Last month I was fortunate enough to attend the Las Vegas Online Seller Meetup and sit in on a presentation by Laura Messerschmitt, VP of Marketing, Outright.com regarding the new tax form called the 1099-K. Rather than paraphrase some of the details from that presentation, I thought it would be better to have Laura put together an overview for eBay Ink readers first-hand. A huge thanks to Laura for taking the time to share this info with our readers.
Cheers,
RBH
Tax time – It’s here again! You’ve probably been receiving those pesky little 1099 tax forms in the mail over the last few weeks. And, If you haven’t heard, there’s a brand new tax form that may have arrived in your mailbox this year. It’s called the 1099-K. 53 Million of these forms are being sent out this year, which means that businesses of all shapes and sizes are going to receive this new form – but, since this is eBay Ink, we are going to focus on what this means for you, the eBay Seller.
Though it seems that it came out of nowhere, the origins of the 1099-K go back a few years. With the passing of the 2008 Housing Assistance Tax Act, Congress required that all credit card processors and third party payment processors, like PayPal, issue form 1099-K to people who receive income through those sources starting in 2011. One copy is sent to you and one is sent to the IRS.
Who gets it?
Not everyone who sells on eBay will get one. There are two big criteria you must meet:
** You must have made over $20,000 through one credit card processor, such as PayPal AND
** That $20K must have been made through 200 or more transactions
If you don’t meet either one of those criteria, then you won’t be getting the 1099-K form this year.
The Details
For those of you who did receive one, the 1099-K form shows your “gross sales”. There’s been lots of confusion about what is and is not included in that total. “Gross sales” includes all of your selling transactions. Refunds and fees are NOT taken out of that number. Shipping revenue IS included. That’s why the number may seem a bit higher than you were expecting.
But, don’t fear! You only pay taxes on profit (revenue minus expenses), not “gross sales”. Your expenses may include such things as PayPal / eBay fees, returns, refunds, shipping costs, supplies, etc. All of those expenses that you incurred last year will reduce the taxes you may owe.
(Note: Both fees and returns are important for eBay sellers to track in order to reduce taxes. If you didn’t track those throughout the year, PayPal provides a CSV file of all of your transactions from 2011. Alternatively, a free account at Outright.com can automatically download your PayPal transactions from last year and sum up the fees and returns for you.)
Net-net, this new tax form shouldn’t send you over the edge. And, if getting your taxes done sends you running around the room like a 2-year-old with a lollipop, then please visit Outright’s Tax and 1099-K Resource Center or PayPal’s handy IRS Information Center for more information on 1099-K and self-employment taxes in general!
Cheers!
LM
About Outright.com
Outright is a free online accounting tool that imports all of your data in one place so that you can see how your eBay business is doing. No math, no manual entry, no paperwork. Outright integrates eBay, PayPal, bank and credit card accounts in one place, so users can stay up-to-date effortlessly — and instead focus on doing what they love to do. To learn more or sign up, please visit http://outright.com.
