Alternatives to PayPal/Venmo - 1099 Tax Implications

[Jagosaurus]

So are you guys still sticking to PayPal or Venmo now that they're issuing 1099s for sales over $600 (accumulated total on year, not one time)?

I very casually sold a few things on forums earlier this year and quickly got halfway there so not hard to do.

Curious what others are doing in the gaming BST community... ?

Saw even FB marketplace & Etsy are now even having to issue 1099s. IRS is going to kill what I basically used as a digital garage sale mechanism. A lot of the time, I wasn't even depositing the money into bank, but buying other items straight from PayPal balance

[opa]

I unloaded all my expensive stuff last year while the limit was still $20k (iirc). I sold nowhere near close to the old limit but I knew this was coming down the pipeline. I think I've done $450ish in sales this year and I stopped there. I'm not against paying taxes... I just don't want to bother filing yet another form so..... yeah, I'll sell on ebay again around January next year.

I think the new limit is pretty unfair to regular people. I think $5000 would be a more realistic amount. You're not running a business at that limit and you're still able to get rid of a few expensive items.

I suppose you could go back to sending cashier's checks if you were buying a big forum lot. Granted, that takes more effort and time.

[Jagosaurus]

Yeah... was hoping to hear "there's a new service 'X' " that isn't subject to the $600 threshold yet.

Guess another option is to spread the love. Under $599 on multiple payment platforms lol.

I need to look into Zelle more. That's more bank to bank certified but could be an option maybe.

[SamuraiMegas]

Haven't thought about it but is it a 600 limit across all platforms individual? Can you get near it on one and then switch?

[Note]

I need to look into Zelle more. That's more bank to bank certified but could be an option maybe.

Yeah, I need to look into getting an account on Zelle too. I recently had a seller request payment in Zelle, but he accepted PayPal F&F as an alternative since I wasn't setup on it. I have a feeling I'll start to see that more often.

I haven't sold much online the past few years, but I'm glad this conversation is starting, as I'd like to know what other options there are. I think the $600 threshold is way too small an amount.

[Jagosaurus]

@SamuraiMegas -
1099s are issued by individual companies and those orgs don't "speak to" one another. That 600 bucks is set by the IRS.

For example, there were 3 different companies I personally had a 3rd party temp (non-W2) agreements with for IT services/products on a small monthly contract. Company A & B cut me checks for over $600 throughout the year while company C was around $500. I only received 1099 forms from Company A & B (they reported to the IRS the amount they paid me), while nothing from C under that threshold.

This is similar to receiving a W2 from your full or part time employers in Jan to Feb, before you file in March. You have to file 1099s received when submitting your personal income taxes. One year I had 2x W2s & 3x 1099s ... fun to compile & file all that then pay taxes for a year of 1099s

This also while you'll hear temp workers or even contractors sometimes referred to as "1099 employees" bc they don't get taxes taken out throughout the year and are responsible for them individually off that 1099 issued.

In short... a lot of people going to loss about 1/3rd of those paypal and Venmo payments they received all year come next March

@note -
I know Chase & WF have Zelle built into their apps. Also, Chase had something called Quick Pay that I think is now combined with Zelle offering.

Interesting...
https://www.zellepay.com/faq/does-zelle ... eceive-irs

Does Zelle® report how much money I receive to the IRS?

Zelle® does not report transactions made on the Zelle Network® to the IRS. The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle Network®.

[Ziggy]

In short... a lot of people going to loss about 1/3rd of those paypal and Venmo payments they received all year come next March

I never had a 1099 to file before... Is that really how it works? I assumed it got lumped into your total income. So if you made 60k on the books, and got a 1099 for $500, then 60.5k is your gross income that you pay taxes on. Is that not how it works? It's not like a bonus or something, which taxes taxed almost in half.

[Jagosaurus]

Correct, 1099 added to your total income which goes through differing bracket %s as you tier up... there's a gaming level up joke in there somewhere

You don't just pay top side % across all. Most people on this forum would likely fall between 22 and 34% tax rate on top side income, incrementally scaling through the differing tiers as income increases.

You wouldn't get a 1099 issued at 500 bucks though, just once you cross 600 threshold. Those paying entities are then required to issue one. So in your example, that's $60.6K:

$0 to $41,775 taxed at 12%
$41,776 to $80.1K taxed at 22%

Those #s changed if married & filing jointly.

So I'd personally view it as 600 bucks inbound, zero taxes paid thus far on it, zero pre-tax deductibles against it (401K, medical, etc) so 22% bracket of $600 = $132 owed to Uncle Sam when filing income taxes off $600 paypal sales

Basically any 1099s I get each year, I save 1/3 of it, planned for my taxes. Usually just lowers my refund but like to be safe.

[Limewater]

In short... a lot of people going to loss about 1/3rd of those paypal and Venmo payments they received all year come next March

I never had a 1099 to file before... Is that really how it works? I assumed it got lumped into your total income. So if you made 60k on the books, and got a 1099 for $500, then 60.5k is your gross income that you pay taxes on. Is that not how it works? It's not like a bonus or something, which taxes taxed almost in half.

Your understanding is correct. 1099 income is just income like your W-2 income.

It becomes an issue if you have a lot of 1099 income and did not adjust your W-2 withholdings to cover it.

If you make 60k W-2 income and then get a $500 1099 it likely won't make a big difference except for an extra $100 or so on your tax bill. But if you make 60k but made 20k in 1099 income, you better have made quarterly tax prepayments or you're looking at owing a lot at tax time plus a penalty. Alternatively, if you have a sense how much 1099 income you'll make in a year, you can increase your W-4 withholdings to cover it.

It's not that complicated. Pay your taxes, folks.

[Jagosaurus]

@Limewater -
The big change here is Paypal & Venmo, and now Etsy & FB MP are deemed 1099 income. This is a new initiative by the IRS.

Most people aren't going to fully understand the implications until filing taxes. I've had 1099 income for the past 8 years or so I immediately understood... save 1/3 of that somehow (bank, W4) or pay the piper in March.

I'm personally not a fan of upticking my W4 and paying extra to the IRS all year. Not in the business of giving the government a free loan at 0% interest of my hard earned money. They won't do that for me...

Also will be confusing to most that at $599, no 1099 issued. Then at $600, they owe somewhere around $132+

Heres a perfect real world example outside of gaming BST...
Mrs Jago had a friend pay her a decent amount of money to split a hotel, Ubers, and tickets on a vacation via Venmo. Now I'm going to owe taxes on that... let that sink in . They didn't even think about it bc they've been doing it for years.