Quick Question about selling and payment methods?

[Hugh Smitham]

Hi,

I'm considering selling a box full of parts I no longer need. In the past I have taken payment via PayPal which was convenient for both the buyer and myself. However, now I believe all 3rd party banking services will be required to issue a 1099k for anything over $600 in a calendar year. I thought this was going into effect last year but I think it wasn't implemented.  I think this year is different. 

How are people dealing with this these days? I am considering only accepting a check for payment, this will obviously slow the process down as I would not ship the product till it clears. 

I understand that you can report to the IRS that you sold said items for a loss but that requires additionally accounting, which I can do but it seems tedious. 

Perhaps, I'm making too big a deal about this?

Anyway, I appreciate any constructive feedback.

Best Regards,

Hugh

[Chester]

IANAAccountant but the main IRS info page makes this pretty clear, I think:

Understanding Your Form 1099-K | Internal Revenue Service (irs.gov)

It is effective for TY 2023. You'll get issued a 1099K for any "Goods & Services" payment through a payment app/processor like PayPal. But not if it's Friends & Family, it seems.

They have instructions for noting the cost of the personal item you sold at a loss, if that is the case, so that you are offsetting the income with the cost and thus not gaining any net income from the sale. (It also clarifies that a loss on the sale of a personal item is not deductible, but a gain is taxable.)

Seems like a pain if you have a whole bunch of these sales and do your own taxes. But not a big deal if you do your own taxes and only make a handful of these transactions per year.

I'm pasting the most relevant section below.

Chester

SF Bay Area

If You Sold a Personal Item

You may get a Form 1099-K if you received payments for a personal item you sold through a payment app or online marketplace.

A personal item is something you owned for personal use such as a car, refrigerator, furniture, stereo, jewelry or silverware, etc.

How you report these payments on your tax return depends on whether you sold the item at a loss or a gain. If you sold a mix of personal items at a loss and a gain, report them separately.

Personal Items Sold at a Loss

A loss on the sale of a personal item isn't deductible.

If you sold personal items at a loss, you have 2 options to report the loss:

Report on Schedule 1 (Form 1040)

You can report and offset the Form 1099-K gross payment amount on Schedule 1 (Form 1040), Additional Income and Adjustments to IncomePDF.

Example: You receive a Form 1099-K for selling your couch online for $700, which is less than you paid for it.

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"

These 2 entries result in a $0 net effect on your adjusted gross income (AGI).

Report on Form 8949

You can also report the loss on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D, Capital Gains and Losses.

[Garth]

If you use friends and family this does not apply. I've only ever used F&F myself and without issue.

[Hugh Smitham]

Garth,

Yes, F&F works but there are some buyers that want the buyer protection not offered via F&F.

On the other hand, if that becomes an issue I could just not sell to that individual buyer. 

Hugh

On Tue, Jun 27, 2023, 1:16 PM Garth <gart...@gmail.com> wrote:

If you use friends and family this does not apply. I've only ever used F&F myself and without issue.

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