Author Topic: 2022 PayPal taxes  (Read 830 times)

Jaboticaba45

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2022 PayPal taxes
« on: November 25, 2022, 12:24:07 AM »
I know we all use PayPal and I read today that they will charge taxes on all earning over $600
Even a kid like me can earn money like that…
Well that sucks…
If anyone want to elaborate on this more or explain it more feel free to.
https://www.paypal.com/us/cshelp/article/how-does-paypal-report-my-sales-to-the-irs-what-are-the-form-1099-k-reporting-requirements-help543
I guess it can be bypassed by friends/family

Giant Gecko

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Re: 2022 PayPal taxes
« Reply #1 on: November 25, 2022, 12:48:16 AM »
With today’s inflation the threshold should be 3 times that. What’s going to happen is hobby sellers trying to recoup some expenses are going to stop selling and many businesses start as hobbies so they will decline too long term. Someone could form a LLC to write off all of the expenses which for many is more than their profits but after 2 years, if I can recall, they have to show a profit to keep it.

spaugh

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Re: 2022 PayPal taxes
« Reply #2 on: November 25, 2022, 01:56:53 AM »
You won't owe anything if all you made was 1000$ or something close to that.  You are still supposed to file a return though.

You don't need an LLC to write off expenses either.  You can write off any fertilizers or plants etc and do it all as a sole proprieter.  Just keep your receipts. 

You paypal earnings are personal income from your sole proprietorship and you can deduct all the plants and fertilizers etc you bought. 

Welcome to being a grown up, and dealing with the government. 
Brad Spaugh

spaugh

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Re: 2022 PayPal taxes
« Reply #3 on: November 25, 2022, 02:02:04 AM »
That said, you could probably do nothing and they won't ever bother you for such a small amount.
Brad Spaugh

Giant Gecko

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Re: 2022 PayPal taxes
« Reply #4 on: November 25, 2022, 09:15:15 AM »
https://turbotax.intuit.com/tax-tips/self-employment-taxes/4-tax-tips-for-money-making-hobbies/amp/L89qz1GNj

Hobby expenses can’t be itemized after 2018, only standard deduction that everyone receives. I had last year’s taxes done by H&R Block and my tax preparer said I couldn’t deduct my hobby expenses. I just think it should be more than $600, nobody is making a living off of that. Also most of the items sold by average folks were paid with $ already taxed to begin with.

FloridaManDan

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Re: 2022 PayPal taxes
« Reply #5 on: November 25, 2022, 10:03:00 AM »
You won't owe anything if all you made was 1000$ or something close to that.  You are still supposed to file a return though.

You don't need an LLC to write off expenses either.  You can write off any fertilizers or plants etc and do it all as a sole proprieter.  Just keep your receipts. 

You paypal earnings are personal income from your sole proprietorship and you can deduct all the plants and fertilizers etc you bought. 

Welcome to being a grown up, and dealing with the government.

Yeah I made my eBay account to offload a bunch of personal crap when i moved early 2022, they were very straight up that the $20k -> $600 taxable income reporting requirement was a hot load from the govt. The website even told me to contact my local politicians and complain, not that it would do anything.

Like spaugh mentioned, keeping track and writing off business expenses is your best bet. Its not considered a hobby if you have a solid paper trail for profits and expenses, although I suppose each state will have its own definition on that, including business license requirements and the like. If you're making some good money Ryan, may want to even consider a separate bank account for business, that could go a long way. Atleast the state of TN doesn't have income tax.

IRS mentioned hobbyist tax deductions might make a reappearance in 2026...  ::)

driftwood

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Re: 2022 PayPal taxes
« Reply #6 on: November 25, 2022, 12:58:47 PM »
This is mainly for businesses selling goods and not reporting it. Those who have business licenses will be forced to report it. Instead of hiding >20k per cash service

If you are buying and reselling personal items(plants, and dont own a business) you will be fine. If you approach 20,000$ a year in paypal payments they will force you to add an EIN and other business documents. Basically before you could make a chunk on etsy, cashapp, venmo, paypal, and as long as they were under 20,000$ each none would report. But now they are

Its not a tax change; it's a reporting change. If you're self-employed, you should already be paying taxes on your total income, regardless of how you receive your payments for goods and services. The new legislation is not a tax change: It's a tax reporting change so the IRS can keep tabs on transactions made through payment apps that often go unreported.

It is possible some people may receive the form by mistake for processing a large transaction on a service like paypal/venmo. you sold a car for 20k, or a bunch of old furniture)

driftwood

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Re: 2022 PayPal taxes
« Reply #7 on: November 25, 2022, 01:03:29 PM »
Like others said, if youre approaching a serious amount per year in supplies/expenses.. it makes sense to form an LLC. An LLC that earned 10,000$ and spent 10,000$ or more pays zero in taxes. A self employed person who makes 10,000$ will pay taxes.

Vegan Potato Man

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Re: 2022 PayPal taxes
« Reply #8 on: November 25, 2022, 02:40:02 PM »
$600 is the threshold for 1099 reporting. Anything more than that must be reported to the IRS.

Source: am self employed

Vegan Potato Man

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Re: 2022 PayPal taxes
« Reply #9 on: November 25, 2022, 02:42:35 PM »
https://turbotax.intuit.com/tax-tips/self-employment-taxes/4-tax-tips-for-money-making-hobbies/amp/L89qz1GNj

Hobby expenses can’t be itemized after 2018, only standard deduction that everyone receives. I had last year’s taxes done by H&R Block and my tax preparer said I couldn’t deduct my hobby expenses. I just think it should be more than $600, nobody is making a living off of that. Also most of the items sold by average folks were paid with $ already taxed to begin with.

1099 contractors generally work for more than one entity and receive a 1099 form from each. The IRS wants their money lol. The only way to avoid this would be to get paid cash under the table. But like Brad said, they probably won't go after someone if its a small (ish) amount.

A 1099 contractor that works for only one entity is likely a misclassified employee. (outside of the context of this thread and getting 1099s from selling on paypal)
« Last Edit: November 25, 2022, 02:46:45 PM by Vegan Potato Man »

pagnr

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Re: 2022 PayPal taxes
« Reply #10 on: November 25, 2022, 03:29:19 PM »
The hobby threshold for personal taxes is $5000 in Australia. If you don't include any of that as income you can't claim the expenses or sales tax.
Most people would do ok under that system, except maybe hobby jewellers with high value gold or silver craft materials as their inputs.
About 5 years ago the Australian Govt applied the GST sales tax to overseas purchases via E commerce.
That was under pressure from major retailers to stem E commerce from cutting their margins.
It is still mostly cheaper to purchase from overseas, especially on sale items. Also depends on the currency exchange rate and postal charges which are a rip off.
The GST makes a slight difference, but probably not enough to stop anybody, especially if you can't find something locally.



Galatians522

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Re: 2022 PayPal taxes
« Reply #11 on: November 25, 2022, 05:26:42 PM »
New simplified tax form from the IRS:

Line 1: How much did you make last year?
$__________________
Line 2a: (for filers not using line 2b) Send it in.
Line 2b: Do you have anything left? Send that, too.

Me: >:(  :o   ::)  :-X  :'(
« Last Edit: November 25, 2022, 05:29:15 PM by Galatians522 »

Epicatt2

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Re: 2022 PayPal taxes
« Reply #12 on: November 25, 2022, 08:51:52 PM »
If a hobbyist in Florida is buying tropical fruits, fruit or veggie seeds, or fruit trees in Florida there is no tax on items considered as foodstuffs for personal consumption. 

I know it's true –at least here in Florida– but one may have tp provide an affidavit to verify that what you are buying is to be used to produce food, or is food, for personal consumption.

I'm no expert, but I learned this from the State of Florida department that oversees sales taxes in our State.  They have a detailed document that includes food plants and seeds, showing them as being exempt from sales tax.

This may be useful information for online buyers and sellers in Florida, but of course as mentioned elsewhere in this thread, different States may have different rules.

OK — HTH

Paul M.
==
« Last Edit: December 01, 2022, 02:07:24 AM by Epicatt2 »

cassowary

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Re: 2022 PayPal taxes
« Reply #13 on: November 26, 2022, 02:29:24 AM »
Spaugh got it right on.

Something to add:
You could barter seeds, no sale, no money, no profit, no reporting requirement EVER.
I'v found that only 1/3 barter agreements are held up by the other party (eg. they never send any seeds in return) but that does not matter since IMOE 100% of people who uphold the barter agreement over deliver cause they are the good ones out there. And by bartering I have gotten hold of seeds I could never imagine I would hold.
Simply because some people don't want to so sell super rare seeds they have because another rare seeds in exchange is worth all the effort. Collectomania :D

The money system is based on our inability to trust each other and a bit of greed.

If we "trusted" each other there wouldn't be any money system.
Within a "trust document" there is nothing sold to "beneficiaries" so that's why you can hand over property to descendants tax free inside a trust document". Yes trust is based on trust and if nothing is sold there can not be a profit also.

Barter is a often a "verbal" or written trust agreement so no money needed and no tax to pay cause there would never be any profit because no sale. And proper trusts are private so no need for any reporting unless you choose too for some strange reason.

But this would only work globally if people where on a moral high peak and contributed willingly to society. Sadly we have the force system now (ATO, IRS ) that indirectly "teaches" people to find cleaver ways to contribute less. The most clever paying the least. Wouldn't it be wonderful if tax heaven accounts had lover initial setup fees and low deposit limits so that the working class could join in on the scheme :D  Thou shall not scheme against others, anyone??
Opps can't do that! Would be problematic for amazon, starbucks and alphabet inc. cause none would pay tax then and there wouldn't be any free services for them...

Pagnr,
18200 AUD is the no payable tax threshold, anything above that is taxable even if it's from selling cute cat shirts on cafepress. But one can always argue that there is no income from the cute cat shirts, it's all about words, that's' why lawyers talk so damn well!

definition of income:
"The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments."

It seams more likely to me angry local biz is an escape goat for more taxation schemes from big brother.

You can define the cat shirts as something else then goods or property and your tax free. Just define it properly.

If you buy from a company or sole proprietor that does not meet the 70 000 AUD limit for GST registration then you never pay GST because it is illegal for them to collect it cause they are nor registered.
So for example if I sell seeds annually for less then 70 000 to Australian residents for tax purposes there is no GST for anyone to pay or froward. International sales not included in 70 000 aud threshold only Au residents for tax P.

Kinda makes sense why my.GOV.au does not want small business anymore. GST gallore!

Peace

For seed and plant swap/barter enter “tropical seeds” @ https://publicnote.com/

pagnr

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Re: 2022 PayPal taxes
« Reply #14 on: November 26, 2022, 03:46:48 AM »

$18200 AUD is the no payable tax threshold, anything above that is taxable.

That is the income tax threshold.

The $5000 is the threshold for income from a Hobby before it becomes a business. So if you sell 4999.00 of bonsai trees you can regard that as a hobby without declaring that as income added to your $ 18200. ( I think that is more like $ 20000 now or soon.)
If you register for GST you can claim back against what you have paid and balance that out. The 70000 threshold is voluntary, you can register before that income but for some it is not worth the extra paperwork and compliance and paying 3 monthly instalments.
As you say the AU Govt has pushed itself into the online commerce area and the platforms like e bay and pay pal collect the GST for them, probably because it also ramps their cashflow too.

cassowary

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Re: 2022 PayPal taxes
« Reply #15 on: November 27, 2022, 10:47:54 PM »
Pagnr,
So the $5000 limit must be self assessed as not being income per definition then. One could probably go way over that since it is self assessed or self defined if it is defined as not being income.

It's also based on one test where it is determined whether it is regular business activity or not. Assessing regularity and periodicity.

Peace
For seed and plant swap/barter enter “tropical seeds” @ https://publicnote.com/

pagnr

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Re: 2022 PayPal taxes
« Reply #16 on: November 30, 2022, 05:07:23 AM »
The $ 5000 limit for hobby income is for tax purposes. The problem is if you deposit the $ in the bank and can't account for it in an audit or explain it otherwise.
If you build up savings or make purchases above what is feasible from your income. The problem won't show until you try to save $ or buy big $ items that are obvious.
The Tax dept has numerous ways to monitor transactions and deposits into your bank account,  and can even check your FB page to see how many $ 50 Durians you had stacked on that new Catamaran on Cape Trib Beach. Not a total  joke, they do check that kind of stuff from what I hear.




















Victoria Ave

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Re: 2022 PayPal taxes
« Reply #17 on: November 30, 2022, 11:46:35 PM »
It’s. Damn shame when this is getting rolled out when billionaires and corporations still have every loop hole imaginable

D-Grower

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Re: 2022 PayPal taxes
« Reply #18 on: December 01, 2022, 07:23:03 AM »
It’s. Damn shame when this is getting rolled out when billionaires and corporations still have every loop hole imaginable

The poor will foot the bill for all of the societal programs and expenses so the rich won't be bothered by those pesky taxes. God forbid they pay their (un)fair share like the rest of us struggling to make a living. We are extorted of our time and energies for the greater good though right?
Trying to grow it all!

 

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