I've been dealing with PayPal transactions for my small side business, and this thread is spot-on about the confusion between income reporting and sales tax collection. What many people don't realize is that the $600 1099-K threshold was actually lowered from the previous $20,000 threshold, which has caused a lot of panic among casual sellers who suddenly started receiving these forms. They see "IRS reporting" and immediately think they owe more taxes or need to collect sales tax, but that's not how it works. The 1099-K is simply an information document that reports your gross payment volume - it doesn't determine what you actually owe in taxes. If you're selling personal items at a loss (like most garage sale type transactions), you often don't owe any income tax on those sales at all. Your seller is definitely confused about their obligations. Even if they were required to collect sales tax (which is unlikely for a casual personal sale), that should have been clearly disclosed and included in the original invoice. You can't retroactively add taxes after payment has been completed and accepted. Stand firm on your decision not to pay additional money. You fulfilled your part of the agreement completely by paying the invoiced amount.

This situation is unfortunately becoming more common since PayPal lowered their 1099-K reporting threshold to $600. Many casual sellers are getting confused about their tax obligations and mistakenly trying to pass those concerns onto buyers. To be absolutely clear: you should NOT pay any additional money. The seller is confusing two completely different things: 1. **Income tax reporting** - PayPal reports their earnings to the IRS via 1099-K, which might affect the seller's personal income tax return 2. **Sales tax collection** - A separate obligation that typically only applies to registered businesses, not casual individual sellers Even if sales tax were somehow required (which it probably isn't for a private transaction), it should have been clearly itemized in the original invoice before you paid. You can't retroactively add taxes after a completed transaction. The seller's potential tax obligations are their responsibility, not yours. You paid the full invoiced amount as agreed - the transaction is complete. I'd recommend a polite but firm response explaining that any tax concerns they have are separate from your completed payment of the agreed-upon invoice amount. Don't let them pressure you into paying extra money for their confusion about tax rules!

Has anyone actually had success getting their 1095-A corrected? Mine's been wrong for over a month and despite three calls to the Marketplace, nothing has changed. I'm near the filing deadline and getting desperate.

I went through this exact same situation last year and can relate to your frustration! After weeks of back-and-forth with the Marketplace, I discovered that declining advance payments doesn't disqualify you from the Premium Tax Credit - you should absolutely still be eligible to claim it when filing. The key issue is that your 1095-A Column B (SLCSP amounts) shouldn't be zeros if you're income-eligible for the credit. This sounds like a system error on their end. Here's what finally worked for me: 1. Use the SLCSP lookup tool on healthcare.gov to find your correct monthly benchmark amounts 2. Enter those amounts in Column B when completing Form 8962 (not the zeros from your 1095-A) 3. Keep documentation showing you looked up the official SLCSP rates Don't let the incorrect 1095-A prevent you from claiming the credit you're entitled to. The IRS allows taxpayers to use the correct SLCSP amounts when the 1095-A is wrong. Just make sure to save screenshots of your lookup results and any communication with the Marketplace for your records. You're not doing anything wrong - this is a known issue that affects people who chose to receive their credit at tax time instead of monthly advance payments.

One important detail that hasn't been mentioned: check Box 6 on your 1099-C form. It should have a code that indicates the reason for the cancellation of debt. Code A means bankruptcy, Code B is for other judicial debt relief, Code E indicates expiration of collection statute, etc. This code can help determine if you might qualify for an exclusion. Also, verify that Box 4 (debt forgiveness date) shows 2024 - if it shows 2023, that would mean it should have been reported on last year's taxes, not this year's.

This is a really stressful situation, but you're definitely not alone - late-arriving tax documents happen more often than people think! The key is acting promptly now that you have the 1099-C. First, definitely verify the information on the form is accurate (amount, your SSN, the date). Then, as others mentioned, you'll likely need to file Form 1040-X to amend your return. However, before you panic about owing money, check if you qualify for any exclusions - insolvency is a common one where if your total debts exceeded your assets when the debt was canceled, you might not owe tax on it. The IRS has worksheets to help calculate this. If you do owe additional tax, file the amendment ASAP since interest accrues from the original filing deadline. Consider consulting a tax professional if the amount is substantial or if you're unsure about potential exclusions.

Just wanted to add one more thing that might be helpful - timing can matter for the gift tax filing! If your mom gives you the car near the end of the year, she'll have less time to prepare Form 709 for the April 15 deadline. Also, keep all documentation about the car's value (KBB printout, photos of condition, etc.) in case the IRS ever questions the reported value. They rarely do for typical car gifts, but it's good to have your paperwork in order. The good news is this is a pretty common situation and the IRS processes tons of these gift tax returns every year. As others mentioned, she won't actually owe any tax - it's just paperwork to track against her lifetime exemption. Don't let the tax implications stop her from being generous!

One thing to keep in mind is that the annual gift tax exclusion amount changes periodically with inflation adjustments. For 2024, it's $18,000 per person, but it was $17,000 in 2023 and $16,000 in 2022. So when you're researching online, make sure you're looking at current year information. Also, since your mom lives in a state with income tax, it's worth double-checking if that state has any gift tax provisions. Most states don't, but a few do have their own rules. Connecticut, for example, has a state gift tax that kicks in at much lower amounts than the federal level. The good news is that even if she needs to file Form 709, it's not as complicated as it might seem. The form essentially just reports "I gave my child a car worth $22,500, which exceeds the annual exclusion by $4,500." That $4,500 gets subtracted from her lifetime exemption (currently $13.61 million for 2024), so unless she's given away millions already, there's no actual tax due.

Sometimes you can appeal the overpayment if it wasn't your fault. Worth looking into tbh

Sorry you're going through this! Just wanted to add that you should also check if you have any outstanding federal debts (student loans, back taxes, etc.) because those agencies can also intercept your refund through TOP. If multiple agencies are in line, they prioritize by submission date. You might want to call the Treasury Offset Program at 1-800-304-3107 to see what offsets are pending against your SSN so you know exactly what to expect.