Selling on PayPal Just Got More Costly (at least in the US)

[Ntrepid]

(Maybe I should title this thread “Another reason to use the Friends & Family Option in PayPal”)

So this morning I got an email from PayPal indicating the 1099 Form for things I’sold and accepted payment via PayPal.

So in addition to fees, here in the US, we get the added pleasure of paying taxes on these sales. :-(


Robert

 

[gerryvz]

I wonder if it is a threshhold of transaction dollars that triggers a 1099.

 

[gsxr]

Robert, it's because you are in VA (I think). Gerry may have similar issues, but F&F payments may not count towards the total.

Will PayPal report my sales to the IRS? | PayPal US

IRS new reporting requirement for payments for goods and services lowers the threshold to $5,000 USD for calendar year 2024, $2,500 for calendar year 2025, or $600 for calendar years 2026 and beyond. PayPal will report these transactions.

www.paypal.com

PayPal will track the payment volume of your account to check whether your payment volume exceeds both of these levels in a calendar year:​

• $20,000 USD in gross payment volume from sales of goods or services in a single calendar year
• 200 payments for goods or services in the same year

​

Some US States require merchant reporting at a lower threshold:​

• Vermont, Massachusetts, Virginia, Maryland: $600 USD in gross payment volume from sales of goods or services in a single calendar year regardless of the number of transactions;
• Illinois: $1,000 USD in gross payment volume from sales of goods or services in a single calendar year with at least 3 payment processed

 

[8899]

(Maybe I should title this thread “Another resin to use the Friends & Family Option in PayPal”)

So this morning I got an email from PayPal indicating the 1099 Form for things I’sold and accepted payment via PayPal.

So in addition to fees, here in the US, we get the added pleasure of paying taxes on these sales. :-(


Robert

I received the same email from PayPal this morning.

 

[Ntrepid]

Hello Venmo!


Robert

 

[gerryvz]

I haven't received anything, but pretty much 100% of my transactions have been Friends and Family.

I'm sure the Price is Right game pushed you over the edge for 2020, @Ntrepid

 

[alabbasi]

Well if you're going to give Jeff Bezos a tax cut, you gotta get the money from somewhere else. Don't you know that we have free cheques to hand out?

 

[Jlaa]

https://www.reddit.com/r/personalfinance/comments/l45kpp

 

[gsxr]

PP is counting F+F funds? Srsly? That's nuts. I wonder what state that person lives in. Must be one of the $600 locations.

We started using Zelle recently, seems good so far... anyone else have experiences with alternate methods of funds transfer? Obviously with something like Zelle, as a buyer you need to trust the seller, as there's no recourse to get your $$ back.

 

[LWB250]

PP is counting F+F funds? Srsly? That's nuts. I wonder what state that person lives in. Must be one of the $600 locations.

We started using Zelle recently, seems good so far... anyone else have experiences with alternate methods of funds transfer? Obviously with something like Zelle, as a buyer you need to trust the seller, as there's no recourse to get your $$ back.

I have used Zelle a couple of times to buy and sell cars, believe it or not. I paid for a portion of the E420 using Zelle and had a guy pay me for my former ML500 using Zelle. There are limits to the amount of funds you can transfer, but if it's below that it seems to work well.

I felt sort of stupid when the guy who bought my ML500 said, "I'll Zelle you the money."

Me: "It's a cash sale, buddy."

Him: "Yeah, and you can stand here with me and wait until your bank confirms the funds are on deposit."

Me:

Dan

 

[gerryvz]

I did some research into this via the PayPal web site.

It appears that the 1099 appears to transactions that are classified at the time they are made as “goods and services,” and that “friends and family” transactions may not count against this total.

I have not received any sort of notice (yet?) of a 1099 from PayPal, despite Maryland’s low threshold. This may be because I insist on all transactions to me being F&F, and I refunded plenty of “goods” payments last year and had people resend them as F&Fs. This was mainly so I didn’t have to eat egregious fees from PP, because in many cases Im not making huge margins on my parts (the Lamin-X and data cards come to mind) and having to eat a few bucks on a $35 sale is just not right.

I’ll certainly report back if I do get a 1099. I have never received one in past years from PP, either.

By the way, Venmo and other payment processors operate under the same rules. They have to, as the IRS and in some cases the states dictate the rules.

From my research, the kicker is the “goods and services” payments. If you take payments as “Friends and Family” then you should be OK, because it’s not classified as a goods and services sale.



More research CONFIRMS that PayPal, Venmo and others consider all transactions marked as “goods and services” to be business-related, and therefore additive toward a 1099-K and reportable to the IRS.

“Friends and Family” payments are NOT considered as business payments, are not added toward 1099-K totals, and are not reportable to the IRS.

So, the ticket is with PP. Venmo, Zelle and others is to receive ALL payments as F&F. Then you won’t have issues.

 

[gsxr]

From what I can tell, Zelle is designed for F&F use only, and should not have tax implications. Their TOS has language to this effect.

Zelle Network® User Service Agreement | Zelle

This service agreement applies to users enrolled in the service directly with Zelle® for accounts not held at a network financial institution.

www.zellepay.com

 

[Jlaa]

Now I understand why Bitcoin and services like Chime are often used by the unsavory to launder money.

 

[JC220]

Its very simple. If I sell a few parts on Ebay and get pulled on the taxation as if it is a business then I will give my accountant the receipts for all the parts I buy on the shelf in a tax year and easily offset the cost. Indeed tax man would owe me a refund!

 

[gerryvz]

From what I can tell, Zelle is designed for F&F use only, and should not have tax implications. Their TOS has language to this effect.

Zelle Network® User Service Agreement | Zelle

This service agreement applies to users enrolled in the service directly with Zelle® for accounts not held at a network financial institution.

www.zellepay.com

Somehow, I don't believe that buying a car from a stranger is a "friends and family" type of transaction......

 

[gsxr]

Somehow, I don't believe that buying a car from a stranger is a "friends and family" type of transaction......

Why would it matter?

 

[gerryvz]

Why would it matter?

I guess I must be an oddball, but I don't consider a stranger I've never met to be a "friend" or "family." Per @kiev's point though, reality could be very different than my beliefs, in this age of social media "friending."

 

[gsxr]

From the Zelle link above. If you don't trust the seller, why are you buying from them?

"THE SERVICE IS INTENDED TO SEND MONEY TO FRIENDS, FAMILY AND OTHERS YOU TRUST. "

 

[ace10]

A really cherry 80 series landcruiser popped up two months ago. established forum member who wasn't totally aware of current values. i tried to buy it within minutes. older gentleman. he wanted to use Zelle. which I don't have. and he didn't want to use a wire. so hours ticked by and then he pulled the deal. smart move on his part. i'm 99% certain he kept the truck.

my typical transaction for sight-unseen vehicles involves locking the deal in with a paypal deposit (not FF), then working out the final pay.

 

[Jlaa]

A really cherry 80 series landcruiser popped up two months ago. established forum member who wasn't totally aware of current values. i tried to buy it within minutes. older gentleman. he wanted to use Zelle. which I don't have. and he didn't want to use a wire. so hours ticked by and then he pulled the deal. smart move on his part. i'm 99% certain he kept the truck.

my typical transaction for sight-unseen vehicles involves locking the deal in with a paypal deposit (not FF), then working out the final pay.

I wonder why he was reluctant to receive a wire? Perhaps because a wire requires giving out your account number?
Does Zelle require giving out the account number?

 

[ace10]

I wonder why he was reluctant to receive a wire? Perhaps because a wire requires giving out your account number?
Does Zelle require giving out the account number?

He had never transacted a wire. Ever. So yes, the account info was a concern. Though he just seemed more comfortable with Zelle.

I've done a couple of member-to-member transfers (2 large Credit Unions) and those felt low risk for both parties.
Keep accounts open at the largest of the large CUs and then you have another way to transact.

On the other side, I've had buyers/sellers want to do similar transfers within their bank. I don't use banks. Haven't in twenty plus years. And some brands aren't even in my market.

 

[gerryvz]

Back in about the 2000 time frame, I bought my 450SEL 6.9 using a bank transfer. I had flown from Portland down to San Francisco to see the car, and meet the seller. Turned out that both the seller and I had Wells Fargo as our bank, so it was as easy as visiting a Wells Fargo branch, and initiating a (free and near-instant) transfer of funds from my bank account into his.

Nowadays, of course, you can do this BETWEEN banks as well, but it takes a day or two.

The only time I ever do a formal wire transfer (which is about once every 5 years) is when I'm sending large amounts of money to a non-US entity. For typical foreign transactions in small amounts with forum members and friends (for example the E420 instrument cluster I just sent to Alastair in the Channel Islands/UK), PP works excellently. Not sure if Venmo or Zelle are available outside of the US.

 

[Jlaa]

Back in about the 2000 time frame, I bought my 450SEL 6.9 using a bank transfer. I had flown from Portland down to San Francisco to see the car, and meet the seller. Turned out that both the seller and I had Wells Fargo as our bank, so it was as easy as visiting a Wells Fargo branch, and initiating a (free and near-instant) transfer of funds from my bank account into his.

Nowadays, of course, you can do this BETWEEN banks as well, but it takes a day or two.

The only time I ever do a formal wire transfer (which is about once every 5 years) is when I'm sending large amounts of money to a non-US entity. For typical foreign transactions in small amounts with forum members and friends (for example the E420 instrument cluster I just sent to Alastair in the Channel Islands/UK), PP works excellently. Not sure if Venmo or Zelle are available outside of the US.

For bigger ticket items that happen maybe only a couple times a year (let's arbitrarily define "big ticket" as a couple thousand dollars and greater) I don't know why wire-transfers are not more popular. In my experience, a wire takes at most a day to process, and there's usually no inbound wire fee. There is typically an outbound wire fee, but if one is a valued customer a the bank, then that outbound fee is also typically waived.

 

[gsxr]

For bigger ticket items that happen maybe only a couple times a year (let's arbitrarily define "big ticket" as a couple thousand dollars and greater) I don't know why wire-transfers are not more popular. In my experience, a wire takes at most a day to process, and there's usually no inbound wire fee. There is typically an outbound wire fee, but if one is a valued customer a the bank, then that outbound fee is also typically waived.

As a seller, I don't see a down side, nor risk, for receiving wire transfer as payment. Once you confirm funds are in your account, you turn over the vehicle, keys, and title. The buyer may pay a small fee but it should be in the ballpark of ~$25 for domestic transfer, assuming it isn't waived.

 

[gerryvz]

The problem with wire transfers is that they are a pretty big PITA logistically, and not cheap. Most main-line US banks charge like $35 or more as a fee for an outbound wire transfer. And yes, an overseas wire transfer is generally an overnight type of thing. But it is guaranteed to work. As the @Jlaa said, if you are say a Chase Private Client or have similar status, then they waive the wire fees.

Perfect for when one is transferring tens of thousands of dollars to one's bank account in Switzerland, Luxembourg, or British Overseas Territories like Jersey, Bermuda or the Cayman Islands.

I hope you Richie Riches who are doing this, are reporting your offshore bank accounts to the IRS

 

[liviu165]

This is a very interesting thread. Although not related to the discussion at hand, I would like to ask please that when the 126board opens up, to have the non-technical threads, not-124 or not-126 model related threads (like this one) common with the ones on 500Eboard. Basically those threads simultaneously on both sites, with dynamically updated posts. @gerryvz, I hope that will be possible.

 

[Jlaa]

As a seller, I don't see a down side, nor risk, for receiving wire transfer as payment. Once you confirm funds are in your account, you turn over the vehicle, keys, and title. The buyer may pay a small fee but it should be in the ballpark of ~$25 for domestic transfer, assuming it isn't waived.

In my estimation, a wire transfer is about the safest way to receive funds for a seller. I believe other states like TN, OH, UT have similar laws, but in CA, there is a law known as the "Good Funds Law" (AB512). As applied to real-estate, which are usually large transactions, this law prohibits the use of ACH inter/intra-bank transfers for transacting real-estate as ACH transfers are revocable. Wire Transfers are irrevocable.

The goal of this law was to improve consumer protection (as opposed to protecting title companies).

 

[gerryvz]

This is a very interesting thread. Although not related to the discussion at hand, I would like to ask please that when the 126board opens up, to have the non-technical threads, not-124 or not-126 model related threads (like this one) common with the ones on 500Eboard. Basically those threads simultaneously on both sites, with dynamically updated posts. @gerryvz, I hope that will be possible.

Any request of that type would need to be addressed by @cascade or @xfadmin, as I am not involved.

From a technical standpoint, however, once the schism is made between the two forums, they will be 100% separate and not able to be linked technically, nor operate off of a common database in the back-end. The servers are completely separate in all respects, and are in reality two different machines.

 

[Jlaa]

Perfect for when one is transferring tens of thousands of dollars to one's bank account in Switzerland, Luxembourg, or British Overseas Territories like Jersey, Bermuda or the Cayman Islands.
I hope you Richie Riches who are doing this, are reporting your offshore bank accounts to the IRS

Tax Cheats (from a US perspective) are having a tough time at it, and rightly so. FATCA, passed in 2010, requires that foreign financial institutions (like, for example, a Jersey-based bank in your hypothetical example) report on assets held by their US account holders. As well, these institutions have now also greatly tightened up their controls on documentation of source of funds.

This is all a good thing, as it makes money laundering harder. Which kind of explains the popularity behind bitcoin and other digital currencies where all that is needed to prove "ownership" to units of "currency" are a phone number or password......

Kind of like the old "bearer shares" concept, where ownership of shares in a company were not registered by the company nor the shareholder. Just recently, in 2019, Switzerland has abolished the use of bearer shares....... which REALLY drives usage of bitcoin..... I think .....

**** I am not a financial-crimes forensic investigator. I just play one on "500E Board Channel"

 

[maw1124]

**** I am not a financial-crimes forensic investigator. I just play one on "500E Board Channel"

and a very knowledgeable one at that...

maw

 

[LWB250]

I wonder why he was reluctant to receive a wire? Perhaps because a wire requires giving out your account number?
Does Zelle require giving out the

In my estimation, a wire transfer is about the safest way to receive funds for a seller. I believe other states like TN, OH, UT have similar laws, but in CA, there is a law known as the "Good Funds Law" (AB512). As applied to real-estate, which are usually large transactions, this law prohibits the use of ACH inter/intra-bank transfers for transacting real-estate as ACH transfers are revocable. Wire Transfers are irrevocable.

The goal of this law was to improve consumer protection (as opposed to protecting title companies).

In every state I've bought or sold property, title companies have a limit of $5,000 for funding using a bank draft of any kind. Anything above that amount has to be an ABA wire transfer.

I hate doing wire transfers. While there are mechanisms between ABA affiliated banks to recover or return funds, wire transfers, are, for the most part, irrevocable. It's scary to me to do them as I want to check every single entry to make sure it's correct. Something a little frightening about sending funds in the six digit range out into the ether...



And I'm a member of a second generation corporate banking family, so it's not like don't I know how the system works.

 

[maw1124]

Yeah... that Fed reference number is literally priceless at times.

maw