Taxes on BST sales

I received this message from Paypal after a BST sale I made (see pic). Anybody deal with this before? A few questions:

• Every BST sale I have made and probably ever will make is at a loss (i.e. I am selling something less than what I bought it for). Are taxes still owed on such transactions above $600 in aggregate proceeds? This to me, defies logic.
  
• Paypal says if the SS number is not provided, they will send 24% to the IRS direction (see picture below). If one provides a social security number to Paypal, what happens? 
  
• If a 24% tax is indeed levied on gross proceeds received via Paypal G&S transactions, I believe this will substantially reduce the attractiveness of selling items (at breakeven or a loss) in this way. Should established / trusted DFS members be permitted to sell via FF (or Venmo)?
  

Hopefully someone can educate me on this as I am sure other members have encountered this issue. Thanks in advance for your insights!

Looks like I found an answer. Personal items sold at a loss are not taxed (but the losses are not tax deductible), but this does require some paperwork. 

"On Schedule 1 (Form 1040): Enter the Form 1099-K gross payment amount (Box 1a) on Part I – Line 8z – Other Income: "Form 1099-K Personal Item Sold at a Loss, $700" Offset the Form 1099-K gross payment amount (Box 1a) on Part II – Line 24z – Other Adjustments: "Form 1099-K Personal Item Sold at a Loss $700""

Any other thoughts welcome, including whether trusted members should be given some leeway to accept FF. 

Thanks!

Can you break up a transaction into multiple sub $600 ones and not pay this ridiculous tax?

Can you break up a transaction into multiple sub $600 ones and not pay this ridiculous tax?

No, they aggregate the transactions. So if you sell 2 used razors and 1 used brush at $200 each, for example, that would trigger it. The threshold used to be $20,000, but it is $600 now.

I was wondering when this would start becoming an issue, this was due to the recently enacted "American Rescue Plan" act signed 2 years ago. It was supposed to take affect last year but they postponed it. It was always supposed to be taxed, now they are making the payment platforms report it.

Here is an excert from an article.

"Before 2022, third-party transactions for business owners and side hustlers followed different thresholds: individuals needed to report gross payments exceeding $20,000 and report earnings if they had more than 200 such transactions, according to the IRS. But as a result of the American Rescue Plan Act, any transactions made after March 11, 2021 that exceed $600 must be reported to the IRS, regardless of how many of those transactions you’ve had.

These earnings were already taxable so this is not a change in tax law, but rather just a reporting change."

The problem I've had with this is they start doing this and so who of us has kept record of how much we paid for these items over the years of purchases. Not having record, how are we to figure what was actually a profit if any. most of us are selling for less and therefore lost money rather than making money to be taxed on. I assume this was for people selling on eBay etc as a business. Unfiortunately it has scooped up ones like us in hobbies turning over goods like you would at a yardsale. I guess they will be taxing yardsales next.....

It is pretty easy to have an accountant offset it.  Since all of my shaving purchases are made on a credit card, I can produce purchases to offset any gains for what I sold.  In my entire life, I made 50 dollars on one razor, pre fees and shipping. 

In other words, I’m always at a loss and I have a really good CPA.

There have been some members who I know that have requested cashiers checks or money orders.  Anymore it’s a pain in the butt, so if PayPal doesn’t work, I won’t buy. 

F&F requests, for an expensive razor, no way.  For a soap lot, I’ll toss in 2-3 bucks.   Just a hassle. 

I did have one guy request to pay me with Apple Pay and it worked - it was around 50 dollars.  

Venmo - I hate it if I don’t know you but they also have G&S now.  

Zelle - I like for F&F, but I need to know you. 

Good old wire transfer works.  But most people cry about fees on their end.  

Bottom line, nothing but PayPal or Venmo G&S should be used if you don’t know the buyer or seller.  Beyond that, you would need to write a legal Bill of Sale and transact against it with a PO.  Seems like a lot of hassle, doesn’t it?  

So, PayPal it is. 

And I’m not a lawyer or accountant, this is not legal or tax advice.  Consult your professional with questions as to your situation.

https://www.irs.gov/newsroom/form-1099-k...ns-general

Good point dtownvino . I suppose it is not that much if a hassle. As you say, all purchases are on credit card and easy to audit / provide receipts for the offset.

I was wondering when this would start becoming an issue, this was due to the recently enacted "American Rescue Plan" act signed 2 years ago.  It was supposed to take affect last year but they postponed it.  It was always supposed to be taxed, now they are making the payment platforms report it.

Here is an excert from an article.

"Before 2022, third-party transactions for business owners and side hustlers followed different thresholds: individuals needed to report gross payments exceeding $20,000 and report earnings if they had more than 200 such transactions, according to the IRS. But as a result of the American Rescue Plan Act, any transactions made after March 11, 2021 that exceed $600 must be reported to the IRS, regardless of how many of those transactions you’ve had.

These earnings were already taxable so this is not a change in tax law, but rather just a reporting change."

That is interesting Itsallgravy … just a reporting change, not a change in tax law. Thanks

This is ridiculous. Maybe the government should start working about spending less instead of trying to get money from the sale of personal shaving goods.