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Be prepared to receive a 1099-K for your sales

After reading another forum thread about the new requirements for Paypal to report sellers transactions and what I felt may be misinformation, I am pulling my post from another thread and pasting it here. In fact many sellers here will indeed fall into the 1099K reporting guidelines, due to having more than 200 transactions.
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I have read that statement so many times, 200 sales AND $20,000 gross payments and couldn't help but wonder if they are incorrect or wording it wrong so that we are not seeing it correctly. It worries me aeveryone is taking Paypals word for this, especially in light of the verbage "gross payments" being used. Why would they use the term gross payments" in conjunction with a designated number of transactions.
If the goal of this is for the IRS to be able to better track and tax income, then why would they apply the "both" criteria to the extent it could mean they are overlooking a lot of money. That would mean as a seller, I could have 199 transactions at an unlimited dollar amount, which could potentially mean a million in revenue ......why wouldn't the IRS want that reported?

I work for a tax office each season and all this has lead me to investigate further and the following statement was taken directly from the IRS site:
What is the de minimis standard for reporting?

"The de minimis standard exempts the reporting of transactions settled by a third-party settlement organization of a payee in a third-party payment network if the aggregate payments to the payee do not exceed $ 20,000 or if the aggregate number of transactions does not exceed 200 within the calendar year. This applies only to the payments settled by third-party settlement organizations."

taken from this page: www.irs.gov/newsroom/article/0,,id=249029,00.html

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Note the use of the word OR.
I think you should read it and interpret it as seems most correct.

63 Responses

You have to pay your taxes on your earnings whether they are reported on a 1099-k or not so why worry about it?
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Inactive Etsy Member 10:09 am Nov 20, 2011 EST edited
I read on paypal's site that it was both 200 sales AND 20,000 dollars... What's the difference? I already pay taxes. If i hit 20k i'll just get it on a form right?

On their site it states that BOTH thresholds have to be met. Paypal can't mess around when it comes to the federal government.
Yep...taxes are going to be fun for me this year:(
So true beaded, and I always do, but many sellers have been led to believe that they "won't fall into that category" and so it made me wonder why there was so much "relief" that they didn't think it applied to them.

The main message here is everyone must keep accurate records and report accurately, as there will now be a 1099 that needs to jive with your reported figures if you have more than 200 transactions.
Bring on the 1099.
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Inactive Etsy Member 10:13 am Nov 20, 2011 EST
It shouldn't be any different. For the last three years i've been paying taxes on income... all income. A 1099 is no different than a w-2 you just haven't paid taxes on any of that money.
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Inactive Etsy Member 10:14 am Nov 20, 2011 EST
For those who have not been paying their quarterly taxes on earnings...watch out! You'll be fined for not doing so if you end up owing on your earnings...I'm actually thankful for the 1099-K that I'll be receiving from PayPal...I'm hoping it will make my year end accounting and tallying a bit easier...
I have yet to understand taxes... Can someone explain? Are all etsy sellers required to pay taxes?
Lisa, this is very true, and for those of us who are already carefully accounting for their sales, it is of no consequence. This is to help those who are not as diligent in their record keeeping.

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