2022 law change - PayPal transactions over $600 (2 Viewers)

[Himewad]

Now that payments over $600 will automatically be reported to Big Brother, is there any concern out there about the feds sharing this information with state tax collectors in an attempt to collect sales tax? The burdon of proof, in terms of what the money is being transferred for, is on us. I don't believe for a minute that this will be limited to Goods & Services transactions.

Lawmakers tucked this little gem into one of the big spending bills that were passed in 2021 - the American Rescue Plan Act.

 

[ReallyGoodUsername]

Source? If you're referring to the 2021 ARPA and they didn't make any changes since a week ago I'm not sure this is correct.

The law (again assuming no changes) lowers the reporting threshold of third party payment processors (TPPP) to $600 total for individuals for goods and services annually (ie if you occasionally go out to dinner with friends, one person covers it and it is paid PPFF, it is not reported) to the IRS.

Edit: obviously we'll have to "wait and see" to see how's its implemented but I don't see any benefit or incentive in the bill that would make TPPPs overly aggressive in their monitoring of FF payments. I only see overly aggressive enforcement as being harmful to TPPPs business.

 

[Himewad]

Source? If you're referring to the 2021 ARPA and they didn't make any changes since a week ago I'm not sure this is correct.

The law (again assuming no changes) lowers the reporting threshold of third party payment services to $600 total for individuals for goods and services annually (ie if you occasionally go out to dinner with friends, one person covers it and it is paid PPFF, even if over $600 itself, it is not reported) to the IRS.

That's a very limited example, but yes, in theory, something like that is not SUPPOSED to be reported. PPFF is SUPPOSEDLY exempt. But with more and more people paying Goods and Services, and with chip prices skyrocketing recently, $600 is a low bar. And again, the burden of proof is on the taxpayer.

But if PayPal decides to just avoid any IRS entanglements, I think it's reasonable that they would just report everything. And if you have a bunch of G&S payments over the course of a year, it's also reasonable that the feds would report this to your state tax collection agency. To get their hands on use tax. Which is a massively under-reported tax that consumers currently get away with (for the most part).

 

[ReallyGoodUsername]

But if PayPal decides to just avoid any IRS entanglements, I think it's reasonable that they would just report everything.

I added the below after you posted I think but is there anything specific in the bill that would make you think this?

Edit: obviously we'll have to "wait and see" to see how's its implemented but I don't see any benefit or incentive in the bill that would make TPPPs overly aggressive in their monitoring of FF payments. I only see overly aggressive enforcement as being harmful to TPPPs business.

 

[Himewad]

I added the below after you posted I think but is there anything specific in the bill that would make you think this?

Nothing other than the aggressive nature of the IRS. I guarantee that PayPal doesn't want to deal with this. But now they will be compelled to cooperate.

 

[ReallyGoodUsername]

Nothing other than the aggressive nature of the IRS. I guarantee that PayPal doesn't want to deal with this. But now they will be compelled to cooperate.

I guess we'll disagree on this but I hope for everyone I'm right

PS willing to take 1-1 odds on whether F&F will be blanket reported or not, if interested PM me !

 

[DrStrange]

The states do not have a history of chasing use taxes on retail customers. Not saying "never", but this is not at all common. The states do chase the retailers, sometimes over pretty small amounts of sales / use tax they failed to collect.

If you are running an internet business in a jurisdiction where sales taxes are owed, perhaps you should be concerned if you are not in compliance.

If you are an end user buying stuff over the internet, I doubt anything different will happen except a few more vendors will start to collect from you at the time of purchase.

As for the Feds and State working together to collect delinquent taxes - absolutely, they work closely often in the same work space. Tracking down tax cheats is more effective with inter-agency cooperation. A good thing, yes? Except from the point of view of criminals.

DrStrange

 

[Himewad]

I’m just saying, if someone spends a few thousand dollars on poker chips, and pays G&S, this transaction will now be reported. And the purchaser is (already) supposed to report the value of the chips and pay use (I.e sales) tax. I don’t run a side business, or a small business, and spend hardly anything on chips, so I’m not trying to get away with anything. I’m just telling people to be aware of the new rules so it doesn’t bite you in the ass when you file next year’s tax return.

 

[RivieraDanny]

I’m just saying, if someone spends a few thousand dollars on poker chips, and pays G&S, this transaction will now be reported. And the purchaser is (already) supposed to report the value of the chips and pay use (I.e sales) tax. I don’t run a side business, or a small business, and spend hardly anything on chips, so I’m not trying to get away with anything. I’m just telling people to be aware of the new rules so it doesn’t bite you in the ass when you file next year’s tax return.

So hold up. If I buy a set for 5000 and later decide to sell it for 5000 your suggesting I bite the bullet and pay tax on that income??

 

[TheOffalo]

You've also run group buys and even if you take no cut and everyone pays FF, there's a concern it might look like you're selling something.

It definitely makes wary if PP or Venmo (or Zelle) might report bigger FF transactions and put the burden on tax payers to prove it wasn't sales. Our home game switched to Venmo, and we probably move around a couple hundred dollars a week, but we don't rake or anything. Hate for that to be lumped in as G&S even though we always send as FF and have to deal with the additional headaches.

 

[TheOffalo]

So hold up. If I buy a set for 5000 and later decide to sell it for 5000 your suggesting I bite the bullet and pay tax on that income??

No, but you might have to prove you didn't sell it at a profit to avoid that. It's more the extra work (unless you are making a profit).

 

[Himewad]

So hold up. If I buy a set for 5000 and later decide to sell it for 5000 your suggesting I bite the bullet and pay tax on that income??

not at all. The tax is supposed to be paid by the buyer. Sales and Use tax is tricky.

 

[RivieraDanny]

No, but you might have to prove you didn't sell it at a profit to avoid that. It's more the extra work (unless you are making a profit).

ok HOW would I prove that?

 

[Himewad]

You've also run group buys and even if you take no cut and everyone pays FF, there's a concern it might look like you're selling something.

It definitely makes wary if PP or Venmo (or Zelle) might report bigger FF transactions and put the burden on tax payers to prove it wasn't sales. Our home game switched to Venmo, and we probably move around a couple hundred dollars a week, but we don't rake or anything. Hate for that to be lumped in as G&S even though we always send as FF and have to deal with the additional headaches.

Exactly. I’m concerned about my group buys going forward. When I pay my invoices, I use PayPal. I don’t want the feds and state coming after me later. The feds would be after the vendor for the income. But the state could try to collect use tax from me for the purchases, which easily run into the thousands of dollars.

 

[RivieraDanny]

not at all. The tax is supposed to be paid by the buyer. Sales and Use tax is tricky.

I file sales and use tax for multiple businesses, I understand hot THAT works, but the new law, if there is one in place, pertains to the IRS. Not the state. And not all states have reciprocity regarding sales tax on shipped merchandise. But yes you are "required" to claim it and pay state sales tax on it. agreed

 

[TheOffalo]

ok HOW would I prove that?

Document your purchase price and your sale price, and report profit/loss on schedule C probably? Will be a pain in the ass if you have to do that for each thing.

 

[Himewad]

I file sales and use tax for multiple businesses, I understand hot THAT works, but the new law, if there is one in place, pertains to the IRS. Not the state. And not all states have reciprocity regarding sales tax on shipped merchandise.

Yes, you need to conduct intra-state business, and have a presence in those states (I believe that's how it works, anyway), in order for YOU to be under any obligation.

But the purchaser, in theory, is supposed to pay tax on the purchase. Like if you buy a used car. When you register your vehicle, you need to state the purchase price and pay the sales tax.

 

[ReallyGoodUsername]

ok HOW would I prove that?

Weren’t you doing printouts of all your purchases before? Swear that was you lol

 

[RivieraDanny]

Exactly. I’m concerned about my group buys going forward. When I pay my invoices, I use PayPal. I don’t want the feds and state coming after me later. The feds would be after the vendor for the income. But the state could try to collect use tax from me for the purchases, which easily run into the thousands of dollars.

Yes if you catch an audit that could happen if the vendor doesn't charge you sales tax... I think it would be easy to prove that it was a group buy and that whoever sold it to you charged the sales tax. No that said every single time a car is sold there is sales tax paid on it. interesting.... 1 car over and over again.

 

[Budha]

I don't see any benefit or incentive in the bill that would make TPPPs overly aggressive in their monitoring of FF payments. I only see overly aggressive enforcement as being harmful to TPPPs business.

Normally I would agree with this from a pure business perspective. It certainly makes complete sense from a logic perspective.

However, the caveat I would make is due to a much more aggressive regulatory environment, companies have been taking a significantly more proactive approach/response to regulatory requirements in anticipation of what’s next, and or the degree to which the enforcement will be stretched to furthest most interpretation.

They don’t want to be in the wrong side of the narrative and/or CFPB, regulator’s, etc.

 

[RivieraDanny]

Weren’t you doing printouts of all your purchases before? Swear that was you lol

I still do.... for just this reason. In and out.

 

[ReallyGoodUsername]

I still do.... for just this reason. In and out.

Good reason to stay out of the singles game

 

[RivieraDanny]

Good reason to stay out of the singles game

eBay logs those for you

 

[RivieraDanny]

Here’s the bin mr audited. Have fun. They don’t say it has to be organized!! Lol

 

[Himewad]

Yes if you catch an audit that could happen if the vendor doesn't charge you sales tax... I think it would be easy to prove that it was a group buy and that whoever sold it to you charged the sales tax. No that said every single time a car is sold there is sales tax paid on it. interesting.... 1 car over and over again.

Yes, but I don't get charged sales tax because the vendor doesn't have a presence in my state. In theory, the purchaser is supposed to self-report purchases made like this. But almost everything I purchase ultimately gets shipped to other people in the group buys. It might be easy to prove this (I do keep very detailed records), but I could also see the state coming back and telling me that since I'm re-selling things (even without a profit), that I need to pay use tax on these items. That's a lot of money.

 

[RivieraDanny]

Yes, but I don't get charged sales tax because the vendor doesn't have a presence in my state. In theory, the purchaser is supposed to self-report purchases made like this. But almost everything I purchase ultimately gets shipped to other people in the group buys. It might be easy to prove this (I do keep very detailed records), but I could also see the state coming back and telling me that since I'm re-selling things (even without a profit), that I need to pay use tax on these items. That's a lot of money.

I agree it would be but are you reselling if we just combined a purchase? I'm just paying you my share of the buy... Cant see them coming after that anyway. but who knows

 

[ReallyGoodUsername]

That's a very limited example, but yes, in theory, something like that is not SUPPOSED to be reported. PPFF is SUPPOSEDLY exempt. But with more and more people paying Goods and Services, and with chip prices skyrocketing recently, $600 is a low bar. And again, the burden of proof is on the taxpayer.

But if PayPal decides to just avoid any IRS entanglements, I think it's reasonable that they would just report everything. And if you have a bunch of G&S payments over the course of a year, it's also reasonable that the feds would report this to your state tax collection agency. To get their hands on use tax. Which is a massively under-reported tax that consumers currently get away with (for the most part).

Normally I would agree with this from a pure business perspective. It certainly makes complete sense from a logic perspective.

However, the caveat I would make is due to a much more aggressive regulatory environment, companies have been taking a significantly more proactive approach/response to regulatory requirements in anticipation of what’s next, and or the degree to which the enforcement will be stretched to furthest most interpretation.

They don’t want to be in the wrong side of the narrative and/or CFPB, regulator’s, etc.

https://newsroom.paypal-corp.com/20...eporting-Requirements-Your-Questions-Answered

1099-K Threshold Change:

• This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.

 

[Himewad]

I agree it would be but are you reselling if we just combined a purchase? I'm just paying you my share of the buy... Cant see them coming after that anyway. but who knows

I'm the only person named on the vendor's invoice. So I would guess that I would be on the hook in the state's eyes.

 

[ReallyGoodUsername]

I agree it would be but are you reselling if we just combined a purchase? I'm just paying you my share of the buy... Cant see them coming after that anyway. but who knows

Are you group buying a meal if you pay for the tab and get reimbursed? Why are we here? The great questions of 2022 !

 

[Saoliver]

Luke 18:11 -- The Pharisee stood by himself and prayed: 'God, I thank you that I am not like other people—robbers, evildoers, adulterers—or even like this tax collector.'