Hi Everyone,

The IRS is making PayPal send 1099 statements for anything over a certain amount ($600 IN 2026).

I am NOT in business. I just want to sell a bunch of things that I have collected over the years, almost always at a loss.

What ways do you use to receive payments for personal items that you sell?

Thanks

Randy

Yeah, it's harder and harder to justify using paypal. I handle this by just explaining it to the people doing our taxes, and the PP money is not included in actual income. No hassle from the IRS on this practice yet.

Add to this the fees and added sales tax and outrageous shipping costs, and they're doing their best to take the joy out of everything. It's best to get F&F payments when possible. Every body has both hands in your pockets. They'll get you hooked on a service and then change the rules.

The only way is to use friends and family. Even venmo will give a tax statement now.

Zelle is sometimes an option.

Apparently, the amount on a 1099-K form for selling a personal item is (a) taxable, if it represents a gain (I.e., you sold it for more than it cost you), but (b) non-taxable, if you sell it at a loss (i.e., for less than you paid for it). I expect that this will all be handled by our tax preparation people. If you don't have tax preparation people, then you're on your own with the IRS code, filling out the forms correctly, and any information you might get from them.

This whole approach seems like a very clumsy/inaccurate/unreliable approach towards detecting people who are trying to run business sales under the IRS radar -- rather than a focused attempt to just irritate individual taxpayers who are selling personal items. Maybe they'll smarten up at some point and do it more reasonably and efficiently as they "modernize" their techniques. :roll: But the IRS doesn't have much of a history in that direction.

yeah, it's heavyhanded, and aimed at people running a business through Paypal.

For casual sellers such as myself, the issue under audit will be to somehow prove my basis in the trombone-related thing I am selling, who the Hell keeps track of such things?

Also, since basis isn't indexed for inflation, there is a real risk of paying taxes on something that you have no economic gain from whatsoever (given the time-value of money).

[quote="JTeagarden"]For casual sellers such as myself, the issue under audit will be to somehow prove my basis in the trombone-related thing I am selling, who the Hell keeps track of such things?[/quote]
Yeah, but it's extremely unlikely that your casual selling will ever be flagged by the IRS and generate an audit; and it's difficult to believe that if something else resulted in your being audited that they'd pick on your casual sales.

For decades, my wife (who does all our tax info prep for the tax service that does all the IRS work) has listed various charitable contributions to local charities (food bank, school system PTA shops, etc. -- all completely legitimate and registered charities), and we often have no records (except our own of what was donated and its value -- which is loosey-goosey to determine by anyone in any event). At times we'll get receipts for such donations, but not always, and often just for the "big" ones (most recently an exercise machine, for example). These have NEVER been flagged by the IRS for any investigation. I suspect we're not alone in this approach.

I also don't think the IRS would demand to see evidence of a receipt of a mouthpiece purchased 20 years ago. They're really looking for patterns -- which I'm sure they get from data mining -- and unless they see a clear, continuing, long term signal -- will ignore you. They have to. They can't be auditing random trombonists for selling a few things over a period of several years. They're looking for regularities (and actually, regularities of combined buying and selling) over time. But I'm sure they are looking for people who maintain Ebay accounts and display "positive feedback" in the thousands, etc. And part of their game is to catch cases of under-reporting for people who are really doing commercial sales and attempt to evade taxes. They're really after "regular sales at a profit" -- which is considered a business.

Yeah, I know that the universal advice/warning is to "maintain records". But that isn't a realistic expectation.

The approach that I take is to not worry about any of our casual sales (which are pretty infrequent as it is). I'm not going to let the IRS cause me to wring my hands on a continuing basis about some vague fear that isn't reasonable. YMMV

Also, since basis isn't indexed for inflation, there is a real risk of paying taxes on something that you have no economic gain from whatsoever (given the time-value of money).

Yup, but that's the way it currently is. I think the amount involved would have to be pretty significant for me to worry about it. And if you would want to benefit from such a consideration, then you should be prepared to provide evidence of the details.

Adjacency related, but specifically flagging the text with reimbursement or gift (if it is so) should prevent any flags. At least that’s what word on the street is. I don’t do that for trombone buying and selling, just large reimbursements that might be seen as potential income

According to the IRS, on their page devoted to the 1099K:

Personal items sold at a loss

A loss on the sale of a personal item can't be deducted from your taxes. But you can zero out the reported gross income so you don't pay taxes on it.

If you sold items at a loss, which means you sold the items for less than you paid, there is no tax liability. You have 2 options to report the loss:

Report the payment on your tax return at the top of Schedule 1 (Form 1040) PDF. This will ensure you don’t pay taxes you don't owe; or

Report the loss on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D, Capital Gains and Losses.

So, not keeping records and not reporting your 1099K income (which is sent to the IRS) does not absolve you from an audit just because you think it's unreasonable that you have to keep receipts on mouthpieces you bought twenty years ago.

I imagine it is really critical that you keep these receipts, etc, for cars. When you sell a used car to somebody for $10000, you definitely don't want to pay taxes on that. You're crazy to use PayPal for this, but I'm sure it happens. Otherwise the idea is that you just eat the tax hit the the random $600 of trombone stuff you sold in the year because you can't accurately answer on the 8949. I'm sure this was part of the calculus when they made the law.

Heavy handed, difficult to enforce, overstepping the bounds on public vs private transactions, absolutely. But the quote above, at least, is accurate. Even if 20% of the people who get these 1099K's do the right thing but are also too confused on how to fill out the 8949 ... the government gets a decent chunk of that 450 billion dollars they were short in reported electronic transaction taxable income.

[quote="harrisonreed"]You're crazy to use PayPal for this, but I'm sure it happens.[/quote]
I've always found PayPal to be a pain in various ways and am trying to divorce entirely from it. I've just been too lazy recently to complete that move -- partly because of how infrequently I actually use it, and partly because many businesses (particularly small businesses) haven't yet made that transition convenient. But yeah, there are any number of circumstances where PayPal just doesn't seem a good fit at all.

I'm sure this was part of the calculus when they made the law.

In one way, I wish I could believe that they're actually this thoughtful about it. :roll:

Just so everyone knows - the $600 limit for transactions through PayPal and others has been repealed, it's back to $20,000/200 transactions. According to Deloitte's analysis of the "Big Beautiful Bill":

Form 1099-K reporting and backup withholding thresholds:

Reporting of payments on Form 1099-K is required for third

party settlement organizations (TPSOs) making payments

of reportable payment transactions to participating payees

(section 6050W). When originally enacted, no reporting was

required by TPSOs on payments to participating payees if

the payee had engaged in 200 or fewer transactions and

received $20,000 or less in payments in a calendar year. The

American Rescue Plan Act (ARPA, P.L. 117-2) lowered this

threshold: reporting is currently required for payments made

to participating payees in excess of $600, with no transaction

threshold, though Treasury has administratively acted to slow

the phase-in of those thresholds. The Act reverts the threshold

from $600 back to the original threshold of $20,000 and 200

transactions, retroactively effective prior to the ARPA changes.

[quote="sctroy"]Just so everyone knows - the $600 limit for transactions through PayPal and others has been repealed, it's back to $20,000/200 transactions. According to Deloitte's analysis of the "Big Beautiful Bill":[/quote]

To me the funniest part of this is ...

The American Rescue Plan Act (ARPA, P.L. 117-2) lowered this

threshold:

... that the bill lowering the amount requiring reporting was called "The American Rescue Plan Act". You just can't help but laugh when you see this. :lol: :lol: :lol: Who says our politicians don't have a sense of humor?