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20,000 Irs Rule
 

I sold 19800 and stopped and now starting to use my new stealth account. Paypal won't report to IRS right.

thanks for your time

Re: 20,000 Irs Rule
 

I assume they have not asked for your SSN/EIN.
OR if they HAVE asked for it that you did NOT provide it.
If that is the case they have no individual's info to provide the IRS so nothing will be reported.

Re: 20,000 Irs Rule
 

If PP hasn't asked for documentation then you are safe...FOR NOW. PP could catch up later however - just saying

Re: 20,000 Irs Rule
 

Not a given.


paypal can go seeking tax info on projected sales.

You are earning money so you still have to pay taxes.

:boink:

Re: 20,000 Irs Rule
 

It is 20K AND 200 transactions. Both must be met. Paypal asks when you approach either. If youy are approaching this late in the year on just one side of the coin, it seems you can go beyond by far what you would be doing say in January.

I know that the accounts I am maxing out would have never been close to the $$$ they let me collect based on the projections of 12 months compared to 3 weeks...

Re: 20,000 Irs Rule
 

I did apply for Ein had to like 6 months ago or my account would of been limited or on hold. Paypal was asking for to apply for EIN or SSN. So I did EIN i heard was safer way to go. Applied the LLC and Corp id

Re: 20,000 Irs Rule
 

If you don't supply your SSN they can't report it. The limits reset at the end of the year

Re: 20,000 Irs Rule
 

LOL dont ask here ask a tax professional! no one here is gonna pay your return if you mess up! just sayin. I was in same boat a year ago.

Re: 20,000 Irs Rule
 

A lot of people don't quite understand what the 1099K is.
It is the reporting of the gross amount of credit card processing if you processed 200+ transactions and 20K.
So echecks, lines of credit payments, instant bank transfers, paypal balance, etc...are are not on your 1099K.

There is not a place on any tax form to add this number. There is not a place to attach the form. All it does is let the IRS know a business processed a minimum amount of credit card sales. So lets say you processed 10K but only reported 7K in gross sales the IRS has something to compare.

You still have the deposits into your bank account and that is income and gets taxed if a profit occurred.

I don't quite understand why anyone with a SS or EIN account is worried about the 1099K.
The only reason I do worry about it is I don't want to add more EINs to paypal accounts at the moment. Of course all the funds withdrawn go into my companies bank accounts and are totaled as income.

I don't even give my accountants 1099s anymore. They are worthless to them. They go by income and that always exceeds credit card processing reported.

Re: 20,000 Irs Rule
 

So yankee if for example you processed 10K in PayPal and it's reported to IRS in 1099K, it's basically reported as gross income right, which you have to add to any other income in your taxes, but then from there you can add deductions/expenses to get to your "actual" profits/income and that's the number you pay taxes on correct?

Re: 20,000 Irs Rule
 

No, PayPal will not report to the IRS unless you meet BOTH thresholds.

However, taxes are still owed.

And you do not pay taxes on the amount of your gross sales, you only pay taxes on your PROFITS. That is the amount of money left over after you deduct the cost of the merchandise you bought, your eBay and PayPal fees, postage costs, packaging supplies, office supplies and any other legitimate expenses you have. The average profit is somewhere between 7% to 12% for a small business. So, if $20,000 was reported, you would likely have to pay taxes on $1,400 to $2,400 in profits. At the 25% tax rate, that would be between $350 - $600 in taxes due. And many people are in an even lower tax bracket than they assume, because there are all sorts of tax deductions and tax credits that you may be entitled to. That is one of the reasons we always advise seeking a tax professional - they can save you money!

Re: 20,000 Irs Rule
 

Yeah Jeff I know it has to be over those numbers I was just using a random number. Thanks for verifying what I thought about only paying taxes on profits

Re: 20,000 Irs Rule
 

Thanks also for the tip of average profit for small business, some people think it's much more than that and want to be millionaires overnight with the $200 iphones [emoji23]

I always try to get at least between 15-20% margins on individual items, not counting overhead. Now quantity is the key

Re: 20,000 Irs Rule
 

It is not ADDED.
It is just what is reported to the IRS.
ALL income is added together to make Gross income. Gross income minus expenses= taxable income as a general rule.
So you collect $100,000, cost of goods is $80,000, operating expenses $10,000 and $10,000 is left over, you pay taxes on that $10,000 This is simplifying as much as possible but point is made.

Now if you collected $100,000.00 via paypal, your 1099K almost certainly will be less than 100K because some people paid with echeck, maybe a gifted payment or two, people like us pay out of there paypal balance, some people still have instant bank transfers, etc... so 1099K might only be $87,000.00 That 87K is not added to the 100K is is part of that 100k
The whole point of the 1099K is to give the IRS a guidline of gross revenue via credit cards. That way you can not claim your gross was $80,000 when the 1099K says $87,000.00
It really is nothing to worry about.
For stealth the issue is supply an EIN or SS for every account. It is not/should not be about not getting a 1099K for tax reasons.

Re: 20,000 Irs Rule
 

Perfect explanation thanks! Yeah taxes it's not the issue it's pretty straight forward if you can keep a good record on accounting, give it to accountant, pay the taxes.

As you say opening LLC is where it gets a little tougher but not impossible. Since you have opened many any tips on streamlining the process? I'm guessing you can open them in any state doesn't have to be where you live right? Maybe some states are cheaper/easier than others? Or better to keep them all near your physical location?

Re: 20,000 Irs Rule
 

I like WY for a variety of reasons.
I almost never hold inventory in my state, so it makes having a clean WY company very easy for me.

Re: 20,000 Irs Rule
 

thanks for the advice. Ya I collected almost 20,000 but with ebay fees, shipping costs, supplies, cost of items, etc. I only profited about mabye 14,000 if that. How will you know if paypal reports to irs anyways? will you get a 1099 in the mail? thanks again

Re: 20,000 Irs Rule
 

Trust me, you will know.....Paypal will let you know.

1099 is Emailed to you.

Re: 20,000 Irs Rule
 

Damn those are really high profit margins!! Congrats!

Re: 20,000 Irs Rule
 

thanks, when does paypal email you regarding the 1099 if they do. So If they don't email then no worries right?

thanks again

Re: 20,000 Irs Rule
 

Late January, sometimes later.

It is in your "Tax documents" tab in paypal. Super easy pdf download.

Re: 20,000 Irs Rule
 

i don't see a tax document tab. thanks