Fun > The Porch
Important information for all members to read
RJ:
I am posting this since it will have impact on our site in a number of ways in the year to come.
New rules on paypal will cause them to report you if you transactions exceed 200 and your total transactions hit $20,000 starting next year.
Many of the single coops have exceeded these limits in the past!
Here is the rub, If I continue doing coops even as a hobby and even if I continue to keep the cost to where I am not turning profit, I will be forced to file documents with the IRS, keep detailed records of everything I purchase for the coops and file forms each year to prove to them that I am doing this as a hobby and do not owe them money. Otherwise they may claim I owe taxes on the total amount of the coop value which is sometimes HUGH!
This impacts the others doing coops for the group also. It is a real issue and I am at this moment not sure how I am going to resolve it for myself. As this is a hobby for my enjoyment it becomes hard to justify all of it.
I opened this thread to discuss this issue but I do point out that I am an honest citizen and work for Law Enforcement, that said I will not be interested or allow the thread to turn into how we can do anything but honest methods. Any post made on other ways will be removed.
When you consider the work involved in doing coops for basically free it may get very hard to get people to do coops in the coming year.
I'm very interested in others thoughts on it.
RJ
ponddude:
RJ,
I was wondering how you were going to deal with this. I was contacted by Paypal earlier this year regarding it as well. When it all comes down to the bottom line, Paypal is only doing what the government has told them. This has to do with new tax laws that were passed during the Bush administration and are taking effect in 2011. It really impacts how our hobby is going to continues.
I am in the exact same boat as you are in and if I continue to do this as a hobby I really can not justify it at the end of the year. I have looked into other payment methods such as Google Checkout which made a brief appearance on my site, but didn't like how it integrated. I even looked into becoming a certified 501(c)(3) organization but than it becomes illegal to even make the 3% fees that are most usually charged. All and all, it doesn't look good for us to continue to go as we currently do.
I know a lot of people will bark about this, but becoming a legitimate company may only be the only method that avoids keeping a tremendous amount of documentation for the government. In most cases in becoming an LLC you only have to charge sales tax in the state you conduct business in. (In my case NJ, in your case FL) Looking into the business world can be daunting but I moved into it after college and even have a degree in it. Although I haven't used it in my "real" job (haven't we all) it may become very important in the future.
Greg:
It may be true that you might need to collect sales tax on sales in the state you're doing business in, but the burden of record keeping and satisfying the feds that indeed you did not make any money on the sales that take place is not lightened in any way in my experience.
Then there is the potential issue of gross receipts tax in some states werein they (the state taxing authority) doesn't care about profitability and levies a tax on the business entity based on the gross cash flow of the business...
Tough issue for sure.
Greg
Jeffl:
Is there a link that explains the laws and rules in more detail?
mmais68569:
We could always go back to the old way before PayPal, checks, money orders & cash. It would mean more bookkeeping but would avoid the tax reporting.
Mike
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