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New 2011 Form 1099-K

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Back in college, I used to sell all sorts of things on eBay for a little extra cash. Two of the more legitimate things I sold were John Deere hats, made popular by Ashton Kutcher and his Punk’d show, and Washington Wizards Michael Jordan jerseys, made popular when Jordan made his brief return to the NBA. Back then, as is the case today, eBay sellers had to report that income on their income tax returns. Many don’t because there’s no checks and balances in place forcing them, there aren’t any W-2s or 1099-MISCs for them because eBay doesn’t pay them, a multitude of sellers do.

The times have changed and now the IRS has produced a draft Form 1099-K used to report Merchant Card and Third-Party Payments made to your ID number (social or employer ID number) in each month. This is a way for the IRS to capture some of the underreported income since sellers will not have to reconcile the third-party transactions, such as through PayPal, with their incomes.

There are a few huge caveats. If you have gross sales of less than $20,000 a year or fewer than 200 transactions, then 1099-K reporting will not be necessary. This is so your small time sellers, like those emptying their attics, don’t get stuck with a paperwork nightmare while actual businesses are still on the hook for sales.

This new form isn’t limited just to PayPal and eBay, though chances are that’s what most of you guys, myself included, are most concerned about anyway.

{ 33 comments, please add your thoughts now! }

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33 Responses to “New 2011 Form 1099-K”

  1. thunderthighs says:

    Just when I thought my hatred of the IRS had reached its limit.

  2. freeby50 says:

    Why would you hate the IRS for requiring businesses to report sales / income information? I applaud the IRS taking measures to catch more tax cheats.
    People selling >$20,000 on ebay are not typically simply cleaning out their attic. These are people in business undoubtedly making a profit and legally owing taxes on it.

    • Cinque says:

      I’m with you, freeby50! If everybody paid just his/her fair share, we’d be a lot better off.

      • my05hammer says:

        I agree too, and there comes a time when taxing the F&^K out of the middle class and letting the lazy get a free ride while the rich skate and pay very little percentage wize compaired to the rest of us tax payers. Or at least that’s how it would seem. Ugh. Sorry for the rant lol!!

        • Rick says:

          Yep, ne need to ignore the FACT that the top 10% of wage earners pay 73% of the total federal taxes paid! Not to mention that the bottom 47% of earners pay zero in federal taxes (they get all withholdings back as a rebate) and a big chunk of these people actually get a check back from the IRS for being deadbeats. Alas, the vast majority of them vote Democrat… wonder why! LOL

          • I keep hearing this claim that the top 10% of wage earners pay 73% of the total federal taxes paid, and how we need to LOWER the corporate tax to “save America.” What they DON’T tell you is that MANY of these huge corporations pay ZERO tax. General Electric is a prime example. Yes, but then the rich will always howl that they pay too much tax, while dole out a crumb or two crumbs to the middle class and the poor, but never more than two crumbs!

          • cat says:

            This is a meme without much basis in fact.

            All workers, that is those who receive wages for work rather than those who receive capital gains for investment, who earn $110,100 or less (in 2012) are subject to Social Security and Medicare withholding which is 6.2% (4.2% at the current reduced rate) and Medicare which is 1.45%. These taxes are NEVER refunded.

            The federal income tax is a progressive tax so once people can feed and house themselves, they are taxed on a sliding scale. Top Federal income tax rates remained at about 90% (REF: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Federal_income_tax_rates_2 ) during most of the Baby Boom Era and that was one of the most prosperous and dynamic eras in U.S. history, so the idea that high taxes kill business success is a myth.

            Certainly a 10% tax on a $1000 family income is a lot more painful than a 35% (the highest income tax rate) on income ABOVE $379,000. (Taxation below 379K is stepped – and lower.)

            Also, laborers’ wages are often held low to increase capital gains to the business owners, so that deadbeat who “doesn’t pay tax,” pays in labor and lack of a livable wage not to mention the loss of commonwealth due to industry-based pollution, extraction of raw materials from public lands, non-specific waste, and the cost of ‘business incentives’ like socialized cost of development, permits, and infrastructure for new business developments (these costs are often waived by local and state governments to attract jobs and must be absorbed by the commonwealth – the citizens who pay property taxes directly or as part of rent).

            I don’t know where you got your 73% figure, but “the top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate.” REF: http://www2.ucsc.edu/whorulesamerica/power/wealth.html . So they really should be paying more tax.

            People who work for $10/hr aren’t deadbeats, they are the ‘working poor,’ who never take government aid, who send their sons to fight unnecessary wars, who are helping their employers make profit.

            Your comments belie your shallow understanding of what is a very complex issue. You display a lack of appreciation for the millions of hard-working people who make this countries businesses succeed. Be careful how much you do to make their lives harder. They are a force that hasn’t yet taken action and there are a LOT of them.

    • NoProfit says:

      1099K justified in every case? Not so, for example consider this real situation. A person has
      a spending problem and they buy way too much
      stuff on eBay. Say for example, musical equipment. They buy from businesses and pay full
      retail price for the items, always. The person
      has financial problems, as a result of bad luck
      and there uncontrolled spending habits. So they
      end up selling most of the stuff they paid full
      retail for, on eBay for what ever they can get,
      which is always below what the paid. Follow me
      so far… what does this mean, if they sold
      $10K on eBay and lost 25-50% of their actual
      investment? This means that they lost $5K on the eBay sales, and did not make one dime of profit, in the 50% loss bottom end. To the IRS
      PayPal 1099k, looks like the person made money,
      but in the actual real world, they lost a lot of money. So it is fair that they should be taxed as if they made money? Totally unfair, and this is the case in some situations. If everyone was taxed in a fair way, for actual profit, this is ok with me, but if people are taxed on income that actually represents a net
      loss, and not any gain at all, then this stinks. The IRS should go after the large semi-legal loophole criminals that are raking in millions, and evading their fair share of the tax burden by having shrewd lawyers protecting them. If you have to defend yourself
      from the IRS to prove you are innocent of any
      knowing tax crimes, do you know how much that along will cost you, even though you never made
      any profit on eBay. A lot… probably thousands, and if you don’t have it, you go to jail or make payments to the IRS for the rest of your life, for profit/income that doesn’t exist. I have sold stuff on eBay, but can honestly say that I have never made any profit.
      EBay forces sellers to use PayPal with their
      transactions, eBay owns PayPal… so is it smart to even sell on eBay if you are not a business? They try their best to make you look
      like a profit generating business, no matter what the true loosing situation may be. It is getting to the point that FREE sales lists
      will be the only smart was to make non-profit
      sales, and forget eBay/PayPal corporate monopoly extortion. My opinion is based on real life situations and experience. You may
      disagree, but I wanted to point out that not
      all sales on eBay are profitable, mine have
      been helpful to recover at times, but always
      a loosing overall situation. However, it could
      be difficult to prove this to anyone.

      • Jim says:

        This has nothing to do with profits! The person in your verbose example would just need to save their receipts and file the correct forms with the IRS to show their losses.

  3. FlyFisher says:

    Would love a tax reform that makes this whole system simpler and saves the bureaucratic costs, but it is good that those who should owe taxes are kept up with. I was worried for a little while until I read the $20,000 requirement. I sell old knick knacks all the time but never totally that number.

  4. jsbrendog says:

    ok you scared me there til the third paragraph. i dont do anywhere near enough business to need to do this. phew

  5. BOB BUCKWHEAT says:

    Maybe either you guys mis-understand or I do. The way I am getting the drift of this new law is it is not just the 20,000 a year thing but 20,000 and or 200 transactions from buyers to your paypal account???

    I mean you could make $200 at a $1.00 a sale and paypal will still have to send that info into the irs because you had 200 transaction completed in that year.

    I myself am disabled and get a very short 960.00 a month to live on and I counted on this under the table 50 bucks a month to help me out.

    I have to give that up now. unless of coarse I have mis-understood this new law.

    any moneys i receive at all must be reported to my disability and those money’s will be deducted from my next check.

    I won $3,200 at the casino near me 3 years ago and had to file at the casino and two days later my disability called and said i had to report all casino wins. They took out every dime and it lowered my check to 240.00 a month until they were paid that money back. What a lesson that was.

    Myself I wouldn’t give them one dime of my money if I could get around it.
    When i hurt myself, it took them 3 years of appeals to finally give in and that was only because I finally had the surgery.
    I paid my taxes before that injury and had every right to the help when I needed it. But they just scoffed at me and made me feel like the scum of the earth for asking for help.
    No Sir,
    I will never give them one red cent if I can help it.

    Not to mention that this idiot running our country just gave auto makers 8 billion of our tax dollars. Auto Industries….. Trillion dollar a year companies. I don’t for one minute believe they were going broke either.

    That was just the begining of our taxes being waisted. The IRS can kiss my disabled hiney for the rest of my life and as for you idiots that think we should kneel down to these clowns running our contry then you can come to my hiney and kneel down there as well.

    We the peopleneed to be able to vote for any taxes being paid out before the taxes are alloted out. Or maybe you irs lovers like the fact the we tax payers just bought several CEO’s in the auto industry new Yaughts,<<<

    Parden me for the spelling,

    I am not a hater of this beloved country so don't get me wrong but I do dispise the people we have running it into the ground.
    This asinign in office now is I truely believe trying to break this country and allow the muslums to arise and take over. My opinion but just what I think. Good Day to you.

    • callieco says:

      Correct, $20,000 and 200 transactions. Personally, I am an ebay trading assistant with a solid list of clients, but only keep a 30% commission out the amount reported by PayPal on the 1099-K. Out of my 30% I pay ebay and paypal fees in addition to supplies such as boxes, bubble wrap and peanuts (the list goes on). I don’t mind paying taxes on the 30% but now it becomes an accounting nightmare at tax time to figure out how to prove that I should only pay taxes on that 30% and then justify the deductions I would have as a self employed taxpayer. Guess I will be going to an accountant soon to get all my ducks in a row. I’ve worked all my life and paid into the system and don’t feel guilty that I have found a way to support myself now that I am retired. I’m not in excellent health so this actually keeps me off of disability which would be a drain on the system. Not sure what the solution is.

    • randall says:

      MR Bob iam with you, People who dont know busisness. they dont know how this afect, this new form is just not good,we are in crisis the economic is sucks,and now they want more extra money for our poor people

  6. ker says:

    1) the law is that you have to meet BOTH thresholds: 200 transactions a year AND $20,000 in sales.

    2) it doesn’t account for selling off that property

    3) i feel it is wrong to tax someone on selling items – for $20K or not – if they bought them legally, paid sales tax on them, and own them, then sell them again. That is DOUBLE taxation. If I paid taxes on my income, used the remainder (my NET income) to buy something and paid the appropriate sales tax, then want to resell it, as noted by another, usually at much lower prices than at which I bought, I don’t see as how I owe the IRS anything – they already got the taxes on my income, the state got my sales tax on the original item. It is then mine to sell, give away, burn, or whatever, NOT to be taxed again.

    4) Muslims are AMERICANS too. I don’t give a rats buttocks if anyone who is a true Muslim takes office. I am just as offended by a RADICAL Muslim as I am by a RADICAL fundamentalist Christian. I don’t want RADICAL anyones running this country, it is supposed to be about MODERATION.

    5) While you rail away at the current administration, does that mean you support candidates whose idea it was to 1) fake a reason to go to war with Iraw, 2) fake a reason to go to war with Afghanistan, or 3) give the corporations more and more “freedoms” under the Constitution than WE THE PEOPLE? Or are you more rational and realize that the wealthy are our problem NOT the poor, because you, my dear friends, ARE the poor. If you are not in the top 1% who owns 98% of the country’s wealth, you have no power. Is that written into the Constitution? Do you think that Jefferson, Washington, Adams, Jackson, et al., had that in mind for American citizens? If you do, then you need to read their diaries, books, and pamphlets. They did not stay silent on those subjects. I am a professional historian, not some nutjob who thinks they know what they are talking about – I have devoted literally 41 of my 46 years on this earth to studying history. I also have friends in very high places in other countries, Arab countries that are very close to the US, but also want to spread the truth about what the US does elsewhere. So before you bash one party over another: they are pretty much the same thing. The question is, to my fellow disabled person: do you want Medicare privatized, so that you have to pay an ever-increasing premium for getting less and less care, while a corporation profits from your chronic illness? Because that is what the GOP has on the table right this moment, 4-7-11. Would you rather have a program that is fair for all disabled and elderly, or that favors the wealthy?

    • Anthony says:

      I totally agree with your take on taxes in this country. What is mine is mine especially afer I had already paid the tax on it. Double taxation is what starts revolutions. And this new 1099K tax was never voted on by the people. The government should be forced to refund the amount that was paid in taxes and the amount of the difference of the resale price to the individual and NOT retaxed again on the SAME item!

    • Rob says:

      Sarah Palin is the only politician who is against double, triple & more taxation.

      Retail businesses pay taxes on the same merchandise year
      after year. So there’s more than double taxation.

      Back in the day if you won a jackpot at the casino you had to pay taxes….never mind the losses you incurred to win that, the IT’S said too bad. Now if you use your players card you can get your total play aka wins/losses and they use that so it’s better cuz we all know you spend more then you ever win. As a former gambler I say come find me and I’ll pay the fine if I won.

      Obama is creating class warfare, HE pays zero……folks HE is one of his picks as a winner. Before you all go spouting off LEARN the truth.

      You tell us your opinions backed by NO FACTS! That’s the sad part. Extending unemployment checks does not build confidence in any sector be it home, business or country.

      Wake up people…Obama could have been the guy to unify this country……instead he has created hatred among the people and divided us at a time when we need each other.

      I myself am helping my neighbors cuz everyone is HURTING!!

      Look at it like that. 1099-k is a killer and unAmerican. That money is sent overseas where billions come up missing. Again wake up people. If you hate your neighbor the those in charge know you are fighting amongst yourselves not paying attention to what is really going on.

      Wake up people!

  7. RK says:

    So many misconceptions about taxes and IRS. That’s how any creeping bureaucracy starts. That’s how taxing begun in the first place. First, oh, it was only for the richest, oh, it was voluntary… and still, you read it is “voluntary” (try to not pay and see how “voluntary” it really is). America was built without taxes, with a steady growth. Then the taxing started and here we are – ready to crash. But, even assuming that taxing is good and neeeded, this is an economic principle that every time tax rate is slashed, the revenue increases. The government knows about it very well so taxing has very little to do with their need for money. If they really wanted to get more, they would lower the tax rates. Ireland slashed their tax rates and their economy literally exploaded a few years back. Also, how many times do you want to pay taxes on the same item that was already bought new and now you are trying to sell it to someone… Now they want your money again, every stinking time the item changes hands. Why? Everything you buy has been already taxed to death (materials, workers, all the nonsensical paperwork you have to fill out, transport, shipping, etc.). Then, someone who makes maybe 70-100k a year is called “rich” while the Turners, Rockefellers, Fords, Gates pay hardly any taxes. High gov. workers are reportedly not paying taxes (it’s been in the news). But then some troll patrol swoops down on every blog that mentions taxes and start shooting their mouths off how, if we just paid our “fair share”… I know, our “fair share” means running on a treadmill like hammsters not having time to even educate outselves about how the real world really works. And, where does your “fair share” go? To wage wars half way across the world on nations most of the cheerleaders for war can’t even find on the map. One of the Founding Fathers said that there has never been a society in the history that was ignorant and free (my paraphrase).

    • Jovial says:

      Taxes are a GREAT idea.

      Bureaucracy and graft are the enemies, occasioning us where nature and we allow it.

      We can do something about two of them until we die.

  8. Jovial says:

    Thank You! for identifying this new IRS form. It’s a milestone in internet commerce that will throttle us all soon enough.

    Record stimulus and yet seemingly a liquidity trap, we’ll need every penny.

    I really appreciate this article.

  9. MVP says:

    Oh yeah, I’m sure if everyone just paid their “fair share” that the budget would be balanced, our thieving politicians (both parties) would never run a deficit, and life in America would be more wonderful than ever. Keep dreaming sheeple.

  10. MVP says:

    And further, if I use my taxed wages to purchase something for $100 (and pay sales tax on it at the time of purchase), then 3 years later sell it for $25, aren’t I entitled to take a loss on my tax return, since my basis is $100 plus sales tax and then I sold it for $25? These IRS b@stards know you aren’t going to keep all your receipts on every item you buy.

  11. swanni says:

    Boo hoo, the poor tax payers want everybody to pay their taxes! Why should we, the ones who knows it only volunteering to pay “your”taxes? Besides, look a little deeper, like the origin of the IRS, the people who founded the IRS, and you will see it was created to get back US dollars from the pubic to offset the inflation rate of a newly produced dollar bill that was no longer backed by silver or gold, but by the “full faith and credit of the United States Government”. Wise up fools, you are all volunteering, but you have no idea how to get out of it because you have no idea about contract law.

  12. deaconrex says:

    It’s funny here that Bob Buckwheat gets a disability check but, complains about taxes. How do you think that disability check is paid for it just appears out of the sky, idiocy. You pick up this free money but you act like it’s your god given right. Bob Buckwheat your disability check is not your god given right. If you can type you can get a job.

    • erer says:

      Welfare payments are largely not paid for by tax revenue. They are paid for with new fake money. The U.S. dollar is a fiat currency, created from nothing, inflated continuously.

  13. brian says:

    So i read this rule as saying 20,000 AND over 200 transactions… So i have over 200 transactions but under 20K in sales am I not going to get a 1099K ?

  14. Walter says:

    If you have over 200 transactions or payments processed above $20000 then only will u be required to file form 1099k..Brian, yes u still need to file form 1099k becoZ you have over 200 transactions

  15. Toby says:

    so i have under 200 transactions and tottal income of 9289.00 I do not have to file correct?

  16. Bruce says:

    Walter you are wrong. It has to be BOTH. From PayPal…

    At the end of this month, PayPal will send you and the IRS a copy of your Form 1099-K for the 2011 tax year in accordance with Internal Revenue Code Section 6050W. Under the new rule, PayPal is required to report the total payment volume received by any payee that:

    · Received more than $20,000 in gross payment volume from sales of goods or services in 2011, AND
    · Received more than 200 separate payments in 2011.

    If you receive a 2011 Form 1099-K, this means your PayPal account exceeded both thresholds during the 2011 tax year.

  17. Joe G. says:

    I am working on my 2011 taxes. I received a 1099-K for some credit card tranactions at a one-night event – I rented a credit card machine for that single night. A total of $1,207 for maybe 20 or so transactions. The tax software I purchased – H&R Block At Home Premium – does not know what to do with this form.

  18. Anonymous says:

    The 1099-K is a nightmare and an unfair one at that. There is no way to show sales slips from items bought 10 – 20 years ago that will most likely be sold at a LOSS but appears to be PROFIT because of the way this is set up.

    I may buy an item for $100 BUT if I sell it for $101, it looks like–on paper–that I made $101 taxable income.

    THIS IS CRAP! I can see people who DO have a “business standing” on eBay having to do this but, PLEASE, can they figure out a more SANE and FAIR way of doing this? Like maybe forgetting the whole thing?!


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