Does anyone know if paypal sales and or auction site sales need to be reported to the irs for taxes? This is my first year selling on here via paypal and through the auction site
Good question. Iāve never reported them.
I am not in the US but normally in the EU it would work like this:
If you have a steadily income from selling Yo-Yos over several month you need to declare it as business. And yeah if it is a business you need to pay tax.
I would assume it works more or less the same in the US.
Normally it is also very much related on how much you make from your normal job and how much from selling yoyos. So if your monthly income from yoyos is significant higher then your normal salary it is a business.
Here in TN, if you make over $4000 in a year you have to get a business license and collect sales tax. Iām sure it varies from one state to the next, so check your local laws. But Iād guess most states are pretty similar, its based on a dollar amount, it doesnāt matter if itās your primary source of income or not.
If you arenāt selling as a business, it falls under hobby income:
You can deduct hobby expenses from the hobby income, so itāll probably come out as a wash if you bought more yoyos than you sold.
But thatās profit, which is very different from sales. Unless someone is running a yoyo company, then theyāre unlikely to make any net profit off of buying, selling, and trading of yoyos, especially once shipping and fees are factored in. PayPal only sends out 1099s for goods and service transactions, so F&F isnāt included. Most states have a $20k threshold which is no big deal, but VA, IL, MA, VT, and possibly a few others have thresholds as low as $600. You will want to report this on your taxes, as PayPal sends a 1099 to the IRS which will need to be accounted for, but it wonāt actually cost you any money in taxes as you werenāt profiting or running a business (unless you were, in which case yes lol).
Thatās good to know, as Iām probably gonna hit the $4k gross mark this year lol. But so much of what I make goes back into supplies, it definitely wonāt be that much profit unless I somehow blow up like crazy. Last year I still counted it as self-employed income, but with all the deductions for supplies Iām pretty sure I ran a net loss If Iām not mistaken, I think it actually helped on my taxes, rather than hurting.
Excellent topic @BadWolfeCo
& great resource @MarkD
There are probably some hobbyists that stretch much further into what would be considered the ābusinessā category than they realize or intend, especially when you get into much more high-dollar collectibles, or are moving around higher volumes than most of us are. Iām happy this came up.
Iām very intetested to hear what some folksā experiences have been.
If you do report, better keep track of costs for them write offs!
I have a small business that saves me a TON.
For paypal/ebay it depends on the amount of business you do. I have a friend who sells things pretty regularly on ebay. He commented in October that he was going to cut back a bit because he was getting close to the limit for a 1099. I donāt know what the amount is, itās probably on their website.
thanks for the info guys ive seen various things from it has to be over 20,000 for PayPal to report it to the irs, to anything youāve ever sold has to be reportedā¦ ive made at most 600 probably a lot less, and i only sell every few months if that, so id hardly consider it income or ābusinessā, im not planning on reporting simply because i dont have all the info from past purchases, but it would be a shame to be investigated over yoyo sales lol
Yes, the paypal site lists the amount as $20,000/yr for reporting to the IRS. They also say that more than 200 transactions (sales)/yr will also trigger it.
thatās one thing i started thinking about, and doingā¦ recently. i have a yoyo drop - could be a flop, whatever - it is still falling into my hobby category i guess. but unfortunately iām not working either, so if i do crap the bed in thisā¦ at least i have something tracked. if it still falls
in standard deduction (which most hobby stuff, when added all with everything else tends to do in my cases) - no biggieā¦ if not, maybe iāll have a few bucks at the end of the year to buy some
new sheets
Hobby losses are not tax deductible. Whether you break even or lose thousands has no bearing on your taxes. If youāre running a small business then itās different. Furthermore while the federal limit for reporting 1099s to the IRS is $20k, which it should be noted is just the limit at which they require companies to report to them and has nothing to do with tax liabilities, many states as mentioned have much lower thresholds which is why you may get a 1099 despite doing well under $20k in gross sales.