That's why a PSA is in order.

[JustEm]

2 minutes ago, regentrude said:

Sure, businesses should report all income.
But it becomes a pain for folks who are not actually "sellers". For example, people use PayPal to collect reimbursements for items they're distributing on behalf of a group.  Folks not familiar with how it works thinks, oh, this is money for item X, so I'll pick "goods" - or they aren't aware at all that there are different options and go with whatever PayPal offers as default.
The "seller" who is just distributing the stuff and isn't actually making money will now be charged the fee and in addition will now have to provide their tax info to PayPal because they are suddenly considered a commercial seller. 

That's why a PSA is in order.

there has always been a fee when using goods and services.  Is there an additional fee now?

[regentrude]

1 minute ago, hjffkj said:

there has always been a fee when using goods and services.  Is there an additional fee now?

I am aware of that. No, the fee is not new. I didn't claim it was. (But there are still plenty of people who don't know about that.)
As I stated in the OP, the new thing is that the threshold for reporting has been dramatically lowered (which may possibly affect folks who aren't businesses but are just distributing the team shirts or whatever.)

[JustEm]

15 minutes ago, regentrude said:

I am aware of that. No, the fee is not new. I didn't claim it was. (But there are still plenty of people who don't know about that.)
As I stated in the OP, the new thing is that the threshold for reporting has been dramatically lowered (which may possibly affect folks who aren't businesses but are just distributing the team shirts or whatever.)

I understand what you are saying and it is a good PSA but it is equally good for people to realize that even before this they weren't off the hook for having a paper trail so really nothing has changed other than it is a bit easier for record keeping purpases.  My original comment was addressing that it will affect many small businesses and casual sellers but it shouldn't because they should already be tracking all that and claiming it.  

In the reselling world many people are really pissed about this change but the only real reason for a reseller to be pissed is if they are hiding their money, which using an electronic account to do transactions really isn't a smart thing to do if you are hiding income.

[daijobu]

I agree with @hjffkj .  I stopped using paypal and Venmo not because of the tax issue but because they take a portion of the transaction when it's in exchange for goods and services.  Now I only accept Zelle or a straight up old fashioned check.

But I do always report my income.  I just put a big =SUM() in my spreadsheet and tell our tax preparer how much I made that year.