You made $60k. Pay your accountant $200!
Potential Tax Liability
I have a friend who inherited many electronic items including those of the audiophile variety. Through ads on this site and others, he sold about $60k worth of equipment within this year. He is not a dealer and does not have a business, either physically or on paper. Most of the payment transactions were made through PayPal. He is now worried about potential tax liability. Sometimes he created invoices. Sometimes the money was sent through PayPal's "Friends and Family" option. The money was transferred from PayPal to his bank account periodically. It suddenly occurred to him about possibly having a tax liability. Made me curious too. Would these proceeds need to be declared as income to the IRS?
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To be precise, again, I should add one more point regarding the fact that there is no Federal Inheritance Tax. Although heirs don’t have to pay Federal tax on what they receive from the decedent’s assets as they existed on the date of death, under many circumstances heirs may have to pay tax on whatever share they receive of income that may be earned by the estate subsequent to the decedent’s passing. That falls under what is known as the Estate Income Tax (for which the executor files Form 1041 if necessary, and it often will be necessary since the filing threshold is $600), as opposed to the Estate Tax (for which the executor files Form 706 if necessary, and it rarely will be necessary since the filing threshold is $5.45 million) :-) Regards, -- Al |
warmglowingtubesart This is getting very repetitive. In the unlikely event that you receive an inquiry from the I.R.S., or a Notice of Audit, you should hire a tax attorney or C.P.A. at that time. Period.It's easier to get professional advice before you're in trouble than to seek it afterwards. It's cheaper, too. |
The 1099-K is meant to ensure that those that do business online report their income. https://plantingmoneyseeds.com/3-things-your-home-business-should-know-about-the-paypal-1099-k/ . If I remember correctly EBay/PayPal, (EBay at the time owned PayPal), was forced by the IRS to send out a 1099-K to sellers that sold items that totaled over $20,000 or 200 transactions in a calendar year period. More importantly A 1099-K had to be sent to the IRS. Problem was the number of people that did not have an actual business on file with the state and or local governing body. They didn’t have a state sales tax permit or a federal ID number for the business. Why would the state let alone the IRS worry about some guy running a small business out of his home? The government wasn’t getting their piece of the pie. With the 1099-K not only do they get their due income tax and state/local sales tax money they know who might be running a business under the radar of the IRS, state, and local government. It’s all about getting their piece of the pie. As for the OP’s friend I would be willing to bet he will get a 1099-K from PayPal. PayPal knows nothing about where the guy got the merchandise he listed on EBay that sold for over $60,000 so far this year. He will then have to pay the person who prepares his taxes to straighten out the mess with the IRS. One thing for sure I wouldn’t just throw the 1099-K in the garbage can when it comes. . |
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