So, Paypal GIFT does count as income

[mjmjr25]

UPDATE 5.2.16 - RESOLVED - No tax due. Details in post #80.

I received a letter in the mail today from the IRS. My 2014 filing was reported to have missed $23K in income.

Looking through the report the entire chunk of missed income was from paypal.

In 2014 I did have $23,000 in positive balance payments.

Of those (to the nearest $100):
-$11,800 were gift payments for group buys on neo
-$1,500 were goods payments for group buys on neo (buyer chose to pay as goods and pay fee)
$1,100 were goods payments for group buy items for domestic shipping
-$3,500 were payments recieved for friends w/o paypal accounts where I acted as a middle man
-$1,200 was me transferring my windy cabs to another buyer
-$2,300 were 4 high value sales of AES / PCB's
-$1,700 were generic buying and selling of stuff on forums and ebay

In my view - the gifted payments are easy to prove there was no income. There is a series of gift payments received ($100, $125, $300, $300, $55, $120, $75, $225, $355, $175, etc) and then a day or two later an amount equaling the gifted amount (exactly) leaves my account, as GOODS to a BUSINESS.

So, the question is - will the IRS care? Do I bother going through the paper-mail dispute, or should I go direct to a tax service? (I use HR Block tax software to file each year).

Does it matter that I didn't receive a 1099 from paypal?

At this point, I have until May 4, 2016 to send a check of $6,973 (which includes interest for the past 1+ year), set up a payment plan, or mail in a dispute to their findings.

 

[DNSDies]

Paypal lets you access your 1099K on your account now:
https://www.paypal.com/selfhelp/article/FAQ919

 

[GohanX]

I have no idea, but if it turns out that you do have to pay extra taxes on this stuff I'm down with throwing a few bucks your way so you aren't paying out of pocket. I'm sure I'm not the only one, you do this site a tremendous service.

 

[skate323k137]

I'd talk to an accountant. It's entirely possible you could create something like an LLC or sole proprietorship that operated with 0 profit for the year. Not sure if you can do it retroactively though... so yeah, talk to an accountant.

If you get fucked over in the end, I've got a few bucks on it too.

 

[Kid Panda]

I'll throw some money too.

 

[Jibbajaba]

I have no idea, but if it turns out that you do have to pay extra taxes on this stuff I'm down with throwing a few bucks your way so you aren't paying out of pocket. I'm sure I'm not the only one, you do this site a tremendous service.

I don't think I ever got in on one of his group buys and even I'd be willing to help out. It's kinda creepy that the IRS knows about that shit in the first place.

 

[Opethian]

I got a hundo with your name on it if it helps. thanks for all the groups buys over the years

 

[MCF 76]

Damn bro that's some b.s. right there, them greedy bastards trying to hunt down every penny they think they can get. I got you back as well my friend you have got me a ton of stuff over the last few years.

 

[wyndcrosser]

Did you link Paypal up to your social security number?

 

[mjmjr25]

Thanks guys - i'm very grateful for the offers and I really hope it doesn't get to a point where i'd need to ask for help, but the offers are incredibly generous.

My concern is two-fold - if i'm on the hook for this, it'll be a similar deal next year. About the same amounts give or take a few hundred here and there.

I had heard if you hit 20K and 200 transactions it will be turned over to IRS, but the language on gift was vague and i've heard it both ways, but this confirms it.

I did meet with an HR Block person today - I don't feel terribly confident using them, so am going to look at other options tomorrow.

In my limited google research from others who've gotten letters in somewhat similar circumstances - at a minimum I SHOULD be able to claim the items i've imported as businesses expenses - obviously there isn't net income on something that was bought for $100 and sold for $100. Also, the actual business that did have net income received that payment as goods and paid their paypal fees and country's taxes on it. So, that may count for something, but how knows.

Right now i'm supposed to be printing out details of every payment sent and received (per the HR Block gal) so they can be itemized as business expenses and payments. Theoretically i'll have 21K or so out and 23K or so in, so the tax would only be on 2K or whatever, the personal stuff sold on forums and ebay, etc.

@wyndcrosser - never explicitly on my social, but my CC and Bank are linked, so i'm sure they have it.

 

[LegoSlug]

That's crazy to hear. I have not linked my pp account to my social, I didn't even know that this was possible for them to do. I do wonder though, how much money has to be involved for them to bother sending out a letter.

Aren't you able to write off all this by having it as a "hobby"? I am sure you have spent more than just 21k on arcade stuff and video games. I mean, you also buy video games with your credit card and debit card, correct? You might be able to make up the other 2k of the 23k by showing proof of additional transactions. Although at 2k it might be below the taxable threshold.

Hope you get everything sorted out man, keep us updated.

 

[Yoshi]

I believe after a certain date they required the SSN. My account was opened in 2000, so they will never get mine.

 

[kuze]

I got a hundo with your name on it if it helps. thanks for all the groups buys over the years

^ Same. Sorry to hear that the group buys are now coming back as a PITA.

Hopefully it will be relatively straightforward to get sorted out for you.

 

[mjmjr25]

The criteria for reporting to IRS is $20,000+ in payments received AND 200 or more transactions.

I now have every payment sent and received. Another joke in this is that printing a label on a "goods" payment is counted as a transaction; since your sending to US Postal Service. So taking a payment for a shipping label will create (2) transactions.

@LegoSlug - yeah, that's the hope. At this point ($20,000) i've technically reached small business status and no longer hobby. So the idea now is I have to prove that money in went right back out. It's somewhat easily provable, but also not. For instance, I can show 25 payments of $100 for SD2SNES/N64 Flashcarts, all in a 3-4 day period. Then I can show a payment to retrogate for $2,500. Then I can show 25 US Postal Service payments of $3. So, all the information is there, it's just a matter of how how easy that is going to be. Unfortunately, with gift payments, there isn't a "goods item" listed, so it's my word that the $100 payment actually went back out and I was essentially a middle-man and no net income made.

Re-reading paypal's language on gift payment - they say it doesn't count as net income, only to end the statement by saying they review them and they can then be held against you as income. This is a hilarious part - it's random. Some gift payments on one day for the same buy count as income, others weren't, they were not reported as income, just straight up gift.

 

[lolifoxgirl]

Hope this works out for you. Couple bones on me if the tax man comes for you.

 

[ballzdeepx]

Damn Mike, sorry you have to deal with this headache. I'm also willing to help if it comes to it.

 

[mjmjr25]

Thanks everyone, sincerely.

I'm only looking for advice (and to alert others to the possibility of this happening to them) only to be met with great offers of help from many friends. I really appreciate it. If I end up on the hook for most / all of it - i'll figure something out. Maybe the collecturd in me will get rid of some meaty stuff. Just have to find a way to collect payments

On the bright side - when I found my 2014 1099 on the paypal site; there was not a form for 2015. So, I have some relief in that worst case scenario, it should only affect this one year.

 

[Yodd]

That sucks dude. Hopefully the fuckers don't come after me since I did all those group buys too.

 

[mjmjr25]

That sucks dude. Hopefully the fuckers don't come after me since I did all those group buys too.

You can check easily; apparently:

PAYPAL-->ACTIVITY-->STATEMENTS (far right in blue text, upper middle)-->TAX DOCUMENTS

If your page is empty - you're good. If you see a 2012, 2013, 2014, or 2015 - then it means they sent at least 20K of income to the IRS. Click on the year to get the 1099.

 

[theMot]

NG.com tax bust. Nice.

From what I understood it is anything over 10k in income from Paypal and they send it to the tax department, that is how it works here anyway.

Maybe in future try getting some people who you know and don't mind to just pay to your bank account directly? Spread it between paypal and your bank like that.

 

[KalessinDB]

Add my name to the Cover Mike Fund if it becomes necessary. I know between all of my crap a reasonably chunk of that 20k is my responsibility. Good luck, man

 

[Mugicha]

and I'm in to help as well.

 

[aoiddr]

and I'm in to help as well.

Ditto here.

(Let's hope you can figure out an alternate payment method, because getting a ton of new Gift tax help payments would mean more 2016 transactions! @_@)

 

[CORY]

At this point, I have until May 4, 2016 to send a check of $6,793 (which includes interest for the past 1+ year), set up a payment plan, or mail in a dispute to their findings.

 

[Liquid Snake]

Add me to the contribution list if mjmjr25 needs help!!!!!!!