new 1099-K rules

[BobC]

Originally Posted by Gorditadogg

But he had a lot to do with baseball

Yes he did! LOL

[parkplace33]

No tax law change, you will just be getting another piece of paper now.

If folks are concerned with tax implications, recommend you talk to a financial advisor that can help you.

[ngrow9]

Originally Posted by BobC

You could keep a log, especially when you purchase something like at a show where probably won't get a receipt. But for purchases from say Ebay or AHs I would definitely print out and keep invoices and receipts. If nothing else, it would show an IRS agent you have independent documentation for at least part of your activities, and make it easier for them to maybe then accept you records to the activities you couldn't get receipts for.

Thanks Bob. Easiest thing moving forward is probably just to download all of my purchase history from eBay each year. Appreciate the help!

[chalupacollects]

[QUOTE=swarmee;2181144]Question: doesn't it also apply to your bank account as inflows and outflows? So whether or not PayPal reports F/F or you take cash at a card show, once it gets deposited into your bank account, the IRS will be informed about the overall amounts entering your bank accounts during a year. Then you'll just have to explain where all the income came from, that wasn't from W2 or 1099.

https://www.usatoday.com/story/news/...se/8411799002/

Pretty sure the "every banking" transaction over $600 being reported by the banks was upped to $10,000 as there was too much pushback from the banks, the people and the opposition party. It was part of the BBB bill which thankfully has been dumped...

[swarmee]

Originally Posted by chalupacollects

Pretty sure the "every banking" transaction over $600 being reported by the banks was upped to $10,000 as there was too much pushback from the banks, the people and the opposition party. It was part of the BBB bill which thankfully has been dumped...

You're right, I believe it was in a different bill that hasn't passed... yet. But they have been known to make some changes retroactive, and if they need to close the loopholes to pay for the bill, expect it to be revisited.

[BobC]

Originally Posted by cjedmonton

Related question: I received a payment via Paypal on Dec 27th 2021, but because I have not sold in a couple years, the payment is on hold until Jan 2022.

Should this sale be reported on my 2021 or 2022 return? I had no access to these funds in 2021, and know I will not receive a 2021 1099.

That is actually a great question, but not sure I'll be able to give you a definitive answer without more info.

First, am I correct to assume you, or the business you use the PayPal account for, are a cash basis taxpayer? If not and you report as an accrual basis taxpayer for tax purposes, I'd say you pick up the sale/income on your 2021 return. But if you are a cash basis taxpayer, you are supposed to pick up the sale/income in the year you actually receive the.cash, or it is at least made available for you to do what you want with it.

In your case it sounds like PayPal shows they received your money and credited your account for it in 2021, which initially sounds like you should then pick it up on your 2021 return. But because they're holding it and not letting you have access to it till 2022, it ends up sounding like you a shouldn't pick it up till your 2022 tax return. The problem is we don't know how PayPal internally looks at this, and whether they consider this your money for 1099 reporting purposes when they first receive it, or when they later remove the hold on it. So in this case, here's what I would do.

First off, see if you can get a phone number or email address you can contact PayPal at. Then contact them and simply ask them, for 1099 reporting purposes do they consider money received on your account one year, but put on hold and not actually released to you till the following year, reported on your 1099 in the year they received the money for you, or the year they actually released it to you. And then just report it in 2021 or 2022 based on what they tell you. And if they tell you they report it in the following year, which will be 2022 for you, you should be able to double check that by looking to see that questionable sales amount gets included on your 1099 for 2022, along with any other sales you have during the balance of 2022.

Now if you can't get through to PayPal, or you can, but no one can then answer your question, I'd just include that sale on your 2022 tax return. And again, you should be able to then double check it to see that they included the sale on your 1099 form for 2022 as well. If it ends up that they didn't include that sale on the 2022 form 1099, that means they must have considered that sale as being received by you in your 2021 tax year after all. But since you didn't include it on your 2021 tax return, go ahead and just add the sale on to what they did report on your 2022 form 1099, and include it all on your 2022 tax return. The IRS won't question you for reporting more sales than what is reported on the 1099(s) you get for a particular year. And since you really didn't have the ability to access the money from that sale till 2022, I don't think an IRS agent would fault you for waiting till then to pick it up on your 2022 tax return, even if PayPal didn't put it on your 1099 for 2022.

One more point going back to you, or anyone else, that is an accrual basis taxpayer. Regardless of whether or not you are an accrual or cash basis taxpayer, the people/entities that are preparing and sending these 1099-K forms to you, and the IRS, are doing so based strictly on the cash basis. So if you are on the accrual basis, chances are the sales income you are reporting on your return will not agree to what is being reported to you on the 1099-K form(s) that you receive. As long as the sales you report on the tax return are equal to or greater than sales reported on the 1099-K form(s) you received for that year, you should be fine. But if the accrual basis sales you report on your return turn out to be less than the total sales reported to you on the 1099-K form(s) you received for that year, you may want to make some adjustment, or at least a notation, on your tax return so the IRS doesn't ended up contacting you about some under reported income.

Sorry for the long answer, but if if you want it to be right, and so you know what to do................

[BobC]

Originally Posted by ngrow9

Thanks Bob. Easiest thing moving forward is probably just to download all of my purchase history from eBay each year. Appreciate the help!

Yup! I always used to use Gavelsnipe myself for all my Ebay activity, until Ebay basically locked Gavelsnipe out a couple years ago. When I heard the Gavelsnipe site was going to be permanently shut down effective 6/1/2021, I started a thread on here back in April, 2021 warning people about the pending move so that if they had sales data they wanted to save from the site, that they better go on and save or grab it somehow before the shutdown. I personally had set up over 18,000 snipes on Ebay through Gavelsnipe, that resulted in approximately 3,000 auctions I had won on Ebay over the years. (I was stunned when I saw how the numbers had added up over the years) Was very glad I printed off and saved all the successful Ebay auction sales data from Gavelsnipe. I never usually did BINs on Ebay, so the Gavelsnipe data should cover almost all my Ebay activity through today. After they shut down Gavelsnipe, I really haven't been on Ebay much at all. Printed off a looooootttttttt of pages of sales data though. LOL

And I'm pretty sure the Gavelsnipe site is down, so you can't access records through them anymore. Good luck with your recordkeeping.

[BobC]

Originally Posted by parkplace33

No tax law change, you will just be getting another piece of paper now.

If folks are concerned with tax implications, recommend you talk to a financial advisor that can help you.

No, not a financial advisor, you want a tax professional. One of my clients for years was a financial advisor AND a CPA to boot, and he knew better than to even try doing his own taxes.

You want to talk to/with someone that has been doing taxes for a while, and not just someone that has a title or degree that sounds like they might know what they are doing. And I don't heartily recommend the walk-in places that are always advertising on radio and TV, and have offices everywhere. There's a reason those people work there and not in a regular tax/accounting/CPA office. They're not all bad, but you never know who you'll get when you just walk in there, and they aren't all that cheap either. They usually charge you on what I call an ala carte basis. They basically charge you for every separate form they fill out, and every piece of paper and tax document they touch.

If you're looking around and start talking to somebody, and they sound a lot like me, you're probably headed in the right direction. LOL

[chriskim]

Saw this on FB.. of course, it could be fake news...


A friendly reminder that starting 2022, you’ll be taxed on your cashapp, Venmo, PayPal and Zelle for any transactions totaling up to over $600. That is one $600 or six hundred $1 transactions. So if you have a side hustle…… don’t use those apps. You're probably wondering why I encourage you to move to cash. If I purchase A tv for $700 in January of 2022 and decided to sell it on November of 2022 for $600 through one of those apps, I will be paying taxes for the $700 when I bought it and I’ll get a 1099K from the IRS on 2023 to pay taxes on the $600 I made off the tv I sold. If that does not sound ridiculous then I don’t know what to tell you. If I can’t write off my taxes for the Tv on the initial purchase, I should not have to pay taxes again on it for selling it. But the government has your best interest at hand. Tax the rich right?!? Good luck on your side hustle for all my friends that have it. Instead of “taxing the rich” they are really taxing the middle class more. But hey…. The government is for the people. I’m sure they just want to make sure you do your finances correctly. Tax the taxes to tax the tax. Got it . Of course if you are well off, you wont care but if you care about your friends that are not well off and their side hustle is what puts food on their table, then maybe you should care.#LGBFJB ~reposted from another post~

[Johnny630]

I see a lot on this board from people who say they just love the cards and could care less about the value of the cards most claim they would never sell they’re just going to die with them and pass them on to their heirs. Sounds like none of this would be applicable If you never sell any of your cards.

Why is everyone so worked up over this ? I think it’s smart for the IRS to be more diligent over collecting revenues from cards sales, there must be way more selling them ever. Maybe this is what the supposed FBI investigation over alleged trimming and shilling revealed lol. Make them pay up or at least put the fear of God in them over it, seems to be working based of this post.

[Pjere]

Originally Posted by Johnny630

Paying taxes it’s a good problem to have it usually means you’ve done well on your cards :-) accept it and pay it. Don’t get wrapped up in trying to avoid taxes.

Agreed!


Sent from my iPhone using Tapatalk

[chriskim]

Originally Posted by Pjere

Agreed!


Sent from my iPhone using Tapatalk

I agreed not to avoid paying tax.. but what about double taxed?

"If I purchase A tv for $700 in January of 2022 and decided to sell it on November of 2022 for $600 through one of those apps, I will be paying taxes for the $700 when I bought it and I’ll get a 1099K from the IRS on 2023 to pay taxes on the $600 I made off the tv I sold. "

[BobC]

Originally Posted by chriskim

Saw this on FB.. of course, it could be fake news...


A friendly reminder that starting 2022, you’ll be taxed on your cashapp, Venmo, PayPal and Zelle for any transactions totaling up to over $600. That is one $600 or six hundred $1 transactions. So if you have a side hustle…… don’t use those apps. You're probably wondering why I encourage you to move to cash. If I purchase A tv for $700 in January of 2022 and decided to sell it on November of 2022 for $600 through one of those apps, I will be paying taxes for the $700 when I bought it and I’ll get a 1099K from the IRS on 2023 to pay taxes on the $600 I made off the tv I sold. If that does not sound ridiculous then I don’t know what to tell you. If I can’t write off my taxes for the Tv on the initial purchase, I should not have to pay taxes again on it for selling it. But the government has your best interest at hand. Tax the rich right?!? Good luck on your side hustle for all my friends that have it. Instead of “taxing the rich” they are really taxing the middle class more. But hey…. The government is for the people. I’m sure they just want to make sure you do your finances correctly. Tax the taxes to tax the tax. Got it . Of course if you are well off, you wont care but if you care about your friends that are not well off and their side hustle is what puts food on their table, then maybe you should care.#LGBFJB ~reposted from another post~

There seems to be something missing from this FB item that you're posting as it mentions paying tax on a $700 purchase, and then again on a subsequent $600 sale of the item you previously bought. Not so sure it is fake news as much as much as it may be misguided thinking (or total ignorance on the part of the FB poster).

You don't pay income tax when you purchase something, so could the tax they're referring to on the $700 TV purchase maybe be sales or use tax? If you purchase a TV like this through Ebay, you'll get dinged for the sales tax, based on where you live, if applicable. But that has nothing to do with using PP, Venmo, or Zelle. That would automatically be charged if you used Ebay for the purchase. And assuming you aren't a formal business buying and selling TVs, any sales tax you paid when you bought the TV technically is deductible, because that sales tax would be added to the $700 cost basis you paid to acquire it, and then offset against what you later sold it for.


And then it mentions owing tax on the entire $600 you get for subsequently selling the same TV you bought earlier that year for $700, and how it gets reported to you on a 1099 now because your sale went through PP, Venmo, or Zelle. If that is the case, you sold something for less than you paid for it, so there's no profit to end up paying income tax on. You'd just need to show on your return that you didn't make money on it. And if the poster was referring to sales tax, it isn't the seller that pays it, it would be on the buyer.

This FB poster is either totally ignorant of the rules, or deliberately trying to be a jerk by giving people bad tax related information. Either way, it just shows how you have to be careful and watch what you read and believe online or wherever anymore, and why it can be extremely critical to have knowledgeable help and guidance in regards to taxes from someone you can trust. Especially over the past few, and coming years, with all the continually changing tax rules, and more to come.

And this new 1099-K reporting threshold just highlights some of the biggest problems the government and we the taxpayers face. The government is trying to get the taxes due and owed from all the operating businesses (legal and illegal) out there, but realizes much of it isn't being reported. Now the government doesn't really look at people having a garage sale or selling some miscellaneous clutter at a flea market once in a while as being in business, and truly doesn't care (or really want) to bother and tax them on any such activities. But in trying to get people actually running ongoing businesses, or even side hustles, that aren't being properly reported, the government ends up doing things, like lowering reporting thresholds for sales on third-party platforms like PP, Venmo, and Zelle to just $600. It will definitely get a lot of previously non-reported businesses to start reporting, or force them to find new ways to transact business that the government isn't already closely monitoring. Unfortunately, these lowered reporting thresholds also grab and affect tons of everyday people that really aren't running ongoing businesses, but now have to go through all the work and hassle these new reporting requirements are putting them, and their tax preparers, through. It is going to be a PITA for a lot of people that get these 1099-Ks next year, that didn't know they were coming.

[BobC]

Originally Posted by Johnny630

I see a lot on this board from people who say they just love the cards and could care less about the value of the cards most claim they would never sell they’re just going to die with them and pass them on to their heirs. Sounds like none of this would be applicable If you never sell any of your cards.

Why is everyone so worked up over this ? I think it’s smart for the IRS to be more diligent over collecting revenues from cards sales, there must be way more selling them ever. Maybe this is what the supposed FBI investigation over alleged trimming and shilling revealed lol. Make them pay up or at least put the fear of God in them over it, seems to be working based of this post.

You could be right about the FBI thing. As for people getting worked up so much about all this, I think it may be due to many people not knowing what or how to properly report their card collecting activities, or what records and details they need to keep, as much as them just not wanting to pay taxes they may owe on cards they're selling. No one is trying to put the fear of God in anyone, at least I know I'm not.

When it comes to topics and areas like this, ignorance is not bliss, in fact in many cases it can turn out to be the polar opposite. Warning people of this change in tax reporting laws at the start of the first tax year it takes effect, as opposed to them initially learning about it at the end of the tax year, will allow them to be much more proactive in how they decide to handle the new change. This is in contrast to the more limited, reactionary responses they would have, had they learned of changes so much later.

Not surprised at all about the potentially expanded reporting requirements and closer monitoring of businesses and people when it comes to taxes. Just look at the costs and record amount of national debt we have now assumed, primarily as a direct result of the pandemic. Add on the additional costs of finally looking to address the long overdue needs of our country's infrastructure, and any fool can see the government needs cash, which they get via taxes. And in these critical and vulnerable economic times, with the pandemic still raging and inflation breaking down the door, one of the last things politicians would ever want to do is raise taxes to potentially further damage the economy. Not to mention the political suicide it can turn into for politicians voting for such tax increases. So instead, people turn to the actual truth and often ask, rather than raise and pile new taxes on me Mr. Politician, why don't you do a better of job of enforcing the tax laws already in place, and getting the people and businesses that aren't properly paying their taxes now to start doing so? And now the politicians are............

[chriskim]

Originally Posted by BobC

There seems to be something missing from this FB item that you're posting as it mentions paying tax on a $700 purchase, and then again on a subsequent $600 sale of the item you previously bought. Not so sure it is fake news as much as much as it may be misguided thinking (or total ignorance on the part of the FB poster).

You don't pay income tax when you purchase something, so could the tax they're referring to on the $700 TV purchase maybe be sales or use tax? If you purchase a TV like this through Ebay, you'll get dinged for the sales tax, based on where you live, if applicable. But that has nothing to do with using PP, Venmo, or Zelle. That would automatically be charged if you used Ebay for the purchase. And assuming you aren't a formal business buying and selling TVs, any sales tax you paid when you bought the TV technically is deductible, because that sales tax would be added to the $700 cost basis you paid to acquire it, and then offset against what you later sold it for.


And then it mentions owing tax on the entire $600 you get for subsequently selling the same TV you bought earlier that year for $700, and how it gets reported to you on a 1099 now because your sale went through PP, Venmo, or Zelle. If that is the case, you sold something for less than you paid for it, so there's no profit to end up paying income tax on. You'd just need to show on your return that you didn't make money on it. And if the poster was referring to sales tax, it isn't the seller that pays it, it would be on the buyer.

This FB poster is either totally ignorant of the rules, or deliberately trying to be a jerk by giving people bad tax related information. Either way, it just shows how you have to be careful and watch what you read and believe online or wherever anymore, and why it can be extremely critical to have knowledgeable help and guidance in regards to taxes from someone you can trust. Especially over the past few, and coming years, with all the continually changing tax rules, and more to come.

And this new 1099-K reporting threshold just highlights some of the biggest problems the government and we the taxpayers face. The government is trying to get the taxes due and owed from all the operating businesses (legal and illegal) out there, but realizes much of it isn't being reported. Now the government doesn't really look at people having a garage sale or selling some miscellaneous clutter at a flea market once in a while as being in business, and truly doesn't care (or really want) to bother and tax them on any such activities. But in trying to get people actually running ongoing businesses, or even side hustles, that aren't being properly reported, the government ends up doing things, like lowering reporting thresholds for sales on third-party platforms like PP, Venmo, and Zelle to just $600. It will definitely get a lot of previously non-reported businesses to start reporting, or force them to find new ways to transact business that the government isn't already closely monitoring. Unfortunately, these lowered reporting thresholds also grab and affect tons of everyday people that really aren't running ongoing businesses, but now have to go through all the work and hassle these new reporting requirements are putting them, and their tax preparers, through. It is going to be a PITA for a lot of people that get these 1099-Ks next year, that didn't know they were coming.

Thx for your detail explanation! Appreciated your time. It make more sense to me now. I think you are correct, they were referring that $700 tv needed to pay SALES tax. But they probably think if eBay send them a 1099-K, then they have to file the whole amount on that 1099-k without adjustment what portions of the sell were a lost, and what portions were gains. Anyways, things get so complicated and people need to have detail track records of buy/sell and make all those accountants so busy during tax time. I just hope Turbotax will catch up with all these messes.

[jchcollins]

These changes - and yes they've been coming for some time... for me are the kick in the butt I needed to finally just stop selling. For too long, many card purchase propositions for me have been sell X to get Y...and in the end this results in wishing that I had not sold stuff. So my pace going forward may be slower, but... no more.

[BobC]

Originally Posted by chriskim

Thx for your detail explanation! Appreciated your time. It make more sense to me now. I think you are correct, they were referring that $700 tv needed to pay SALES tax. But they probably think if eBay send them a 1099-K, then they have to file the whole amount on that 1099-k without adjustment what portions of the sell were a lost, and what portions were gains. Anyways, things get so complicated and people need to have detail track records of buy/sell and make all those accountants so busy during tax time. I just hope Turbotax will catch up with all these messes.

If you use Turbotax yourself, I believe you can access online tax help through them. They hire tax preparers, CPAs, etc. to be available for online guidance and help as kind of like independent consultants. I don't know what the charge/cost is for using them. My understanding is they don't actually prepare the return for you, just help and answers questions so you can file yourself. It is like walking into one of the big national tax prep franchises though, like H&R Block or Jackson Hewitt, where you don't know who you'll get to help you or how good they and their qualifications are. For whatever reason though, I feel you would more likely be getting better quality and maybe more knowledgeable people to help you through Turbotax, but it will still just be luck of the draw as to who you get. Reason for my saying that is I know someone who's worked as one of these part-time, online consultants for Turbtax in the last few years. He's very knowledgeable and he'd even been the Controller for a very large, well known mid-West brewery for a number of years, so he's no slouch. And from what he was telling me, it seems Turbotax does pay attention to who they hire to act as consultants for them. Good luck.

[tha-rock]

I heard about this today from a member and reading this post has not only been informative, but confusing and frustrating. It is going to be a nightmare to do this. Is IRS really so desperate for funding that they need to create a system that will sweep up millions and millions of ordinary folks who manage to sell $600 or more in a year in an online marketplace? Can the $600 threshold be raised to a more reasonable amount? What would it take to do that?

I am refining and downsizing my collection. Most of the items I'm selling were acquired at a cost, although I have no written sales records of what I paid for 99+% of those items. I understand paying taxes on sales at the capital gains rate, but how do I establish a price paid for something I sell so that I don't have to pay taxes on the gross amount? Will the IRS just take my word for what I paid? I imagine many of you are in the same boat. How are you going to handle it?

Not long ago I sold a Jim Rice signed baseball for $25, which is what I paid for it, when I bought a few from Sure Shot Promotions. After ebay fees, I lost money on this baseball, but under the new law ebay would show this as a $30 income ($25 + $5 postage), when in reality it was a net loss to me. Having to pay tax on a net loss is salt in the wound. Many of you probably have clear memories of what you paid for certain things but would be at a loss if IRS asked you to prove it. Some of the things I am selling, I purchased 20- 40 years ago. No sales receipts and memory would not be reliable. Some items were acquired in trades. How do we deal with these issues?

If I bought a card in 1990 for $500 and sold it in 2022 for $1000, and have no documentation of my buy price, how can I avoid paying tax on the entire $1000? This has been fun as a 'hobby' and if I made money selling an item, it has been my means of funding other purchases for my collection.

It seems that this may push many hobbyists into creating "businesses" and all of the headaches that will bring just to avoid overpaying taxes. I don't want to look at my hobby as a business. Am I wrong? Am I making any sense?

[cjedmonton]

Originally Posted by BobC

That is actually a great question, but not sure I'll be able to give you a definitive answer without more info.

First, am I correct to assume you, or the business you use the PayPal account for, are a cash basis taxpayer? If not and you report as an accrual basis taxpayer for tax purposes, I'd say you pick up the sale/income on your 2021 return. But if you are a cash basis taxpayer, you are supposed to pick up the sale/income in the year you actually receive the.cash, or it is at least made available for you to do what you want with it.

In your case it sounds like PayPal shows they received your money and credited your account for it in 2021, which initially sounds like you should then pick it up on your 2021 return. But because they're holding it and not letting you have access to it till 2022, it ends up sounding like you a shouldn't pick it up till your 2022 tax return. The problem is we don't know how PayPal internally looks at this, and whether they consider this your money for 1099 reporting purposes when they first receive it, or when they later remove the hold on it. So in this case, here's what I would do.

First off, see if you can get a phone number or email address you can contact PayPal at. Then contact them and simply ask them, for 1099 reporting purposes do they consider money received on your account one year, but put on hold and not actually released to you till the following year, reported on your 1099 in the year they received the money for you, or the year they actually released it to you. And then just report it in 2021 or 2022 based on what they tell you. And if they tell you they report it in the following year, which will be 2022 for you, you should be able to double check that by looking to see that questionable sales amount gets included on your 1099 for 2022, along with any other sales you have during the balance of 2022.

Now if you can't get through to PayPal, or you can, but no one can then answer your question, I'd just include that sale on your 2022 tax return. And again, you should be able to then double check it to see that they included the sale on your 1099 form for 2022 as well. If it ends up that they didn't include that sale on the 2022 form 1099, that means they must have considered that sale as being received by you in your 2021 tax year after all. But since you didn't include it on your 2021 tax return, go ahead and just add the sale on to what they did report on your 2022 form 1099, and include it all on your 2022 tax return. The IRS won't question you for reporting more sales than what is reported on the 1099(s) you get for a particular year. And since you really didn't have the ability to access the money from that sale till 2022, I don't think an IRS agent would fault you for waiting till then to pick it up on your 2022 tax return, even if PayPal didn't put it on your 1099 for 2022.

One more point going back to you, or anyone else, that is an accrual basis taxpayer. Regardless of whether or not you are an accrual or cash basis taxpayer, the people/entities that are preparing and sending these 1099-K forms to you, and the IRS, are doing so based strictly on the cash basis. So if you are on the accrual basis, chances are the sales income you are reporting on your return will not agree to what is being reported to you on the 1099-K form(s) that you receive. As long as the sales you report on the tax return are equal to or greater than sales reported on the 1099-K form(s) you received for that year, you should be fine. But if the accrual basis sales you report on your return turn out to be less than the total sales reported to you on the 1099-K form(s) you received for that year, you may want to make some adjustment, or at least a notation, on your tax return so the IRS doesn't ended up contacting you about some under reported income.

Sorry for the long answer, but if if you want it to be right, and so you know what to do................

I greatly appreciate the detailed response!

Finally got a response from Paypal on this. They said it is reportable on the 2021 term since that is when the buyer sent the funds, even if they are not yet available to me.

The parcel is still en route, thus the hold until it is delivered. However, the buyer completed the transaction on their end in 2021, so that’s how they said it will be viewed.

Watch me claim it for 2021 and then get a 1099 for the 2022 tax year anyway (assuming no other sales for the year). That’s a mess I don’t want.

[BobC]

Originally Posted by tha-rock

I heard about this today from a member and reading this post has not only been informative, but confusing and frustrating. It is going to be a nightmare to do this. Is IRS really so desperate for funding that they need to create a system that will sweep up millions and millions of ordinary folks who manage to sell $600 or more in a year in an online marketplace? Can the $600 threshold be raised to a more reasonable amount? What would it take to do that?

I am refining and downsizing my collection. Most of the items I'm selling were acquired at a cost, although I have no written sales records of what I paid for 99+% of those items. I understand paying taxes on sales at the capital gains rate, but how do I establish a price paid for something I sell so that I don't have to pay taxes on the gross amount? Will the IRS just take my word for what I paid? I imagine many of you are in the same boat. How are you going to handle it?

Not long ago I sold a Jim Rice signed baseball for $25, which is what I paid for it, when I bought a few from Sure Shot Promotions. After ebay fees, I lost money on this baseball, but under the new law ebay would show this as a $30 income ($25 + $5 postage), when in reality it was a net loss to me. Having to pay tax on a net loss is salt in the wound. Many of you probably have clear memories of what you paid for certain things but would be at a loss if IRS asked you to prove it. Some of the things I am selling, I purchased 20- 40 years ago. No sales receipts and memory would not be reliable. Some items were acquired in trades. How do we deal with these issues?

If I bought a card in 1990 for $500 and sold it in 2022 for $1000, and have no documentation of my buy price, how can I avoid paying tax on the entire $1000? This has been fun as a 'hobby' and if I made money selling an item, it has been my means of funding other purchases for my collection.

It seems that this may push many hobbyists into creating "businesses" and all of the headaches that will bring just to avoid overpaying taxes. I don't want to look at my hobby as a business. Am I wrong? Am I making any sense?

You make a lot of sense and I can understand your confusion, but don't think you're alone. If you're thinking you have to form a business now, you don't. If you look at and read my posts, in this thread and back in others from prior months/years, I've talked and written about the various ways people in this hobby can end up reporting their sales activity, and at least some of the pros and cons of each way to possibly report what they're doing. As I've been saying for quite a while now, people buying and then selling sports cards, like many of us do, will basically fall into and end up reporting their card sales activity as either a dealer/seller/flipper that is actually in business and treating what they do as such, or as an investor, and also finally as a true collector/hobbyist. And I've also said you can probably be reporting as any of these three different sales types (dealer/investor/collector) all at the same time, depending on your unique set of circumstances.

I'm merely passing along information so fellow collectors will at least have and know the basics of what they should be doing, so they are better informed and able to best decide how to handle and report things for their own unique situations and circumstances. And I'm a big proponent of advising people to seek out good, qualified professional help with tax reporting and preparation when they need it. If you start going back and reading through my posts, you'll soon see I keep saying the same things over and over again, and I'm really getting tired of all this typing. LOL

Anywy, to specifically answer your question about costs and records, even if you don't have an actual receipt or other specific documentation to support every single thing you've ever bought, I would not go and just report the cost of such an item as $0 then if I sold it. Instead, I would give it my best effort to recreate what the cost was, and failing that, would give it my best educated guesstimate as to what I paid for something, and use that to report on a return. You could even create or maintain some type of log, notes, spreadsheets, or other written records to keep track of such undocumented acquisitions, like cash purchases you had from a show you attended years ago. It may not be perfect, but you do the best you can to be reasonable and as accurate as possible. Hope this hopes. Good luck.

[BobC]

Originally Posted by cjedmonton

I greatly appreciate the detailed response!

Finally got a response from Paypal on this. They said it is reportable on the 2021 term since that is when the buyer sent the funds, even if they are not yet available to me.

The parcel is still en route, thus the hold until it is delivered. However, the buyer completed the transaction on their end in 2021, so that’s how they said it will be viewed.

Watch me claim it for 2021 and then get a 1099 for the 2022 tax year anyway (assuming no other sales for the year). That’s a mess I don’t want.

Well good, glad they answered you. Keep the copy of the email they answered with, or at least the name of the person you talked to. And if you do report the sale in 2021, and then find they stick it on your 2022 1099-K form after all, I wouldn't panic. I'd be sure sure to report the full amount of the sales on your 2022 1099-K form on your 2022 tax return. And then if you report your 2022 sales as a dealer in business, I'd deduct the sales amount you had already reported on your 2021 return as some type of other expense of the dealer business being reported on your 2022 return. But if you report your sales activity on your 2022 return as an investor or collector, go ahead and list the sales amount you already reported on your 2021 return as a sale on your 2022 return as well. But for the cost basis, report the same amount you reported for the sale so the net profit comes out to $0. Either way, you still end up fully reporting the sales shown on your 2022 1099-K form, but don't pay tax on the sales income you already reported on your 2021 tax return.

Hope this helps, good luck.