Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
guysmiles89
New Member

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!

I got a surprise of a 1099K in the mail this weekend from Paypal, I live in Mass. I am on SSI disability, I have 2 kids and single. I sold personal items around the house, used clothes, books, movies, glass items, really junk. I used the profit to catch up on my electric bill which was ready to be shut off. My total with Paypal was $2500.00 for the year, this does not including shipping fees, PayPal fees, Ebay fees, shipping supplies like mailers or tape.  State of Mass wants me to claim any sales over $600.00. So, I just went on turbotax, filled in all the info, well I get a refund! Remember, I would not be filling taxes at all this year because my only income is SSI disability, I think the 1099K is making standard deductions and child credit kicks in. Federal refund is $800 and the state is $402. So the state of Mass wants me to claim this $2500.00 and then give me a refund on it, seems like the state is losing money and not making it off Ebay sellers. I would prefer to not file my taxes at all. Id be OK with no taking the $1200.00 in refunds so it doesn't mess up my SSI. What is the best way to handle this?

5 Replies
DanielV01
Employee Tax Expert

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!

Don't file.  The 1099-K does not require you to file.  What it is is a statement required by Credit Card merchants to report the fact that they sent you over $600 in the year.  But that doesn't mean the money is taxable or even reportable.  In your case, it's not.  The reason is that the sales you made were on your own used items.  These items have lost value over time, and you did not gain any money from the sale.  Even if you did, you would not have earned income (you do not have a business).  And since the rest of your income is SSI (also not reportable), you don't have a filing requirement.

And truth be told, you're correct.  You would have more potential issues with the IRS for filing than if you simply don't report it.  But keep this information with your records.  If the IRS were to ask questions why you didn't report the income, you can state that this is why.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
uniquestyle6
New Member

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!

Hello,

I have a similar question.  FB marketplace requires you to input your SSN after sales total $600 or more regardless of your state residence.  Their policy states it is required by US law (none are referenced) and for 1099 purposes.  However they include the shipping costs (paid by the buyer directly to FB who I assume has a contract with USPS and THEY make money on) along with adding the sales tax that they are collecting on your behalf and remitting to the state.  None of that money is ever deposited into a seller's account.  I have had about $450 in sales based on added the listing prices (before paying the FB commission) but they are stating that my sales have hit $600 by adding on the shipping and collected sales tax as mentioned above.  This is beyond frustrating as we are selling preowned personal items at a loss similar to having a yard sale.  I am uncomfortable about providing my SSN but our payout is currently frozen until I provide it and the items have already been shipped. 

 

Since I am being forced to supply my SSN, won't not reporting 1099K income on a tax return result in a paper audit where you will need to explain why this "income" is not actually income and therefore not listed in your tax return?  

Critter-3
Level 15

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!

https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-1099-k-in-turbotax-online...

 

 

 

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

               


Opus 17
Level 15

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!

The IRS will expect you to report the 1099-K in some manner.  Let's start from the top:

 

If you are buying and selling stuff online, it is either a hobby or a business.  It is a business if you are engaged in an "ongoing trade or business" and conducting your affairs in a businesslike manner (advertising, seeking new business, trying to make a profit, etc.)  You report your business income and expenses on schedule C and the net profit is added to your other income for income tax purposes and you also pay self-employment tax.

 

Let's assume this is hobby, based on your question.  You only have a taxable gain (profit) if you sell the items for more than you paid for them.  Most of the time this is not the case for selling used clothing and household items.  But, you still need to keep accurate records that include the following information: item description, date you acquired it, how you acquired it, price you paid (or information about the value if it was a gift or inheritance), date sold and selling price.  Keep copies of checks or print your PayPal statement and highlight it so you can track each payment to your item listing the sales records.  Keep copies of your FB ads and so on.  You can estimate or use your best recollection if you don't have the original receipts but you must have some kind of written record, even if it's from memory, that will show the IRS that you are selling used items that you previously purchased.  

 

As long as you sell items for less than you paid, you don't not have a taxable gain.  But, you can't deduct a loss.  If you sell items for more than you paid, the difference is taxable.  As a hobby, you are not allowed to deduct expenses like shipping. 

 

Let's take the situation where you are selling used items as a hobby and most of the items are sold for less than you paid.  You don't have to list these items on your tax return, but you do need to keep a spreadsheet or other records.  If you sell any items for a gain, you will list those items on the "Sales of assets and other property" section of the Income page, they will go on schedule D.  There are three options to deal with the 1099-K.

1. List the 1099-K as income, say it was a hobby, not for profit, not a business.  It should go into the program as "other income" and not as a schedule C business.  Then, go to the "other uncommon income" section at the bottom of the Income page and enter an item of "other income" that is a negative number to balance the 1099-K.  Use a reason like "1099-K offset".  That will zero out the income.  The IRS may send a letter asking for an explanation.  If they do, you will send a letter explaining the situation and a copy of your records that proves that the 1099-K money was not actually taxable income because the proceeds were less than your original costs. 

 

2. Ignore the 1099-K.  The IRS may send a letter asking for explanation. Respond as above.

 

3. Don't enter the 1099-K in Turbotax.  Instead, print your return and file by mail.  Attach a copy of the 1099-K and a 1 page letter explaining why you did not include it as taxable income.  Don't include your proofs, keep them available in case the IRS asks later.  You won't e-file in this situation. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Massachusetts 1099K from Paypal, no income, if I file this 1099K it gives me $1800.00 in refunds, I have 2 kids and would be head of household. HELP!


@Critter-3 wrote:

https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-1099-k-in-turbotax-online...

 

 

 

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……


I doubt that selling $600 of used items on FB marketplace counts as an "ongoing trade or business."  But it certainly does cross that line for some people. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
v
Privacy Settings