John, you're probably more on point with this than you may think. The trick is to not ignore these 1099-K forms people are going to get, and make sure they are properly being reported on their tax returns so that they match up with IRS info, and don't run afoul and get bounced by the IRS' automated system. It likely won't be triggering tons of audits. And for long time collectors who don't have complete and perfect cost basis data, I suggest using your best and most reasonable estimates for costs and basis, and just be sure to start keeping better records going forward.

Now as for specifically looking hardest for covid relief fraud, I think their biggest problem and concern currently is exactly the same as it is for PSA, trying to catch up on their backlog of work. LOL :D

My recollection of the 1986 legislation was that it was called The Tax Reform Act of 1986. I think the simplification act was when President Clinton was in office. BobC, does that sound right, or were there multiple 1986 acts, or what??

Ha ha, you might be right Frank, it's getting late and I'm getting old. My point was still valid regarding all the work it created and what we were calling it. I may have to go back and amend my post. Thanks.

I had a tax professor who left the classroom for a couple of weeks to go to DC to help with the Tax Reform Act of 1986. And when that Act became law it set things in motion that culminated in the greatest loss of life of Americans ever, occurring on April 15, 1987.

Just over 5 million Americans vanished. Before the Tax Reform Act of 1986, someone filing a 1040 just listed a number for minor children in the household. But the TRA of 86 placed a requirement of listing a minor child's SS# on the new returns. Taking into consideration that 17 year olds from the previous year would have turned 18, and subtracting out newborn children for that tax year, the returns filed in 1987 showed that there were just over 5 million kids who were claimed as dependents the previous year and who should be showing up on the 1987 returns for tax year 1986, but no one claimed them. Those kids vanished.

In the old days newborns didn't get a SS# application sent in as part of being in the hospital. I didn't. A few years after my (younger) brother was born, I recall Dad showing me that a SS card had arrived in the mail for me. Mom and Dad applied for both of us. Dad kept up with the cards, I was maybe 8 or 9, and if I'd gotten it then I'd have lost it. My brother and I have consecutive SS#s. About 30 years later my twins are born, the hospital is getting info for SS applications, and when their cards arrive their numbers are quite different. My old card has a line on it on the front, "not to be used for identification purposes," which greatly amuses me because that's exactly how it's used and they no longer put that on the cards.

I remember those days Frank, forgot about that sudden loss of kids being claimed as dependents. That was another crazy result from that 1986 tax act being passed. Nowadays a baby doesn't leave the hospital without a social security number at least being applied for.

Do you remember the phase-in/phase-out of certain deductions created by the Reform Act, or the impact the brand new Passive Loss Rule had on the nation's economy? Ugh!!! People often look back at how after the 2008 mortgage loan debacle the government stepped in to save businesses and our economy, and may think of that as the first time our government has had to cross the line and directly take over and deal with private businesses like that, at least since the Great Depression. They may have forgotten what happened after the Tax Reform Act of 1986 was passed and the feds had to form the Resolution Trust Corporation to deal with the aftermath of that legislation.

Are social security applications available on the Rio Grande?:eek:

That's a good one Frank! LOL

That brings up the law giving anyone born on US soil automatic citizenship, jus soli. That thinking/law exists in only about 33 countries in the world, almost all exclusively in the American continents.

So are you for or against "anchor babies"?

Hi Ben! You haven't heard about the "national coin shortage" ? Old people arent leaving the house an using their change purse, and people recieved so much stimulus they have no need to hit the coin star machine in exchange for an Amazon gift card.

I see the racists showed up to the party. Good to know.

I am really confused on what to do now for taxes. In the past I just kept spreadsheets and paid taxes on net profits. However, eBay accidentally sending out 1099-K forms has me a little worried.

eBay assured all California people that got 1099-K forms in the mail that this was a mistake and that they didn't send the forms to the IRS/California Franchise Tax Board. I for one can't trust eBay and I have no idea if they are telling the truth here.

If I use the 1099-K form that eBay gave me and the IRS/CFTB didn't get it, would this raise red flags? Or would they not care?

I am leaning towards using this 1099-K form, even if eBay says to disregard it. I have a feeling that I will do my taxes as usual and if I don't use the 1099-K form and eBay actually sent it, that I would get a bill for the 1099-K and have to amend my taxes to deal with this nonsense.

For people in California who got the 1099-K form we are supposed to throw out because it was a mistake, what are you going to do? Are you going to ignore it or use it?

I received my tax form from eBay last week.

What the form does not indicate is the amount I PAID for the cards I sold.

The dollars on the tax form assume this is pure profit, when I could have actually LOST money. In any case, it is not pure profit because I had to purchase the cards.

Dandor,

What EXACTLY did Ebay say in their communication to you? Sending you a 1099-K form if you had not yet met the required threshold for 2021 in and of itself is technically not a mistake. The rule simply mandates that someone like Ebay must prepare and send you a 1099-K form when your sales (and number of transactions in 2021) reach a certain amount. If you didn't reach those threshold amounts, there's no law or rule that says Ebay (or whomever) still can't send you a 1099-K reporting your 2021 sales, regardless of what they were.

So when you said they told you it was sent in error, could they possibly mean the sales amount being reported on the 1099-K form they sent was wrong, and that is why you should disregard the 1099-K form, and also why they didn't go ahead and send copies of the form to the IRS and CFTB?

So, does your record of Ebay sales agree with what is on the 1099-K form you got? If not, see if you can reconcile it and figure out what the difference is. At least start there.

From what you're saying, it sounds like you've been reporting your past Ebay sales on your tax returns all along. If that is the case, reporting your sales on your 2021 tax returns shouldn't raise any red flags with tax authorities, even if Ebay sent no 1099-K forms in to them regarding your 2021 sales. The only red flag that would potentially be raised is if Ebay did send in a 1099-K form to the IRS/CFTB for your 2021 sales, and you did not also report AT LEAST the same amount of taxable sales on your returns as was reported on the 1099-K form(s) you got for last year.

Hope this helps at least a bit, but again, let me know exactly what Ebay actually said to you. Seeing the actual correspondence would probably be the best way to do that. For privacy purposes though, might be better to PM me, unless you can redact/hide your personal info.

NEVER SEND PERSONAL DATA ONLINE UNLESS YOU CAN HIDE/REDACT THE PERSONAL INFO, OR SEND IT IN AN ENCRYPTED FORMAT OR AS A PASSWORD PROTECTED DOCUMENT!

Thanks,

BobC

They screwed up with everyone in California. I had less than $4000 in sales and less than 150 transactions. This is exactly what we were told. I received my 1099-K form in the mail today. Part of me is on the fence about if eBay truly didn't send the form to the IRS/CFTB. I guess I could take their word, but the mailed 1099-K form has me concerned.

A recent technical issue resulted in a 1099-K form being incorrectly provided to you. Please disregard the incorrect 1099-K form. The incorrect 1099-K form was not sent to the IRS or California Franchise Tax Board.

We’re working to resolve the issue and ensure that it will not happen again. Unless you had more than $20,000 in gross sales and 200 transactions in 2021, we will not submit a 1099-K form to the IRS or the California Franchise Tax Board.

We sincerely apologize for the error and any inconvenience this may have caused.

As always, thanks for selling on eBay, and for being part of the eBay community.

The eBay Selling Team

The sales amount reported on the 1099-K form is not assumed to be all profit, it is just the reportable gross taxable sales you had for the year. It is up to the recipient to report this gross taxable sales amount in the proper place on their tax return, and then also to list and report the allowable expense deductions on their return and then subtract those from the sales to arrive at their net taxable income/profit/gain (or loss). You want to be sure to report your gross taxable sales in the appropriate place(s) on your tax return so the IRS can easily match any 1099-K income reported to them on your behalf to the gross sales amount reported on your tax return.

Please note, the reported gross sales on your tax return doesn't have to tie exactly to the amount of gross sales you got reported to you on 1099-K forms you received for that same year, but you want that gross taxable sales amount reported on your return to at least be the same, if not more, than what was reported on the 1099-K form(s) you got. If the gross taxable sales amount reported on your return is less than what was reported on the 1099-K form(s) you got, and copies of which were sent the IRS, when the IRS tries to match the 1099-K form(s) sales to your return, they'll come up short and you will get a correspondence from the IRS questioning what they think may be un-reported income, along with an estimate of what they think you may owe them on that unreported income. If you fail to report anything at all about your 1099-K reported income on your tax return, the IRS figures you have no expenses to offset against those sales because you didn't report any. They don't just assume the sales are 100% profit.

Like I said, this is technically not an error. They (Ebay) can still send everyone the 1099-K forms and they've done nothing wrong, except maybe make more work and expense for themselves by doing something they didn't have to. In this case I think the "error" they are referring to is the one they created by sending these 1099-K forms out to people who weren't expecting to get these till next year, and are now pissed as hell at Ebay thinking they're going to have to start reporting these sales on this year's (2021) returns instead of starting on next year's (2022) tax returns. And i'll also bet a few people had already filed their 2021 tax returns not expecting a 1099-K this year, and then this "present" from Ebay showed up. I'm sure that made a lot of people happy! :rolleyes:

I'm thinking Ebay is doing a lot of damage control because of all their sellers they've pissed off due to this. And as a result, I don't think they'd make an even greater monumental error by telling everyone not to worry because they didn't actually send any 2021 1099-K forms that did not meet the reporting threshold in to the IRS/CFTB, but then sending them in anyway. I can't believe even Ebay could be that effing stupid! So though I can't guarantee it, I think you'll be okay to assume your 2021 form 1099-K did not get sent in to any tax authorities. Good luck.

I have talked to some upper management people there. I believe that they can be that stupid!

If I did use the 1099-K form for my taxes, would the IRS/CFTB question me using a form they never got? I know the run reports and can find out immediately if you didn't use the 1099-K to file. However, would they run a report the reverse way to see if you used a 1099-K form that they never received. I guess they wouldn't care since reported income means more money for them.

I was going back through a few sellers I enjoy who sell more unique ephemera/photography type items looking to get a few nice things. And their entire stores were completely removed. Not a single listing. Not to mention a few of my watches are now completely gone (they are not under completed listings).
How do people expect true hobby sellers, and by hobby I'm talking a few sales a month maximum type hobbyist. To be able to sell for any kind of profit?

I personally fall in this category and have removed my 60 or so listings. Between the 28% tax on collectables and ebay's 12% I would be losing money on 90% of my listings and doing 10x more work at the same time.
And I keep hearing "just set up as a business and do this and that" no. I'm doing it as a hobby not as a business.

How, in any world are the real collectors punished the most? It is very sad.

eBay will see record losses, if not this year then next. And they know it, they sent letters to Congress asking for the change to be reversed or a much higher threshold to be imposed.

What are hobbyist and small sellers doing with these small profits you might ask that warrants this change? Stimulating the economy with purchases at stores and supporting restaurants and tons of other taxed businesses? Impossible. They are funding terrorists and buying drugs with that money!

So now they lose that stimulation and people stop selling so they lose the taxes on buyers too. Very smart and well thought out government decision.

You got it exactly right, what isn't reported to them, they don't know about and they don't really care. They get concerned when they see a taxpayer isn't paying tax on something they do know about. They assume most all taxpayers are generally honest and voluntarily report all sales on their tax returns (And you thought Ebay was stupid?). So if anything, the IRS probably expects to see more returns with higher reported taxable sales than what was being reported on those same taxpayer's 1099-K form(s) than not.

Sounds like you'll be okay filing your 2021 returns as you had in earlier years. Good luck.

And as for Ebay's intelligence, I was trying to be nice and give them the benefit of the doubt. LOL

No comment regarding the political aspects, I'll leave that to others.

As for the tax side of things, how can taxes suddenly be causing you to lose money on 90% of your sales? You do know you only pay taxes on NET capital gains from collectibles sales, after deducting the cost of the items sold, plus the direct transaction costs to acquire and sell you items (which includes Ebay's fees)? And the 28% tax is only a MAXIMUM tax rate on your net long term gains from collectible's sales. Depending on what other income is being reported on your return, the tax rate on your long term collectible gains can be much lower than that. The only way you'd be losing money on collectible's sales if you just sell something for less than what you paid for it, plus the Ebay fees.

I'm definitely new to this, I don't play with stocks or really any investments. Mainly Just cash and cards as much as possible (I know cards are an investment but I guess I never looked at them that way, especially when selling on eBay to purchase another card or whatnot). I honestly don't know the ins and outs at all. Just from simple research headlines that I guess didn't explain it very well to me. I was under the impression the deductions were only possible if you were set-up as a business. I'm pretty sure the eBay fee part at least? Maybe not, I have no idea.
I have only based my possible losses on the information I had which added up to the 40% of the total sale which is clearly wrong. I almost always sell on smaller margins so this implied say I got a card for $100, sold it for $150 I would be taxed 40% of $150 being $60. I wasn't aware it was only on the net gain. I Actually feel foolish now knowing that. I also couldn't find anything not flashing a 28% tax rate until I dug far deeper. Seems clickbait and scare tactics definitely worked on me this time.

Thanks for the rundown.

I want to make it clear though, I still think it is unnecessary and terribly egregious for a small time seller. And should be reversed asap.

How would you expect ebay to know how much you PAID for your cards?? I'm confused.

I figured consigning to auction houses cost less than selling on eBay years ago and now eBay craps just getting worst. Not only the tax perspective but dealing with non-payers, potential return, threaten of leaving neg feedbks by the buyers, eBay not returning fees becuz of disputes....etc etc etc

eBay just isn't a happy place to sell anymore.

Do auction houses submit the same info as eBay for sales by consignors?

No I think that obligation is on the consignor.

I have noticed an uptick of sellers online now saying no more paypal goods and services. Probably has to do with this change.

Technically, no, AHs don't have to give 1099s to consigners. First off, 1099s are normally given to mostly show what someone was paid for their service or labor (think independent contractor), intangible income (interest and dividends), or the proceeds from the sale of intangible investments (stocks and bonds). This recently added reporting of sales via 1099-K forms is specifically designed and geared/targeted towards third-party payment platforms/services. If you use a payment service such as Paypal, you can have money go into and out of your Paypal account for all kinds of transactions, with nothing ever going through a bank account where the IRS can easily access and check your activity records. The IRS can'/won't do it and go through accounts with Paypal, or similar payment platforms like Zelle, Venmo, etc., so they added 1099-K reporting so people couldn't completely run a business the IRS couldn't find out about and/or have the activity records easily checked if they want.

The sales of cards and items through an AH are what are known as the sales of tangible personal property, and there are currently no direct laws requiring the sales of tangible personal property be reported to the IRS via a form 1099. AHs don't own or technically sell anything. Consignors hire AHs to assist them in listing and selling their items, for an agreed upon fee/commission. It is NOT the AH paying consignors, it is the auction winners that pay the consignors, so the AH wouldn't really be the one responsible for sending a 1099 to the consignors anyway, if 1099 reporting were currently required on sales of tangible personal property, which it is not. In fact, if there is technically anyone that may be required to issue a 1099 as a result of an auction, it would be the consignors issuing one to the AH (if the AH is not incorporated), along with a copy to the IRS, to report the commissions/fees they paid the AH for the labor and service they provided in helping to sell the consignor's goods. The same way someone would report what they paid an independent contractor for work they had done for them.

For the record, very briefly back in 2010 I believe, there was a law passed that would have potentially forced places like AHs to start reporting such sales activity to the government. But apparently it was quickly caught and reversed in 2011, before anything ever took effect. But that doesn't mean the laws can't/aren't going to be changed requiring such reporting in the future. Fun stuff, huh?

Sorry, double post!

Well, I'm the polar opposite of you, and definitely not new to taxes. LOL

I was afraid from what you were typing that you might not be familiar with how this works tax-wise in regards to cards and our hobby, so jumped in to hopefully provide some guidance. I've typed way too many answers for things like this already so, rather than repeating myself and just typing more, go back and read anything else I already posted in this thread. And then do a search for posts I've made and you can go read through and catch up on all the tax related posts I've made. You will find a wealth of knowledge in them. Just remember though, tax laws can (and sometimes do) dramatically change overnight, so something I wrote/said a while back may not be 100% valid anymore. And when in doubt, reach out and try to check with a qualified tax professional, especially one familiar with the state you're in.

As for this whole thing being so egregious for the small-time sellers, I don't necessarily disagree. The government is out for the bigger fish, but unfortunately these new reporting laws and thresholds are seen by them as the most efficient, thorough, and possibly politically correct ways to go about seeking better compliance with and enforcement of our tax laws. Unfortunately, for these new laws/methods to work, they kind of have to cover and be applicable to everyone to work. Don't forget that part of this is also to deter others from skirting the tax laws in the future. And the big fish of tomorrow usually start out as the little fish of today. So unfortunately, I doubt you'll see these new rules/laws being repealed anytime soon, if ever at all.

To expound on my earlier fish analogy, think of the government/IRS as fishermen casting out their nets to get a great catch. As in reality with real fishermen though, when they pull the nets back in they will, along with the big fish they sought to catch, also inevitably have ensnared a lot of little fish and other unintended creatures they weren't really after. Not much else they can do though if they really want to crack down on the tax evasion/fraud problem. Good luck, and feel free to ask if you have any more questions.

Paying taxes you owe isn't new. The only thing that is new is eBay reporting our sales to the IRS directly so they can catch scofflaws who do not report their income or pay taxes on their profits. If you maintain accurate books and declare your income from cards already, the 1099 is a popcorn fart. I get dozens of them every year (lawyers get 1099d for everything) and just toss 'em in the shredder since I have accurate books I can document as needed.

Note that taxes are paid on profits, not gross receipts, as Bob pointed out. If you sell a card for $10 that cost you $9 you pay tax on the $1 profit. If that puts you at a loss with eBay fees, you need to be in a different business because your margins are too thin.

Adam,

You need to incorporate so they don't have to send you 1099s anymore. LOL

For the ones you do get though, I hope you at least take a quick look at them before they are shredded. In the past, I've had clients get 1099s that reported incorrect amounts, and we'd contact the issuer to get it corrected before filing my client's tax return so it didn't screw things up. You never know! :)

you are supposed to claim the income to the IRS regardless of a 1099

At some point in 2022 this is going to cease to be breaking news, right?

People were getting their piss hot about this last August.

Last August??? This was signed into law back on 3/11/2021. A colleague and I were talking about it right after, and knew then this would create one heck of a $#%©storm when everyone finally realized what was happening. Some people/clients we told about it right away were having a fit after we had explained what this would mean. Thing is, it was buried in the American Rescue Plan Act, and no one in the media ever really talked about it. That is what usually happens with some of these random tax law changes, until the tax season hits, and then everyone finally hears about it and creates an uproar. This delayed reaction isn't something new. In fact, I can almost guarantee that come this time next year, there will still be people just finding out about this reporting change when their 1099-K form shows up in their mailboxes, totally unexpected! LOL

Bob,

I admire your willingness to assist all of the handwringers. And gratis, no less! The patience of Job. I get it all the time even from people in my own office. Explaining the UCC code and District of Columbia statutes on property law. I learned 4 simple rules over 30 years ago that have helped. I sleep quite well obeying them.

1. Use/consult a tax professional.
2. Report your income.
3. Pay your taxes.
4 When in doubt refer to Rule #1.

I have used the same person since 1989 and the guidance has been invaluable.

Thanks, appreciate that. I didn't bother chiming in much over the years, but more recently have gotten tired of seeing people who clearly have no real tax experience or knowledge posting tax related comments and responses that are so wrong, it is not funny. And then I think of all the people that end up reading those posts who may actually think what they are reading is true or correct, and it starts bothering the heck out of me. Especially with all the tax crap that has been happening over the last 4-5 years, and is going to continue going forward. I'm not really telling anyone what they should or shouldn't do when it comes to their taxes, just providing some info and background so they can hopefully make a better, more well-informed decision for themselves. And with the way flippers and investors have really invaded our hobby in recent years, along with the seemingly insane surge in prices, we are definitely becoming more noticeable to tax authorities. And they can (and already have in many cases) also influence and impact how people decide to eventually report their hobby activities and reflect such on their tax returns.

Glad to hear you've got your own trustworthy, long term, tax person. That can make life a lot easier for many people. Not necessarily for everyone, but for way more people than you can probably imagine. And absolutely love your four rules, especially #4. Have my own mantra I've repeated over the years that I always liked to tell clients: Tax evasion is a crime, but tax avoidance is your Constitutional and God given right!

And as for offering help gratis, wasn't looking for anything. But I do collect a lot of different pre- and post-war sets and cards, and seem to especially like oddball and obscure things. So if anyone got some knowledge and help from my posts, and feels so inclined to send me a duplicate or extra card/item or two they may have no real use or need for as thanks, I won't say no. LOL. :D

I don't know everything, but if someone has questions, I'll try to help. Thanks.

I get what you are saying. With you, tax law, with me property law. I have been doing what I do for 36+ years. I know more than 95% or more of the attorneys when it comes to that. I got my second wife through property in law school. The attorneys always try to finesse it when I tell them something that should be done. When they hem and haw I just tell them that I keep ALL of my records. If it comes back across my desk in a year or two and the issue is not fixed the new attorney will know exactly who handled it the last time.

I have also used your mantra for 30 plus years. Unfortunately, it is lost on some people so I compose my rules.

It is a wise man who knows what he knows and is willing to admit what he doesn't.

I cannot help with the the cards. I do not collect baseball at all. I collect Olympic photography and buy and sell mainly pre-1980's Olympic autographs. I mainly contribute on the other side, but I like the community and read threads on the main page that catch my eye.

Ha Ha,

I hear you when it comes to attorneys. Usually when you get involved with an attorney in some sale/merger, or other big, complicated deal involving multiple people and/or entities, they always try to come in, take over, and act like the quarterback to, I guess, impress the client to justify their fees and have everything done how they like and want. I learned to just chill and sit back because the clients would never sign anything until I looked it over. I'd find all the mistakes and errors, and also point out the problems and omissions. I sometimes wondered if the attorneys actually ever paid attention when people told them what the deal/transaction was, or how it was supposed to go down and work tax-wise. Don't get me wrong, there are a lot of great attorneys, and then there are a lot of other attorneys. LOL

Add about 9-10 years on to your experience for me. I started in the '70s, so this is the 6th different decade I've worked in.

And I also like your saying about being a wise man. I have a little bit different take on that topic and have told people through the years that the more I know or learn, the dumber I feel. And they'd invariably ask me what I meant. And I'd tell them it seemed like every time I learned one new thing, I'd also discover there was like ten more things I didn't know and was now even dumber than before. It would always get a chuckle out of people, who would also agree I made a great point. LOL

Sounds like you have a great collecting activity/collection as well. I've never gotten that deep into the Olympics myself, but the athletes and stories behind a lot of the photographs you own have got to be truly amazing.

Take care.

Ah, but wouldn't you have to claim that card as income if someone considered it a 'payment' for your services? :cool:

But seriously, and to add to what someone already said, I appreciate all the information you are offering here. Even if a lot of it might not apply to me, it's still good to have a general understanding of the impact. Thanks!

LOL

Nice try, but since I wasn't billing anyone, the item would be considered more of a thank you gift, and gifts are not considered as taxable income. And as long as someone giving a gift(s) to another person keeps the total amount/value of all such gifts to that person at no more than $16,000 for the 2022 year (up from $15,000 in 2021), they don't have to report or do anything else in regards to those gifts, or owe any gift taxes on them. And if the person giving the gift(s) is married, they can actually double the amount of gifts they'd like to give me in 2022 from $16K to $32K, and still not have to worry about paying any gift tax on it. However, the person giving the gift(s) to me, and their spouse, would want to each file a Form 709 gift tax return for 2022 to report that they agreed to split the gift(s) one of them gave me, between the both of them now.

Again, nice try, but don't ever attempt to BS a BSer! :D

That $32,000 would probably buy a lot of nice vintage cards. Either that or one prism, refractor, blue chrome, laser cut, uniform patch signed on card 1/1 of the flavor of the month unproven rookie in the NBA or MLB who has not finished a full season, but had some good games.

Do appreciate the comments and sentiments. But just because something may not specifically apply to you today, it doesn't mean that may not change tomorrow, or at some other point down the road. Just knowing about a lot of what I'm telling everyone won't necessarily answer all your questions, but it sure as heck will help you to at least realize when to start asking more questions and looking for help.

Just got my 1099-K yesterday and had to redo my taxes while I wait for my last K1. After shipping costs, shipping supplies, travel to National, cost of cards/supplies sold, snacks, meals while at National, simplified home office deduction, utilities, travel to USPS, etc.....figures out to almost a wash.

Elections have consequences. And we are sure as heck paying the price now.

They do, but did you like it better when the IRS was toothless and people weren't paying their fair share? Why blame the currently-elected people for this?

My students have games to play when it's indoor recess. Two of the games have a gazillion pieces, and often they are left lying around. So I have pulled those games from the shelf. Some students blame me because they can't play them now, and some students blame the kids who couldn't clean the games up in the first place. Who would you blame?

You.

I think it’s an undeniable fact that a particular party that won the last election wrote the bill and voted for it. One can debate whether the IRS should be going after people making a few hundred dollars on the side and be for or against it, but I don’t see how we can possibly deny that the policy is in effect because of the currently elected people that wrote and passed it.

This part, that it happened and a certain group made it happen, I don’t see any room for a debate on. They wrote it, they passed it, they are responsible for these new laws. If that’s good or bad is up to the individual.

YUP!!!

But to be fair, probably doesn't matter who's in office as they need to cover and at least try to start paying back all the increased debt we've had due to the pandemic. The interest alone we paid last year was over half a trillion $ I believe. If they have to start raising interest rates in an attempt to curb inflation, we could be in for a world of hurt.

And for now, they're initially trying to increase compliance and enforcement of the existing tax laws before raising the rates, or creating new ones. Or they may just wait. Don't forget that a large part of the individual tax laws and reductions passed back in 2017 are scheduled to expire at the end of 2025, with no one doing anything.

"Whom" would you blame, not "Who". Hope you don't teach English. :D

I also want someone to define "fair share". There's never a number associated with that phrase.

I believe the majority of folks wouldn't mind 'a toothless IRS', as the vast majority of us are sick of being taxed to death on everything, everyday and watching them just piss it away on stupid 'Government Funded' crap nobody truly cares about. The currently 'installed' politicians are part of a criminal syndicate, IMO.

Taxation without representation

Be careful of debating politics......and also if you are going to debate your name is going to be out here. I don't like anonymous debating too much. thanks
.

Not debating politics, I offered no opinion myself on legislative priorities or IRS priorities. I said it is an indisputable fact who wrote and voted for the bill and is thus responsible for its status as law today and that this is on pubic record. If it violates a rule to state that that is a fact, I'll censor the post.

It's talking about politics. Fact or not doesn't matter. Just talk about cards. :).

Actually, either who or whom could be correct. If the answer to the question is he or she then who would be correct. If the answer is they or them then whom would be correct.

Who's on first?

Canada Tax Rules are Different
 

So I was speaking with my tax advisor who validated that any sales below $1000 are not subject to Capital Gains tax in Canada. Collectibles are classified as Listed Personal Property (LPP) which is "personal use property that usually increases in value over time". Sales of these items are subject to capital gains tax unless the acquiring cost and selling price are both below $1000 for an individual item.

Bob, just want to express deep appreciation for the clarity you provide on tax related issues. I feel like my tax accountant has, at times, struggled to articulate what I need to do to be a law-abiding, tax paying citizen in this area. He's meticulous, but doesn't deal with this specific type of income much.

I'd like to formally motion to the Board, that Bob C. hereby be proclaimed the Grand Poobah of Revenue Recognition & Taxation! I'll be placing your new avitar (below) in my forum contacts list. Truly, thanks again. Joe R.

Thanks for this. Been wondering about this for awhile.

Cheers...

Hello all...A lot of knowledge on this forum which is why I joined. Thank you for that.

I read this thread (well nearly all of it) with great interest as I am a long time collector that would like to begin to liquidate. This has become a more intimidating and daunting task than maybe it was 20 years ago and I'd like to do it with the least hassle and most profit. My collection was always intended to supplement retirement so it's important, I take the best avenue while liquidating.

Last week, I did meet with a tax professional. She was knowledgeable, but as you might guess not an expert on sports cards/memorabilia. She spelled out several options for me:

1) Starting a sole proprietorship. This would allow me all the Schedule C deductions I encounter, however, she discouraged this because of self employment taxes. She mentioned income here would be taxed at my normal income tax rate (24%).

2) Starting a partnership with my silent partner wife, who would then become co-owner of the business (not worried about that) and would avoid self employment taxes. All of the benefits of the sole but with added tax advantage.

3) Just be a collectibles seller on ebay, where I would be able to deduct shipping, fees, supplies. Not sure what else. But I would be taxed at the higher collectibles tax rate, which I believe she said was 28%

So my question here is two fold:

1) What do you think most sellers in our hobby on ebay do? Option #3?
2) Is the added expense and complexity of #2 worth it? I'll assume #1 isn't a viable option unless there is some hidden benefit I can't remember her mentioning.
3) Edited to add a 3rd question...so I guess it's now three-fold. Do you need a TIN to sell at card shows?

Thank you in advance! These are complicated times in our once simple hobby.

Bob

Welcome to the forum. Great questions. Net54’s resident CPA, Bob C., will probably soon respond. He will probably thoroughly answer each question in great detail. :D

"1) What do you think most sellers in our hobby on ebay do?"

Until this year, pocketed the proceeds and never declared the income.

That's for sure -

Been on eBay for 25 years now and the fun has long since completely worn the eff off.....

So Done with them -

These are not quite mutually exclusive but maybe inversely proportionate.

+1

Least hassle or most profit……you can only choose one.

I would guess that's not limited to eBay. Cash is king at card shows too and I've never been given a receipt or been charged sales tax.

If you are looking to liquidate in the most time/cost effective manner possible, it may be worthwhile looking into consigners like Greg Morris Cards or Probstein or going to one of the big auction houses like Heritage or Goldin or one of the others. It obviously depends on what you have, how much you have, etc. But they will handle everything with regard to shipping to individual buyers, and it will simplify your tax bill as well.

Selling on ebay can be a huge hassle. Selling on the BST board here is easier. But if you are going to individually sell hundreds of cards, it will be a lot of work. You might save yourself a bit of money doing it yourself, because you arent paying consignment fees, but you also have to calculate how much your actual time is worth. Most people fail to consider what their own time is actually worth when trying to estimate something like this.

Thank you. All good points but I'm not interested in a 3rd party...other than possibly ebay...at this point. I'm good with it taking a few, even five or more years to sell. Not in a rush. My wife and I plan on working for 5 more years so just thinking about starting the process. If it becomes too labor intensive I may change my tune.

Right now I'm more concerned with which approach from the three I mentioned, makes the most sense.

Interesting...Does the Gov't define the big fish as those that make more than $600 but less than $20K? In theory anyway, wouldn't the same big fish be caught at the $20K threshold? At face value, it doesn't feel like those are the people they are going after.

I think the ideal solution here is simply to have ebay take out a portion of the final sale price to offset the tax that we'd ultimately have to pay and let ebay pay the government.

If I sell an item for $50, and ebay takes their 13% in fees, then takes 10% in what I'd typically have to pay as a gains tax, then at least I know that when I sell something, I get 77% of the hammer price, and thats my money and I don't have to worry about being taxed on it later. Then I can figure out what my minimum sale price should be.

What I am curious about is how auction houses handle the taxes now. I've never sold through Heritage or Mile High or Goldin. If you consign with them, do you get a 1099 form? Or do they pay the tax to the government? It seems like they have moved toward direct depositing the proceeds into bank accounts, so since there is no paypal in the middle, how does that work? I've heard that is how Probstein does it too. So if you send Probstein a bunch of stuff and they list it on ebay and it sells for $1000, they take out their cut and you get the rest, but do you get a 1099 in that case? I can't imagine how that would work.

the 1099 portion of this is a question i hear a lot from people who are casual sellers. and i'm far from a tax expert (and haven't read far into this thread), but maybe bob c can answer this:

with regards to the 1099, are people paying for the total amount collected on the cards, or is the amount you paid for the card taken into consideration?

sorry if this was answered already.

Great question, to which I have no perfect answer. In theory, you would think that even at a $20,000 threshold they would get all the "big fish" as I termed them, but then you're forgetting the other threshold factor under the old rules. You also had to have 200 or more transactions. That means someone could sell a T206 Wagner, a PSA7 '52 Topps Mantle card, and a PSA10 1986-87 Fleer Jordan rookie card on Ebay for well over $1 million total, but if those are the only three cards they sold on Ebay all that year, using Paypal, they shouldn't get a 1099-K because they didn't meet the 200 transactions threshold. Meanwhile, some guy cleaning out his garage found 200 different items he could (and did) sell for $100 each, does get his sales reported on a 1099-K for that year. So who would you say qualifies as a "big fish" in my example now? See the issue?

In my opinion, the law fixed the new 1099-K reporting threshold at simply $600 as that was already the long established reporting threshold for having to give 1099-MISC or 1099-NEC forms to certain individuals/entities (and the IRS) for work, services, or other things they provided and/or performed. Probably politically easier to defend, most everyone else has a $600 reporting threshold for getting a 1099, why shouldn't you? And because a lot of people performing work or providing services to others get paid nowadays via Paypal, Zelle, Venmo, etc., as opposed to just by cash or check, it makes sense to impose the same $600 threshold across the board. Unfortunately, these payments platforms are used for GOODS and services payments, so selling items on Ebay gets caught in the same net as say using Paypal to pay for the guy who mows your lawn and plows your driveway.

Technology like using these online payment services is great for the users. It is also great for the businesses, individuals, and governments that want to track and keep better tabs on what those users are doing, unfortunately.

Bob,

A question on terminology for you. If a casual seller(not a business) on ebay or here or anywhere else, sells an item at a price lower than paid(probably more likely in the event of used merchandise than cards) no "taxable event" has occurred, yet they are receiving a 1099 for the gross proceeds.

In theory the new 1099 issuance is creating a tax reporting requirement that is many cases not required, as no tax liability was created ???

Great, then the guy that bought a T206 Wagner for $500,000 twenty-five years ago would definitely be happy to sell it on Ebay today. If he now gets $1,500,000 for it, Ebay takes 10% ($150,000), and sends it to Uncle Sam. Meanwhile, the seller's actual profit on the card was $1,000,000, which if that full amount was subject to the maximum federal cap gains tax rate of 28%, it means he actually should have owed $280,000 in federal taxes, so your idea may have just saved the seller $130,000. Of course, it also just means the rest of us federal taxpayers have to use $130,000 of our tax payments to make up for the shortfall. Oh, and what about state and local taxes on the seller, or is Ebay going to somehow take care of that as well?

James, not trying to put your question/idea down, just demonstrating how impossibly hard it might be to have such a concept work and not always equitably satisfy everyone involved.

Your question in paragraph #3 has already been addressed in earlier posts in this thread. You can go back and look.

You subtract the cost of the card and all your expenses connected with selling it.

Sent from my SM-G955U using Tapatalk

Quick answer, you are only supposed to pay taxes on the NET taxable income or NET capital gains, after deducting applicable expenses and the cost of items sold, from your gross sales amounts. The 1099s only report gross sales, not net taxable income or gain.

And yes, this was also addressed earlier in this thread. Do go back and read through the thread.

Scott,

You've sort of got it right. Whether a casual seller sells an item on Ebay for a profit or a loss, the sale itself is always still technically a "reportable taxable event", regardless. But as you stated, if the casual sale resulted in a loss, so there would be no actual resulting tax actually due, the IRS and other taxing authorities are not really going to care if the sale wasn't reported on your tax return.

However, because the IRS religiously matches 100% of all 1099s they receive to taxpayer tax returns, if you got a 1099-K for a casual sale on Ebay one year where you lost money, even though you end up owing no tax on that sale, you do now want to report it on your tax return because if not, you're getting a letter from the IRS assuming your gross sales was all income you should have paid tax on.

The issuance and your receipt of a 1099-K form does not technically create a "tax reporting requirement" though. You're technically supposed to report all taxable events on your tax returns, whether included on a 1099-K form or not. What the issuance/receipt of a 1099-K form does is create a "tax compliance opportunity" for the IRS to double check the casual seller to make sure it looks like they are complying with the applicable tax laws. Hopefully you see the difference in the nuances.

If there is no 1099-K reporting of a casual seller's sales activity, it is pretty much up to their own conscience whether they report this activity on their tax returns or not. But whether they choose to report such activity or not, every sale is still technically a "reportable taxable event", whether for a loss or a profit. Just like every trade is also a "reportable taxable event". I 've said this before that all card trades, whether involving any cash as well or not, are also taxable events. People may choose not to report them on their tax returns, which is their personal choice. But if ever down the road you do get questioned by the IRS about your tax basis for say a T206 Red Cobb you sold, and you pull out an invoice from Brockelman Auctions for a different card you previously traded straight-up for that Cobb to now show your original tax basis, don't be shocked if the agent might start asking a lot more questions.

And just because the original casual sale you mentioned was for a loss, it doesn't always mean it may not still have tax consequences for the seller. As a casual sale, the seller is not going to be considered to be a Dealer in business. But is the casual seller then classified and operating as a Collector or as an Investor? As a Collector, the sale is part of the seller's hobby, and no losses are deductible. If operating as an Investor though, investment losses are potentially deductible, or eligible to carry over to future tax years as capital loss carryovers. So in the end, you may want to think about reporting a casual sale loss on your tax return after all.

Thanks Bob,

Agree and understood.

Just curious how they match up the 1099's.

In my other business, non-card related, I receive a handful of 1099's. All my CPA does is copy them and keep them with the return and none are ever line itemed, just lumped in with the rest of the business income, of which they are a small fraction. The return is electronic, so how does the IRS see or account for them?

Is this normally how they would be handled?

Scott

Depending on the type(s) of 1099s one gets (1099-K, -MISC, -NEC, -INT, -B, -S, etc.) there are certain places on one's tax return where these normally end up being reported. All 1099s the IRS receives, either electronically or via paper copy, are eventually entered into their computer system, and totaled by the various 1099 categories. Everyone's tax returns, either electronically or paper filed, are also eventually entered into the IRS' computer system as well. And then at some point they will run a matching program to make sure that the various 1099 totals, being independently reported to them, are also being reported by you on your tax return. They don't actually match up individual 1099s, they look to see if you've at least reported the total amount(s) of what was shown on the 1099s you also should have received. If the amounts reported on your return match or exceed what was shown on your 1099s, you're generally good to go.

If you reported less income on your return (or maybe put it in the wrong place) than what was reported on your 1099s, the IRS' computer system kicks it out as an error, and normally generates an automatic letter to the taxpayer outlining the discrepancy, as well as how much they calculate that you now owe them, plus interest and penalty charges, if relevant. They assume in the case of a 1099-K discrepancy that the total unreported gross sales reporting difference is ALL taxable income, with no offsetting costs or expenses. In other words, the opposite of criminal courts. You're guilty of owing the taxes they say you owe, until you can prove your innocence and that you actually owe no, or less, tax than they say.

This matching and sending out of letters in case of discrepancies counts as a formal IRS audit by the way. You do not need to actually meet in person, or even talk to an IRS agent on the phone, to undergo an audit. And it could take a year or two before the IRS gets around to running the cross-match of 1099s and people's tax returns. The IRS actually has three years from the later of the due date of a return you file, or the actual date you filed it, to examine and commence an audit of your return under normal circumstances.

And this is exactly how this is normally handled by the IRS. They are slow, overworked, understaffed, and dealing with what is now considered a crappy and somewhat outdated computer system, that has already been successfully hacked at least once to my knowledge.

This should have covered all your questions Scott. Have a good one.

Great response Bob as always. I didn't consider the 200 transactions component, but even still, I think they'll catch a lot more minnows than tunas. But at least they can defend the $600 with some logic...though it is bad for hobbyists.

Unfortunately, it is what it is. And as a result, a lot of people selling some stuff on Ebay this year that never before paid taxes on such sales are going to end up reporting that sales activity on their 2022 tax returns. There's going to be a lot of hassles and questions come tax time next year. It ends up creating a lot more work for a lot of taxpayers, and for the IRS. So I'm not really sure anyone is really happy about this.

And don't forget, some of those minnows they are catching today are going to end up growing into the big tunas of tomorrow.