Thoughts/clarification regarding Paypal & 1099 forms?

[MyComicBookArt]

When dealing in comic books and artwork,

I'm assuming that many boardies had to deal with this last year

(what was your approach?)...

[font:Impact]Since PayPal is having to report to the IRS

total Gross of payments received for an account

that reaches $20,000 or 200 transactions ...

[/font]

 

 

payments made towards comics purchased should then count as a business expense/deduction- correct?

(if so, did you report comic books on Schedule C in a category or itemize on Schedule C or A?)

(if itemized how detailed did you get?)

 

(I'll definitely be deducting the PayPal fees and eBay fees)

 

Any thoughts / direction / clarification would be appreciated

Thanks!

-Michael

 

[mschmidt]

It's actually $20,000 and 200 transactions - if both criteria aren't fulfilled, you won't get a 1099.

[CKB]

My opinion is that it would be very unwise to try to address that 1099 on a personal return without a schedule C. You can try to address it as hobby or other income but that doesn't allow you to show your deductions in a detailed manner.

 

At $20k+, the whole game is to find as many legitimate deductions as you can.

 

[MyComicBookArt]

My opinion is that it would be very unwise to try to address that 1099 on a personal return without a schedule C. You can try to address it as hobby or other income but that doesn't allow you to show your deductions in a detailed manner.

 

At $20k+, the whole game is to find as many legitimate deductions as you can.

Very helpful! Thank you!

[BrianR]

It's actually $20,000 and 200 transactions - if both criteria aren't fulfilled, you won't get a 1099.

 

This is my understanding as well

[Passport Comics]

I think the above is true, yes. However, somewhere I read you CANNOT deduct the PP and EBay fees, since they're a "normal part of doing business". Am I wrong?

[jimjum12]

It's actually $20,000 and 200 transactions - if both criteria aren't fulfilled, you won't get a 1099.

 

This is my understanding as well

 

..... this is NOT totally true. If your paypal account is set up to accept merchant cards you will receive the 1099 at much lower figures. I got one for less than 6K in sales and only a couple dozen transactions. GOD BLESS......

 

-jimbo(a friend of jesus) (thumbs u

[jaybuck43]

Regardless of whether or not Paypal issues the 1099, the additional income is expected to be reported on your Income Tax returns. Paypal fees are tax deductible as Work Expenditures, so please do keep a list of all fees paid (you can print out a list at the end of the Fiscal or Calendar year (depending on how you report of course) These would go under Schedule C. I keep a list and receipts of all prices paid to acquire and costs associated with selling any books. In some cases you can qualify your sales under Capital gains and pay a reduced tax on the sale, and similarly use deductions on any losses you sold your pieces at. I would advise you to speak with a tax attorney or Financial professional on any of this. All the best

 

*Transmission or receipt of the preceding materials or information does not constitute legal advice, establish an attorney-client relationship, or create any duty of jaybuck43 to any person accessing this website. * (Sorry gotta CMA)

[mschmidt]

I think the above is true, yes. However, somewhere I read you CANNOT deduct the PP and EBay fees, since they're a "normal part of doing business". Am I wrong?

 

Yes, you're wrong

 

They're fully deductible business expenses.

[BrianR]

what the heck are merchant cards?

 

[sd2416]

I thought it was 5k in transactions. Did they up it?

[jimjum12]

what the heck are merchant cards?

 

...... I'm not exactly sure....but I would imagine I unwittingly signed up for that when I opened my eBay store. GOD BLESS....

 

-jimbo(a friend of jesus) (thumbs u

 

P.S. My first 1099 from paypal arrived less than a week before April 15th...... I was NOT a happy camper.

[Shrevvy]

First, don't take tax advice from an internet forum. Talk to an accountant or at least someone from H&R Block.

 

There are some things to keep in mind when talking to an accountant.

 

1) you can deduct your purchases, but only when you sell. If you buy a ASM #1 for $1000 and sell for $1200, you will only claim $200 in income. You cannot, however, deduct the AF #15 you bought with that $1200 until you sell it.

 

2) Cap gains taxes on collectibles are higher than other cap gains taxes. 28% if I remember correctly. Cap gains only takes into effect after 1 year of ownership. You need to be making more than ~$225k filing jointly for your marginal tax rate to be higher than 28% and benefit from the cap gains tax on collectables.

 

3) You can write off any legitamate expense including eBay and Paypal fees. This could also include safe deposit box, gas, convention travel and admission, bags & boards, overstreet guides, GPA subscriptions, etc. This is where an accountant helps and is needed.

 

The IRS is not friendly to the hobbiest. They discourage hobbies as a business so as not to subsidize anyone's collecting interest. What that means is that if you do not show a "profit motive" in the eyes of the IRS and continually have losses, they will not allow you to deduct those losses from income. Unlike everyone else, the IRS can have its cake and eat it too...

[Fan Boy]

Gee ... sure sounds scary when it come about IRS goons and tax like this from paypal or eBay!

 

 

[MyComicBookArt]

1) you can deduct your purchases, but only when you sell. If you buy a ASM #1 for $1000 and sell for $1200, you will only claim $200 in income. You cannot, however, deduct the AF #15 you bought with that $1200 until you sell it.

 

[font:Century Gothic]Trying to conceptually understand the process[/font] by using your example

(so that I know the right questions to ask an H&R rep.)

 

[font:Arial Black]Let's say in our simplified fictitious scenario:

that in 2013 I bought ASM #1 for $1000.

Then in 2013 I sold the ASM #1 for $1200.[/font]

 

 

So, on Schedule C,

Part I Income

1. Gross Receipts Of Sales: $1200

 

Then on Schedule C,

Part II Expenses

 

On what line would I input the $1000 expense in this scenario?

It doesn't seem to fit any of the categories of lines 8-26.

 

Would I consider using line 39 since there was no previous inventory?

(especially since the book was purchased in 2013 and sold in 2013)

 

a schedule C form for reference

 

 

[Shrevvy]

I will preface anything I say here that I am not a tax professional. I have filed many of these though (but I paid someone to do them) and analyze businesses for a living. That being said, always ask a tax professional.

 

On Schedule C, the $1,000 expense would be "Cost of Goods Sold," which is line 4. You would not use line 39. All the IRS wants is the total. But, to arrive at the total using their worksheet starting in Part III of schedule C, you would have:

 

Line 35 Beginning Inventory $0 (assume you owned no comics in this scenario)

Line 36 Purchases $1,000 for ASM #1

Ignore Lines 37-39 for now as they don't really pertain to this simple example.

Line 40 is the total of Lines 35-39, which is $1,000 in this case

Line 41 Ending Inventory $0 (we sold the ASM #1)

 

COGS is Line 41 ($0) less Line 40 ($1,000), which gives you a COGS of $1,000.

 

Adding in the AF #15 purchased gets you to the same number. The things that change are Purchases (now $2200) and Ending Inventory (now $1200 as you still own the AF #15). You still get $1,000 in COGS, but Line 40 is now $2200 and Line 41 is $1200. The difference is still $1,000.

 

[MyComicBookArt]

I will preface anything I say here that I am not a tax professional. I have filed many of these though (but I paid someone to do them) and analyze businesses for a living. That being said, always ask a tax professional.

 

On Schedule C, the $1,000 expense would be "Cost of Goods Sold," which is line 4. You would not use line 39. All the IRS wants is the total. But, to arrive at the total using their worksheet starting in Part III of schedule C, you would have:

 

Line 35 Beginning Inventory $0 (assume you owned no comics in this scenario)

Line 36 Purchases $1,000 for ASM #1

Ignore Lines 37-39 for now as they don't really pertain to this simple example.

Line 40 is the total of Lines 35-39, which is $1,000 in this case

Line 41 Ending Inventory $0 (we sold the ASM #1)

 

COGS is Line 41 ($0) less Line 40 ($1,000), which gives you a COGS of $1,000.

 

Adding in the AF #15 purchased gets you to the same number. The things that change are Purchases (now $2200) and Ending Inventory (now $1200 as you still own the AF #15). You still get $1,000 in COGS, but Line 40 is now $2200 and Line 41 is $1200. The difference is still $1,000.

That was incredibly helpful! Thanks for taking the time to respond.

-Michael