New tax laws regarding PayPal, VenMo and Zelle

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Darth Vater

Senior Member
Anybody using these peer to peer payment apps to buy gear should probably read this article. Much stricter tax laws are now in place. Anything over $600 will get a 1099 form sent your way. $6000 is the new threshold where it was previously $20K before they'd hit you up for taxes. Probably will stop some people (like me) from buying/selling anywhere except locally where I can get paid in cash. I hate the IRS! I knew a girl in HS that was a real b*tch and don't you know she ended up working for the IRS. I'm sure she'll go far. :mad:

grow.acorns.com

New Venmo, PayPal, Cash App, and Zelle tax rules 'absolutely' mean more audits, CPA says

Starting January 1, third-party payment services like Venmo, PayPal, Zelle, and Cash App, are required report any transactions over $600 to the IRS.
grow.acorns.com grow.acorns.com
 
Ransan

Ransan

Senior Member
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Accountant here:

I think it’s about time, but for small beans, not in favor of…

During the formal end of year process, the forms are issued to contractors and vendors that ARE NOT incorporated, who have been paid out at least $600 for the benefit of their taxable income reporting and the companies compliant tax liability purposes.

In this case a private seller or vendor is generating income via sales revenue - any type of income totaling $600 + is the standard issuance for a 1099 K - Misc Income form.

They in turn will have to report that as their taxable income in the form of revenue from services.

The IRS will then reconcile between the 1099 issuance from the company as they either will report your annual payout using your EIN or SSN as sole identifiers.

So just make sure you have email correspondence if applicable, receipts not e-invoices showing customer detail, dates, $ amount, confirmation of items purchased/sold, and you should have no problem in the event of an audit.

That’s about the best advice I can give.

Hell as much flipping as I’ve seen around these parts you guys are sticking more into your kicks than Bentleys, Maxwell, or even DCP who have to pay taxes.

Darth welcome to the true dark side 🙂
 
Over50drumguy

Over50drumguy

Member
Darth Vater said:
Anybody using these peer to peer payment apps to buy gear should probably read this article. Much stricter tax laws are now in place. Anything over $600 will get a 1099 form sent your way. $6000 is the new threshold where it was previously $20K before they'd hit you up for taxes. Probably will stop some people (like me) from buying/selling anywhere except locally where I can get paid in cash. I hate the IRS! I knew a girl in HS that was a real b*tch and don't you know she ended up working for the IRS. I'm sure she'll go far. :mad:

grow.acorns.com

New Venmo, PayPal, Cash App, and Zelle tax rules 'absolutely' mean more audits, CPA says

Starting January 1, third-party payment services like Venmo, PayPal, Zelle, and Cash App, are required report any transactions over $600 to the IRS.
grow.acorns.com grow.acorns.com
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I’m not wild about the IRS as I’m sure almost nobody is , but they don’t make or pass tax laws . They just apply them. This was brought up earlier this year in the American Rescue Plan Act of 2021 and was passed by Congress and signed into law by the president.
 
L

Lefty Phillips

Well-known Member
No worries for me, there's usually a way to create zero liability. Having a business license makes it even easier. Capital expenses and such.
 
dcrigger

dcrigger

Senior Member
Darth Vater said:
Anybody using these peer to peer payment apps to buy gear should probably read this article. Much stricter tax laws are now in place. Anything over $600 will get a 1099 form sent your way. $6000 is the new threshold where it was previously $20K before they'd hit you up for taxes. Probably will stop some people (like me) from buying/selling anywhere except locally where I can get paid in cash. I hate the IRS! I knew a girl in HS that was a real b*tch and don't you know she ended up working for the IRS. I'm sure she'll go far. :mad:

grow.acorns.com

New Venmo, PayPal, Cash App, and Zelle tax rules 'absolutely' mean more audits, CPA says

Starting January 1, third-party payment services like Venmo, PayPal, Zelle, and Cash App, are required report any transactions over $600 to the IRS.
grow.acorns.com grow.acorns.com
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Somebody correct me if I'm wrong - but I don't believe this will effect anyone BUYING gear at all. Just those SELLING.

Between doing credit card transactions and collect sales tax from each buyer - these companies plus Ebay, Reverb, etc, are functioning more as consignment houses than simply classified ad services or merchant service companies.... And the monies they distribute to sellers (after having first held on to their expenses and service fees) has to be accounted for - just like all other "independent contractor" type money over $600.

Fact is - this money that private sellers collect was always supposed to be reported on their tax returns anyway - nothings change as far as the tax obligation goes. This change just makes it harder for some people to cheat.

Personally I don't see the problem - you buy a drum, you later sell the drum - you pay taxes on the profit. You lose money, you write it off against other pieces that you profited from.

This is nothing that every "real" business has to deal with everyday. And now with computers - and even us little guys using credit card processing - collecting sales tax, etc. - flying under the radar for the "hobby" seller is harder to do.

Actually it is still just as possible as before - just do everything in cash or money orders, use mailing lists and bulletin bards, instead of international online marketplaces and flying under the radar is still possible...

But who in the world wants to go back to that?!?!!? :)
 
dcrigger

dcrigger

Senior Member
Lefty Phillips said:
No worries for me, there's usually a way to create zero liability. Having a business license makes it even easier. Capital expenses and such.
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Not sure how a business license would change anything - that's a local thing, not a state thing.

I believe, for anyone selling enough for this to matter to any significant degree - just file a Schedule C (independent contract, small business) form with your taxes - and declare all of your gear buying expenses against whatever money from selling was collected.... it's just a small business like any other.
 
C

Chris Whitten

Well-known Member
bud7h4 said:
Sounds to me like they're inventing ways to tax you because we're allowing them to get away with it. Some bloke selling some thing to some other guy is not self employment.
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You are profiting. It becomes 'self employment' when people are buying and selling multiple items on Ebay or Reverb.
I have had to account for gear my whole career as a musician, why should you be able to avoid it?
If I buy a vintage kit for $1000 I can claim it as a business expense and get a tax break. If a few years later I sell that kit for $2000 I am required to tell the tax man and it may be included in my taxable income for the year.
As 'dcrigger' points out, this is hardly going to impact the people who sell a couple of lower priced items every now and then, but many people are selling on the internet as a (defacto) business.
 
L

Lefty Phillips

Well-known Member
dcrigger said:
Not sure how a business license would change anything - that's a local thing, not a state thing.

I believe, for anyone selling enough for this to matter to any significant degree - just file a Schedule C (independent contract, small business) form with your taxes - and declare all of your gear buying expenses against whatever money from selling was collected.... it's just a small business like any other.
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Uh...

Business licences are 100% a state thing.
 
Ransan

Ransan

Senior Member
Chris Whitten said:
You are profiting. It becomes 'self employment' when people are buying and selling multiple items on Ebay or Reverb.
I have had to account for gear my whole career as a musician, why should you be able to avoid it?
If I buy a vintage kit for $1000 I can claim it as a business expense and get a tax break. If a few years later I sell that kit for $2000 I am required to tell the tax man and it may be included in my taxable income for the year.
As 'dcrigger' points out, this is hardly going to impact the people who sell a couple of lower priced items every now and then, but many people are selling on the internet as a (defacto) business.
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Exactly - I’ve always wondered if being a musician and purchasing related items would be taxable write offs.

But yea, it’s become to the point where musicians are no longer that and becoming private shop, look at Reverb profiles for example.

How many of them have actual licensing?

Some of the kits passing through are serious, and not talking entry level items the stories for profit are everywhere here.

Nowadays online commerce has made seemingly impossible acquisitions more likely.
 
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GruntersDad

GruntersDad

Honorary Lifetime CEO
Staff member
If PayPal and others are are collecting taxes on sellers, it is because they themselves are paying taxes as a business. The American tax code is as thick as a set of encyclopedias, and anyone who can keep up, is indeed a genius.
 
single-ply

single-ply

Senior Member
I'm waiting for this to hit Craigslist. Not sure why they aren't included. I'm not a big fan of selling on CL, but it will see a big uptick in the following months.

Next, the IRS will employ a crack team of yard sale police that show up and count your cash on the spot and leave with 15%
 
MrInsanePolack

MrInsanePolack

Platinum Member
dcrigger said:
Personally I don't see the problem - you buy a drum, you later sell the drum - you pay taxes on the profit. You lose money, you write it off against other pieces that you profited from.
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This is the part I have a problem with. I must pay a tax on the item when I purchase it. I have not made a profit here, rather acquired an item. Now if I sell said item, I must again pay a tax for getting rid of the item. Here I have made a profit, and profits (income) are taxable.

If a drum is not income because I paid for it with cash, I should not be taxed for it. If I receive it as payment for a service, then I should pay a tax on it.

The feds are (and have been) collecting 2 taxes on every single thing you buy and sell with few exceptions. That's 🖕'd up.

When you buy a car, new or used, you pay SALES tax. Yet you made a purchase, not a sale. And that same car generates the same SALES tax (from the new buyer) each time it changes hands. So 1 car, multiple paydays for the feds from both parties.

I'm not okay with this. This is some 1920s Al Capone math.
 
MrInsanePolack

MrInsanePolack

Platinum Member
single-ply said:
Next, the IRS will employ a crack team of yard sale police that show up and count your cash on the spot and leave with 15%
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Some places require a permit issued from the municipality to have a yard sale. There are your yard sale taxes.
 
GruntersDad

GruntersDad

Honorary Lifetime CEO
Staff member
single-ply said:
I'm waiting for this to hit Craigslist. Not sure why they aren't included. I'm not a big fan of selling on CL, but it will see a big uptick in the following months.

Next, the IRS will employ a crack team of yard sale police that show up and count your cash on the spot and leave with 15%
Click to expand...
Most laws allow yard/garage sales once every six months without assesing taxes.
 
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