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Originally Posted by Aquarian Sports Cards
I don't want to get into it here, but what you're saying and what my accountant AND my professional association say differ very greatly from what you are saying.
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No problem or issue, just pointing some things out that can be found on and in IRS sites, forms, and instructions. I just think there are potentially two very distinct and separate reporting issues in play regarding AHs and 1099 reporting. And I agree that one clearly does not require AHs to report respective sales by consignors through them on 1099 forms, just as your accountant and professional association have said.
The other potential issue though is a bit more abstract and not so clear cut as it does not involve the 1099 reporting of ALL auction house sales by a consignor. It only involves the 1099 reporting of AH sales that were paid for using a very distinct and defined type of third-party payment system, like Paypal and Venmo (but not Zelle); or possibly credit/debit cards, or the like. And the concept of nominee 1099 reporting by middlemen is a long known and established concept and practice that the IRS can look to in verifying deductions by individuals/businesses on their tax returns, and for which non-compliant individuals/businesses may be subject to fines and penalties for, or potentially even the loss of deductibility for such items.
Look at it another way. You are set up at the National, and have an account and one of those portable credit card machines so you can remotely accept credit card payments. Meanwhile, your good buddy and long-time friend is set up one aisle away, and comes running over to you to ask a huge favor. He's got a potential customer looking at a high five-figure purchase, but he can't take credit cards. So he begs you to let the buyer run the purchase through your CC machine and system, which you agree to, and forward him the money after the funds clear to you (net of the service fee for handling the transaction of course). End of the year comes and whatever CC system/plan you use sends you a 1099 reporting your gross sales for the year, including the sale you passed through for your buddy at the National. You are technically supposed to issue and send your buddy a nominee 1099 then to report the sale that was actually his, so that sales revenue appropriately ends up on his tax return, and you can deduct it from the sales revenue on your own tax return. Failure to do so, IF EVER CAUGHT BY THE IRS, could result in fines/penalties to you for not properly filing the appropriate information reporting documents, or maybe worst case scenario, you get stuck paying income tax on your friend's actual sale. Not likely to happen, but also not impossible that it couldn't. Same overall concept when an AH accepts Paypal goods and services payments on behalf of their consignors.
The IRS clearly does not catch a vast amount of errors, inconsistencies, and outright tax evasion and fraud on probably millions of tax returns filed with them every year. But with ever increasing uses of technology, and more and more stringent requirements and reporting thresholds, they are constantly getting better at catching this stuff. This newly lowered $600 reporting threshold, for 1099-K reporting, starting this year, will give them even more tax data to analyze and look at now. And it will also likely resort in many individuals and businesses that were previously not on the IRS' radar screen to suddenly start showing up. As usual, I'm merely passing along tax information that may be relevant to people and businesses involved in certain aspects, or in different sectors, of our hobby/industry. I do not judge others for how they report (or don't report) things on their tax returns, and leave it up to them to decide for themselves what they ultimately want/decide to do. I hope you, and maybe other AH personnel and owners on here, may find something I've shared helpful in the long run.