Questions about IRS and $20,000 in sales being automatically reported

[phreak23]

I currently use ebay/paypal as a hobby, not to get in details, but I buy/sell/trade and so far this year I have accumulated a total of about 16K in paypal sales activity, my report also shows that my purchase activity is about 15k. First question I have is, what is "sales activity" and "purchase activity" when I download my annual report. I know my sales is high, but my purchase activity is almost just as high as my sales activity and I am unsure why. I know for a fact I have not made almost 15K worth of purchases using my paypal account so far this year.

I am also wondering why Paypal automattically sends your info to the IRS at the 20K mark, I am not a business and I just use Paypal as a hobby, if I had to pay taxes on the 20K in sales I made this year it would be devestating consitering this is not profit! I am not running a business of any kind, just buying and selling things I collect. I am freaking out its only May and I've already sold 16K worth of goods and I do not need the IRS hounding me for money they don't deserve 🙂

Any help or advice would be great. I don't want Uncle Sam coming after me next tax season lol.

[brewhardware]

The IRS is concerned about getting their cut from income producing activities whether you're officially setup as a business or not. If 20k of income is reported and you legitimately did not profit from those activities, you would simply report the $20k in revenue on Schedule C of your 1040 and then under expenses, report the costs associated with receiving that 20k. You only pay taxes on profit (just like a real business). You can't make a profit and claim it was just for fun to avoid paying taxes.