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Starting next year for the 2022 tax returns your income will be double-reported to the IRS if you get paid via PayPal as both they and AirBnB will report the same income you earned via two separate 1099K forms . Be prepared for the IRS to think you made double what you really made. This applies to other entities that take customer payments on your behalf then pay you via PayPal, such as TripAdvisor and any other service, not just short-term rentals. All this because due to the new Rescue Act, the threshold for reporting has dropped dramatically: Instead of reporting only if you make both more than $20,000 and received at least 200 transactions per year as has been the case for years, due to COVID and the “gig economy” it will now change to just $600/year – and any number of transactions (even just one).
Oh what fun tax returns will be next year, I can hardly wait!
Thank JJD, that is what we plan on doing. It’s just that we’ve never had to do any deducting whatsoever for service fees, duplicate income, guest refunds, etc, etc., etc., before because we never had more than 200 transactions (200 bookings) and $20,000.00 in one year, so the change in procedure will be more dramatic for us.
This is the first time we will even be receiving 1099K’s from AirBnB, VRBO, Booking.com, PayPal or anywhere else for that matter. Before we just reported the income we received with no need to report what the guest was charged by the OTA sites since we never received that in the first place. When you advertise on multiple platforms and have PayPal to take into account, that is suddenly a helluva lot more work!
But now that you mention it, sites like AirBnB and VRBO should not be reporting 3% service fees or taxes or guest service fees, etc. anyway right, because they never paid us that. Don’t they just report what we get paid out/receive on the 1099K, or do they actually report what the guest was charged, even if we never see it?
Yes, I get it. I was hoping it was just what we were paid. But since it is a 1099K that covers credit card expenses they can report what they kept as well. Not sure that seems fair because “1099” in general is for income but I had a feeling it might be what you are saying.
Yes, it will be a huge change for me – but also for probably half the population since the threshold is changing so drastically. I think the IRS knowing this will be bombarded with questions and possible taxpayer confusion or error. I will use next year as a learning curve and see how I handle it alone. It’s just that I will have to deduct all commissions and processing fees for several platforms plus PayPal and double income reporting, in addition to all the normal expenses & deductions. It’s not about not understanding, it’s just about how long it takes and how accessible all the information will be because I wasn’t using downloadable .csv spreadsheets from the sites before.
True, but we have several properties as well. It’s just going to be a huge change.
But that’s my point. What AirBnB or VRBO charge the guests and keep (their service fee, taxes, etc.) and what they keep from us (3%, or whatever it is in your case) is not money we receive or get for others. We never see that money. So in this case it appears that they are reporting money they received and kept as “paid to us”. Seems strange to me. But I guess what you’re saying is that a 1099K is more of a record of every transaction the service makes in our name, and every charge and fee involved in that transaction, even if it did not go to or benefit us.
Schedule C as a sole proprietor business. Is there a benefit in filing Schedule E as well? I thought it was just one or the other.
So then it is as we thought, that Schedule E is only if you are personally renting out a place (house, etc.) you own yourself for extra income, but Schedule C is if you are running an official documented business in which you advertise and serve customers regularly.
That’s strange as sources on the Internet seem to confirm what I just wrote; here’s just a couple:
Schedule E is used for reporting rental income from residential rental real estate, and royalty income. That’s it. SCH C is used for reporting active business income, and that’s it.
and this too:
A Schedule C is for the reporting of business income and or losses, whereas a Schedule E is used to report rental income and or losses. The income that is earned that is reflected on your Schedule C is subject to self-employment taxes, whereas the income reflected on your Schedule E is not.
One is strictly for personal rental income for a property you own and the other is if you are running an official registered business, in this case a rental business.
Well we have an accountant doing the taxes. But we still have to gather all the info and deductions, a lot more deductions next year. But for our situation it appears a Schedule C should be fine unless you can think of a reason it isn’t. We will also read up on the IRS info again more carefully, but I don’t see a reason why Schedule C would not work.
To make it even more complicated, our property is in an S-corp (actually, it’s a wholly disregarded foreign entity that’s an LLC held by our S-corp US business with farmland that we rent out but that has a mortgage against it in order to buy the foreign property) so we have to file corporate tax returns (albeit S-corp returns). But we don’t have to figure out whether we use Schedule C or E!
LOL, I hope you’re not referring to me “starting a rumor” simply by asking about it. I don’t recall ever making a statement but you can correct me (quote me) if I’m wrong. And like I said, we have an accountant which will advise us once we provide the necessary info. But thanks anyway for your input.
