Author Topic: PAYPAL just sent me a TAX form!! WTF!? What am I doing? I NEED tax advise! (Read 7198 times)

FrankenFrankenstuff · « **on:** February 01, 2012, 08:48:05 PM »

OK. So long story short.
I have been making stuff and selling it, recieving the money through PayPal. I have no records/ reciepts for this past year other than...my PayPal account showing my transactions/deductions. The TAX form that I just got 1040K - is crazy high. The numbers just dont seem to match up. I am frigging broke.

If it costs me $25 to make $80 how do I make the IRS or PayPal care....if I have no records? I will be calling a tax guy tomorrow...but for tonight I am freaking out.

Retro Rocket · « **Reply #1 on:** February 01, 2012, 08:52:44 PM »

Talk to the tax guy tomorrow mate, its not like you hit the friggin mother load or anything......Don't sweat till you know whats going on .....

FrankenFrankenstuff · « **Reply #2 on:** February 01, 2012, 09:11:45 PM »

Yeah, I dont mind paying some taxes on a profit, but I need to know how to show what my ACTUAL profit was, and not what PayPal has claimed I recieved. (or did recieve but spent on...making the money to begin with)

FYI I have been working on that oil side/ no filler ribbed cover for you....but the price just tripled and I need it paid in gold. (mailed in a plain brown package) Please write "this package contains no gold" on the sides in black marker.

UG. I wont sleep tonight.

jamesb · « **Reply #3 on:** February 02, 2012, 08:37:24 AM »

the state of Missouri sent me a tax form one time for when i fought there and worked some corners the fight paid 2 grand the corners didn't pay crap but they said it was worth $12,000 i contested and they threw it out.it don't make sense just call the person who does your taxes and they should be able to help you out

BLUE71TURBO · « **Reply #4 on:** February 02, 2012, 08:54:50 AM »

Quote from: FrankenFrankenstuff on February 01, 2012, 08:48:05 PM

OK. So long story short.
I have been making stuff and selling it, recieving the money through PayPal. I have no records/ reciepts for this past year other than...my PayPal account showing my transactions/deductions. The TAX form that I just got 1040K - is crazy high. The numbers just dont seem to match up. I am frigging broke.

If it costs me $25 to make $80 how do I make the IRS or PayPal care....if I have no records? I will be calling a tax guy tomorrow...but for tonight I am freaking out.

NO, NO ,NO ! It cost you $ 55.00 to make $ 80.00 RIGHT ? RIGHT ? ! Alway's inflate your baseline cost factor to show low profits. Time + materials + shop expenses ( tooling, electrical etc. ) and labor time.

With the right tax man you could come out ahead with a nice refund. You can wright off alot of your exspenses for tooling i know because a friend of mine did it for his little machine shop buisness at home. If you don't have a buisness license get one. It will help you out in the long run.

toytuff · « **Reply #5 on:** February 02, 2012, 09:02:42 AM »

Quote from: FrankenFrankenstuff on February 01, 2012, 08:48:05 PM

If it costs me $25 to make $80 how do I make the IRS or PayPal care....if I have no records? I will be calling a tax guy tomorrow...but for tonight I am freaking out.

Because we have entitlements to pay!

tt

BobbyR · « **Reply #6 on:** February 02, 2012, 09:20:19 AM »

Quote from: FrankenFrankenstuff on February 01, 2012, 08:48:05 PM

If it costs me $25 to make $80 how do I make the IRS or PayPal care....if I have no records? I will be calling a tax guy tomorrow...but for tonight I am freaking out.

This is not good on several levels. If Paypal sent you a statement, they also sent ot to the IRS and probably the State.

You can deduct our material and labor costs. In addition you have waste and parts that did not come out while you were manufacturing.

The local guy who sells insurance and doe taxes or HR Block people may not be up to the job. DO NOT USE I HAVE NO RECORDS EXCUSE WITH THE IRS OR STATE. They can ding you for that alone.

How much stuff did you buy to make the covers.
How much does each set take.
Release agants.
These things you should have recipt for.

Sam Green Racing · « **Reply #7 on:** February 02, 2012, 09:26:59 AM »

Don't worry to much Joe, any half decent accountant will flatten that.

I hope I don't get hit for tax on this.

http://forums.sohc4.net/index.php?topic=101218.0

Sam.

MCRider · « **Reply #8 on:** February 02, 2012, 09:31:29 AM »

Quote from: SamCR750A on February 02, 2012, 09:26:59 AM

Don't worry to much Joe, any half decent accountant will flatten that.

I hope I don't get hit for tax on this. http://forums.sohc4.net/index.php?topic=101218.0

Sam.

If you are just a conduit for personal gifts, which are otherwise non-taxable, you'll be OK. But if you're drawing an admin charge etc, it gets complicated. Its all a matter of degree.

MCRider · « **Reply #9 on:** February 02, 2012, 09:36:25 AM »

The 1099K is new this year. Its the governments way of tryting to capture activites that have been going unreported. The 1099K amount is gross and as mentioned, you will deduct from that the costs of creating the gross. The net is what you'll pay tax on. Could actually be a loss. There is a form, usually Sch C for this type thing.

You're own labor is not deductible, but labor you pay to someone else who helped you is. Of course if you claim that deduction, the receiver must claim it as income.

FrankenFrankenstuff · « **Reply #10 on:** February 02, 2012, 09:38:45 AM »

I work alone. I will be getting that form right now. Just doing the math PayPal itself gets 3% off the top of my gross income...is that deductable?

MCRider · « **Reply #11 on:** February 02, 2012, 09:42:24 AM »

Quote from: FrankenFrankenstuff on February 02, 2012, 09:38:45 AM

I work alone. I will be getting that form right now. Just doing the math PayPal itself gets 3% off the top of my gross income...is that deductable?

Yes, EVERYTHING that you pay, even that which is withheld at the source, you will deduct. Your own time represents your taxable portion of the transaction.

But your tooling, materiel, shop costs, ofc costs, postage, etc., comes off, reducing the gross to a net amount which you pay tax on. If its a loss, it will reduce the taxable income from other sources on the return.

2011 is a transition year, the 1099K amount is not required to be reported. However, if that amount is indeed part of a trade or business, you'll still report it in your gross income.

Get help.

MCRider · « **Reply #12 on:** February 02, 2012, 09:45:10 AM »

If you have a net gain on Sch C, you'll need to pick up Sch SE as well. If your net gain is more than $400 (I think) you'll pay the Self Employment Tax, which is a euphemism for the amount you contribute to the Social Security System. Just as we do thru withholding if it were a wage.

Retro Rocket · « **Reply #13 on:** February 02, 2012, 03:03:54 PM »

Quote

FYI I have been working on that oil side/ no filler ribbed cover for you....but the price just tripled and I need it paid in gold. (mailed in a plain brown package) Please write "this package contains no gold" on the sides in black marker.

Shhhhhhhhh, payment sent to "John Smith"

Sam Green Racing · « **Reply #14 on:** February 02, 2012, 03:32:38 PM »

I think I know a guy named John Smith.... in fact, I think I know quite a few.

The most famous of all is this John Smith.... http://www.johnsmiths.co.uk/age.cfm?url=/brands/bitter.html

Cheers, Sam.

BLUE71TURBO · « **Reply #15 on:** February 02, 2012, 06:36:34 PM »

Well Joe, from now on save EVERY RECEIPT ! Even your gas receipt's. Get a magnet sign for your car or truck and you can write off repairs and gas !!

The damn tax man is always on the hunt !!

Obama "The Taxman" - The Beatles

FrankenFrankenstuff · « **Reply #16 on:** February 02, 2012, 07:20:31 PM »

I want to play by the rules...its just catching up to them that I am having issues with.

MCRider · « **Reply #17 on:** February 03, 2012, 06:04:10 AM »

Writing off repairs and gas of a vehicle depends on whether you drove the vehicle on business activities. The magnetic sign only increases this potential by the cost of the magnetic sign.

If you drive the vehicle for personal activities and business activities, only business counts, so you prorate the expenses between bus and personal.

The IRS is clear, putting a sign or painting up the vehicle does not increase the possible deduction over the amount you would otherwise get without the vehicle being painted up. Its the activity of the trip, personal or business, that generates the deduction.

This is to be documented in a log book, diary or such. The IRS will allow you to recreate the log book from other records, if you do not keep one concurrent with the activity.

Check with your tax guy.

FrankenFrankenstuff · « **Reply #18 on:** February 03, 2012, 07:06:11 AM »

I am not going to claim any car or gas. I typically drop stuff off on the way home or lunch. Right now I am just adding up all of my straightforward expenses.

Bob Wessner · « **Reply #19 on:** February 03, 2012, 07:21:57 AM »

Quote from: FrankenFrankenstuff on February 02, 2012, 07:20:31 PM

I want to play by the rules...its just catching up to them that I am having issues with.

The U.S. tax code is 70,000+ pages long.

Have fun.

Duke McDukiedook · « **Reply #20 on:** February 03, 2012, 07:30:40 AM »

What a joke, this is the sorry state of the thug IRS and their goofy, loophole ridden tax code.

D-bags like one of the guys running for POTUS skates at a 14% tax rate and little guys like Franken get raked over the coals for selling a tchochkie or two.

What a lame, horrible cosmic joke.

MikeKato · « **Reply #21 on:** February 03, 2012, 07:32:03 AM »

Talk to your tax guy but if your gross number is less than $20,000 this article says enter $0 in the gross revenue line.

"It is worth noting that smaller merchants are exempt from the reporting requirements. Payment service providers must submit 1099-K forms only for sellers with $20,000 in annual revenue and 200 transactions in the calendar year. Both conditions must be met to trigger the reporting requirement.

In its initial rollout for the 2011 tax year, the IRS is directing merchants to enter a zero on the new 1099-K line on their business returns, making the gross revenue reconciliation less of an issue, for now."

http://www.auctionbytes.com/cab/cab/abn/y12/m02/i03/s02

Go back to bed and get some sleep.

lucky · « **Reply #22 on:** February 03, 2012, 08:23:42 AM »

Quote from: FrankenFrankenstuff on February 01, 2012, 08:48:05 PM

OK. So long story short.
I have been making stuff and selling it, recieving the money through PayPal. I have no records/ reciepts for this past year other than...my PayPal account showing my transactions/deductions. The TAX form that I just got 1040K - is crazy high. The numbers just dont seem to match up. I am frigging broke.

If it costs me $25 to make $80 how do I make the IRS or PayPal care....if I have no records? I will be calling a tax guy tomorrow...but for tonight I am freaking out.

DO NOT....I repeat, go to H&R block.
You need a CPA but just write down what it costs to make your product.
Don't go to the lawyers office with no records.
Write down costs.

BTW when you find a CPA stay with them and the rest of your financial life will be organized.

Whenever you are "in business" you must keep good records.
Thats how to make a profit.

BTW.. one time I made a serious effort to run a business and after one year I threw in the towel but I broke even on costs vs profit and the CPA told me I was lucky, and that many start up business did not do nearly as well.
But it was my record keeping that saved the day.

MCRider · « **Reply #23 on:** February 03, 2012, 09:29:25 AM »

Quote from: MikeKato on February 03, 2012, 07:32:03 AM

Talk to your tax guy but if your gross number is less than $20,000 this article says enter $0 in the gross revenue line.

"It is worth noting that smaller merchants are exempt from the reporting requirements. Payment service providers must submit 1099-K forms only for sellers with $20,000 in annual revenue and 200 transactions in the calendar year. Both conditions must be met to trigger the reporting requirement.

In its initial rollout for the 2011 tax year, the IRS is directing merchants to enter a zero on the new 1099-K line on their business returns, making the gross revenue reconciliation less of an issue, for now."

http://www.auctionbytes.com/cab/cab/abn/y12/m02/i03/s02

Go back to bed and get some sleep.

This is the confusion of a transition year when they try to install another compliance tool. You are not required to make the 1099K entry. But you are still required to report income you know you received, on a line other than the 1099K line, and net it out against deductions.

In the future, the IRS will get their copy of the 1099K from the payer LIKE PAYPAL and the taxpayer gets their copy.Then you put it on the line prescribed and the IRS computer can match it up. Like they do with 1099-Misc now. They have become very good at matching 1099-Misc.

But the requirement for a taxpayer to report income is never relieved. Only the method that it is done may be modified or in this case the compliance routine has been delayed. For example, nothing in that article indicates a seller businessperson is relieved from declaring income. Only that they don't have to reconcile the 1099K.

Don R · « **Reply #24 on:** February 06, 2012, 06:53:44 AM »

I entered a drag race at Indianapolis, paid 300 to enter and had so sign a 1099 to get the 100 I won. friggen great.

News:

Author Topic: PAYPAL just sent me a TAX form!! WTF!? What am I doing? I NEED tax advise! (Read 7198 times)