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I wouldn't bet on that being the case. Otherwise, everyone will always just send to family or friends to circumvent the tax law. Even if that is the case initially (not saying that it is), you can bet the farm that will change. Best case scenario is the person getting the money will still get a 1099-K form and it will be a hassle at tax time.
The biggest drawback using friends and family, is that transaction cannot be disputed. Not sure if this has been mentioned or not. If anyone ever ask you to send money this way thru PayPal, if you don’t know the individual,, treat as if it’s probably a scam.. I pay my leagues fees in my fantasy leagues using the friends and family, feature, but I know it’s not a scam, no way would I use that feature if I was’t sure. I always put in the comments something like “Happy Birthday”, never mention anything fantasy related. Losing the ability to dispute a transaction is why most people don’t circumvent the tax law.
While I agree with you regarding not cheating PayPal out of their fees, but in respect to the 1099K issue, I suspect people won’t be able to get around the IRS using family and friend transactions for money received from fantasy football. The IRS won’t care about the distinction. They know everyone will use that as a way to avoid the 1099-K form, so the IRS will prevent it from happening, if not right away, then very soon. I’m out of the PayPal game as of today. I also won’t be selling on E-bay anymore because of the changed 1099K law.
JohnnyU, I’m doing the same thing regarding eBay, I’m not selling anymore of my sports collection on their site and I’ve been a member of eBay since their inception.. I’m actually so upset about these new tax laws, it’s almost making me a little depressed. For the average person who grew up collecting sports cards and other memorabilia, we have no clear paper trail on how much each item costs us. It’s nuts. My gut tells me that eBay will be losing a lot of sellers who are like us.
You can go that route if you want, but for now there is a clear and easy way to still send fantasy winnings electronically to friends and family without it being reported on a 1099-K. I haven't seen anything that even says a purpose of this change is to capture winnings for fantasy football for tax purposes.
Technically you right and I agree, but after all of these years of not enforcing it, it’s just a hard pill to swallow.
I never said the purpose of the change is to capture winnings from fantasy football, but it is a victim of the change. You can go ahead and keep collecting winnings and fees in PayPal thinking family and friends transactions will save you from the 1099-K form, but I would rather be proactive and minimize risk by not using PayPal until I know more. Not to mention the risk of accounts being frozen, which is very real.
For "goods & services" not from friends. As long as people don't put anything fantasy/gambling related in the memo and don't use the goods & services option to pay then nothing will happen. The woman ScottF tweeted about was probably running multiple leagues and she or the players were writing "fantasy league dues/winnings" in the memo.
I wouldn't count on that being the case. The IRS doesn't care about that distinction and simply want to get paid, so they are not going to allow that loophole long term IMO. Otherwise everyone can avoid the 1099-K if that were the case.
It's not a loophole. Loopholes are legal. Avoiding taxes by not reporting income is tax evasion. Doesn't matter if a third party is reporting it to the IRS or not. It's the tax payers responsibility to do so.
I'll bet that PayPal will send anyone a 1099-K with this new tax law who receives $600 or more yearly, whether money was sent with the family and friends transaction or Goods and Services. At the very least I'm not willing to take the risk, thus the reason I closed out my PayPal account yesterday. If you are willing to stomach the risk, then have at it. The original loophole to avoid PayPal fees by choosing family and friends may still be good, but I wouldn't count on PayPal not sending you a 1099-K form, probably at the IRS mandate, regardless of transaction distinctions. Don't confuse sending to family and friends and PayPal fees with the new law 1099-K form. They are two totally different animals.
If you're a law abiding citizen you shouldn't be concerned about receiving a 1099-K. When you enter it you'll also be asked questions to determine if it's taxable income. You should be determining your taxable income whether you receive 1099's or not.
Well, I would rather not have to pay taxes on fantasy football cash won, especially how relatively small the amount is, but is usually over $600. Might as well stay away from PayPal in that case. I don't want the hassle either.
I might be confused, but won’t this will only happen if you have a paper trail for what you paid for the old junk also you have to itemize your tax returns, which a lot of people don’t do now. If someone sells $600 or more worth of junk during the coarse of the year and they don’t itemize, won’t they have to pay taxes?
So if I lend a friend $600 bucks and he Paypals it pack to me a few months later I'm going to be taxed for that? No way. The $600 threshold clearly applies to "goods & services".JohnnyU said:
I would have to hear it from PayPal before I believed it. Perhaps someone should ask them?
OK, I believe it. I still question whether that will only apply to goods and services long term, but it is their documentation that way.
Nobody would ever use paypal/venmo again if sending a few bucks to friends and family was taxable.
That’s why I opened a new savings account and move my PayPal balance to it. I will still use PayPal to collect fees, but will immediately transfer it to the saving account. Then in December I will put just enough money back in PayPal to pay winnings (not including what teams roll over to the next season obviously) and do that as soon as it clears in PayPal. The goal is not leave a sitting balance In PayPal.UFFLCommish said:
When I use PayPal and Venmo to send and receive poker, er, I mean, "book club" money
I never put cash into my PayPal or Venmo account. They’re linked to my checking account and the act of paying someone pulls that exact amount from my checking account. Is that not how it works for you? Or are there downsides to the way I do it that I’m not aware of, especially in light of these new tax rules?
Always had our checking linked to PayPal, just want to keep fantasy football separate from my checking account, thus the reason to open a new savings account. Either way, keep PayPal a zero balance as soon as possible.When I use PayPal and Venmo to send and receive poker, er, I mean, "book club" money
But, yes, when people pay ME, then I definitely immediately transfer that money to my checking account that same day.
Understood about the separate checking account, but I guess I was responding to this sentence you wrote: “in December I will put just enough money back in PayPal to pay winnings". And my question was why are you transferring any money into PayPal at all? The act of using PayPal to send friends money automatically transfers money from your checking account to your friend's account and you don’t have to have any money sitting in the PayPal account at all.
No, I don’t use PayPal that way. I don’t want PayPal automatically transferring anything from my checking. I will transfer money to PayPal in December to pay league winnings. That is my preference. Before I just kept it in PayPal at all times until ready to pay winnings. I don’t trust them, but will use the service to send and receive money via family and friends and immediately take money received out of PayPal and put in my bank. Hope that answers your questions. I’ve heard too many instances of PayPal freezing accounts, again, I don’t trust them. I keep the league funds in a savings account because it is free for me. Another checking would cost me a fee from my bank and I want to keep fantasy funds separate from my main family account, which is the one PayPal is linked to.Understood about the separate checking account, but I guess I was responding to this sentence you wrote: “in December I will put just enough money back in PayPal to pay winnings". And my question was why are you transferring any money into PayPal at all? The act of using PayPal to send friends money automatically transfers money from your checking account to your friend's account and you don’t have to have any money sitting in the PayPal account at all.
Don’t mean to be nitpicking. I’m just trying to really precise in understanding this topic with the recent tax changes.
Ah. I’m glad I asked some extra questions! I thought the frozen accounts being mentioned were the PayPal accounts themselves and not the associated/linked bank accounts! If that’s the case, I totally get your approach of not allowing auto-transfers and handling that manually. Thanks for clarifying.
My worry is about PayPal acct. being frozen,. not my bank account. But I choose to use PayPal in this manner nevertheless.
