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What Does PayPal Sending 1099 Forms To eBay Sellers Mean?



Robert sent in this question: “I heard PayPal will start sending 1099 reports to the IRS this year. What does this mean to eBay sellers?”

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Starting in 2011, PayPal and all merchant processors will send 1099 forms to the IRS for all cleints who have done 200 or more transactions and have total sales over $20,000.

Read that again. That’s not an OR statement, it’s a BOTH statement.

This means that most eBay sellers won’t be effected by this change.

If you are effected, or think you might be effected by this change, you should make sure you are keeping track of the costs associated with your eBay business.

The 1099 form only shows gross sales. When you do your taxes, you subtract your costs from your sales to determine the profit.

Remember your costs are everything involved in running your eBay business. Here’s a few common deductions for eBay sellers:

  • The cost of the items you sell.
  • The use of your car for business. The IRS will allow you to take a deduction for every mile you drive on business.
  • If you use your eBay selling room for nothing else, you can deduct a portion of your housing costs. That’s rent, or mortgage payment, plus utilities for the year times the size of your house divided by the size of the room you use.
  • The cost of packaging supplies.
  • Bank, eBay and paypal fees. Bank fees are shown on your statement each month. EBay fees are simple to find because you get an invoice each month. PayPal makes it hard to see their fees. A simple formula for determining PayPal fees is (transactions X .30) + (gross receipts X .029).
  • Remember I’m not an accountant, and I don’t give legal or accounting advice. I only cover these topics so you can get an idea of the questions you should ask your accountant.


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