new 1099-K rules

[theshleps]

With the new 1099-K issuing rules (starting 1/1/22) if you receive over $600 on PP, venmo etc in a given calendar year (as opposed to the former 200 sales + $20,000 income) the IRS will issue you a 1099-K and count it as income unless you can prove you took a loss. I make alittle bit yearly from sales. Don't need the money but like to get rid of dupes but the hassle and headaches this will cause will probably make me pull all stuff off ebay. I wonder how others feel about this

[NiceDocter]

Does this include a total for all "gifts" or is it just for goods and services?

[Fred]

And what's a crypto currency supposed to do?

Edited to add a face.

[theshleps]

goods and services
https://pages.ebay.com/seller-center...l#m22_tb_a2__4

[G1911]

These new rules, and the effective shifting of the burden of proof, are going to be a major pain in the rear. Tons of people are going to get fleeced by the state, they’ll get their tax bill and pay it without going through all the hoops to show some of it isn’t profit and isn’t taxed. Suckers will get ripped off by the state and everyone else will have to jump through hoops, even if technically nothing is changing in what you truly owe on your taxes.

This is one reason I barely ever sell, it’s simply not worth it because I owe 9.3% of the profit to the state of California and 35% of the profit to the feds. This leaves me with 100% of the risk and only a little over half of the money I get if I sell. At that rate it is much better to trade for other cards I need, even if I’m “losing” in trade value.

[birdman42]

To be clear, it isn't the IRS that issues 1099-Ks, it's the payer (or, in this case, the third party payment processor). The information gets reported to the IRS at the same time it gets reported to you.

So if, for example, you sell 5 cards for $200 each and get paid through PP for each, that's $1000 and will be reported. If you sell a single card for $500 through an AH, then they do not need to issue a 1099-K. (They can choose to do so.)

It appears non-commercial transactions will be included; there's no mention of a distinction in the IRS instructions for completing the form. In one way this is going to be a shock to some people. We have a church client that receives most of its monthly contributions through Zelle. On the other hand, if there were a distinction we might see parties such as PP clamping down on the use of F&F. I see the PP page mentioned above, but there's no mention of F&F transactions being exempt. And again, the IRS instructions for the form don't appear to allow for an exemption for non-commercial transactions. I'd really, really like to be wrong about this, but I believe I'm correct.

Bill

[birdman42]

Originally Posted by G1911

Tons of people are going to get fleeced by the state, they’ll get their tax bill and pay it without going through all the hoops to show some of it isn’t profit and isn’t taxed. Suckers will get ripped off by the state and everyone else will have to jump through hoops, even if technically nothing is changing in what you truly owe on your taxes.

I respectfully and strongly disagree. If your tax preparation is done by a competent person--which could be you--then you'll know to subtract your basis and expenses from your revenue. And you won't get a "bill" based on your 1099-K as long as it shows up on your tax return.

Where you will get a "bill" is 18 months after filing if you haven't reported the form. Then you'll get a Letter CP2000 from the IRS saying that they see this item as being reported to them, but it isn't on your return. Based on the information they have available to them (the money in only, not your basis or expenses) they will propose an adjustment to your tax amount. I've seen enough of these CP2000s to know that it's much easier to report everything on the original return than it is to get things straight afterward. If you report it properly, then you won't get any pushback. But if you're responding to the letter, the IRS will want to see documentation.

This coming tax season's gonna be a beast, and next year's even worse.

Bill

[birdman42]

Originally Posted by Fred

And what's a crypto currency supposed to do?

Edited to add a face.

Crypto transactions have always been reportable--every time you sell, exchange, or trade virtual currency or use it to pay someone. Until now I've had to rely on screenshots to get the information needed (date, gain or loss). Beginning in 2024 crypto transactions will be reportable the same way stock transactions are: on a 1099-B. There are already services that will produce a 1099-B from your exchange account.

For someone who's been trading in crypto, this change will actually make things easier. But imagine what this will look like for someone who uses Ethereum to buy their Starbucks every day. Right there is 260 reportable transactions. Yikes.

And by the way, unless you can definitely pin your hard wallet or exchange to the US, your crypto will be considered the same as foreign currency. If you have more than $10,000 outside the US at any one time during the year you'll have to file an FBAR (Foreign Bank Account Report, AKA FinCen114) in addition to your tax form. The FBAR doesn't incur any taxation; it's to keep track of money overseas, ostensibly to curb money laundering. But the penalties for not filing are severe--up to 50% of the account balance for every year of non-compliance.

Bad News Bill

[theshleps]

Originally Posted by birdman42

It appears non-commercial transactions will be included; there's no mention of a distinction in the IRS instructions for completing the form. In one way this is going to be a shock to some people. On the other hand, if there were a distinction we might see parties such as PP clamping down on the use of F&F. I see the PP page mentioned above, but there's no mention of F&F transactions being exempt. And again, the IRS instructions for the form don't appear to allow for an exemption for non-commercial transactions. I'd really, really like to be wrong about this, but I believe I'm correct.

Bill

From the paypal page
1099-K Threshold Change:
This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.
So F/F still no limit

[birdman42]

Originally Posted by theshleps

From the paypal page
1099-K Threshold Change:
This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.
So F/F still no limit

Yay! I'm sure PP's legal team has done their homework on this. Two things stand out for me: the "currently" disclaimer, and the lack of an exclusion in the form instructions.

Happy to be wrong,

Bill

[mrreality68]

1. It will be interesting to see how pay pal and others adjust
2. It will be interesting to see how this impacts new purchases on this forum for collectors
3. It will be interesting to see if trading picks up between collectors.

Does it mean more people starting to pay via checks again?

Only time can tell what this truly holds for the forum

[bnorth]

My only concern is how it will affect the amount of items I see for sale. Waiting to see what all the non tax paying ebay "dealers" are going to do.

The real question is will it be cheaper to just pay the tax or pay an accountant to sort it out when just selling a few items you no longer want. My guess is just pay the tax.

[BobC]

Originally Posted by theshleps

With the new 1099-K issuing rules (starting 1/1/22) if you receive over $600 on PP, venmo etc in a given calendar year (as opposed to the former 200 sales + $20,000 income) the IRS will issue you a 1099-K and count it as income unless you can prove you took a loss. I make alittle bit yearly from sales. Don't need the money but like to get rid of dupes but the hassle and headaches this will cause will probably make me pull all stuff off ebay. I wonder how others feel about this

This isn't new news. I'd mentioned this in posts months ago that touched on things like sales taxes. I got into it with another poster bitchin' about Ebay unfairly collecting sales tax on everyone now. He was claiming things like his wife selling a few things on Ebay every year, and how that was supposedly exempt from sales tax because she wasn't running a business and the sales were nominal. I explained how beginning in 2022, this new 1099-K threshold may suddenly get 1099s sent to her and make it look like she was running a business, albeit a nominal one, after all.

This new reporting threshold came out and was known early last year. There just wasn't a lot of talk and press about it back then. And what birdman42 is saying is right on the money. If you get one of these 1099-Ks and don't do anything about it, it isn't a question of if you'll hear from the IRS, it is only a matter of when you finally hear from them. And his other statements regarding crypto currencies are all correct as well. The government plans to make it as difficult as possible to hide any activity from them so they can't tax it.

[GaryPassamonte]

The enforcement of these 1099 rules could have a large impact on the material that sells through auction houses, particularly high dollar items. We could go back to the days when direct sales and trading dominated the landscape.

[sb1]

Bob,

Won't this require most to now file a schedule C as a business in regards to the 1099?

Also for those selling used items on ebay, of which their basis is higher than the price realized(think used clothing or other household goods), do they now have a loss to offset other income? Or... since they sold the items for less than the original cost, has a "taxable event" actually occurred?

And another thought. For those selling collectibles, it appears this 1099 will be lumped in and figured at the filers AGI marginal rate? Otherwise in the past it would/should have been filed as a collectible sale. So going forward those in the lower brackets would be far ahead.


Just more food for thought.

[Jewish-collector]

I wonder if card shows will be even more prevalent for sellers ?

[swarmee]

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/

You're still playing the "I hope I don't get audited" lottery. Keep all your receipts from sales to show your expenditures for items you might sell. If you've been skirting the federal tax laws for years, let this be a wake-up call.

[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.

[BobC]

Originally Posted by bnorth

My only concern is how it will affect the amount of items I see for sale. Waiting to see what all the non tax paying ebay "dealers" are going to do.

The real question is will it be cheaper to just pay the tax or pay an accountant to sort it out when just selling a few items you no longer want. My guess is just pay the tax.

Not so sure you want to do that.

Say you get a 1099-K for $2,000, and the items you sold cost you $1,000. That means you profited and should be paying income tax on just $1,000. But if you include nothing in your return, the IRS automatically assumes the entire $2,000 reported to them is ALL taxable profit, refigures your taxes with this added income, and bills you for the difference that you didn't pay them when you originally filed your tax return. And of course they will also tack on interest and penalty charges to your tax bill as well.

And since the 1099-K is mainly for reporting transactions from the sales of goods and services, I can also see the IRS assuming this unreported income as coming from a business you run. In which case the IRS may simply assume you are self-employed, and charge you self-employment tax (social security and Medicare tax) on top of the delinquent income taxes as well. And the IRS pretty much shares info with all the states that have income taxes, so depending on where you live, you may end up hearing from your home state as well. And in some locations there can even be city income taxes involved. So there can end up being more than one letter. Lots of fun.

Depending on your situation, you could decide to report such 1099-K activity as a business, and include the reported sales on a Schedule C business reporting form in your tax return. But if you don't want to report your sales as a business, you would probably need to report each individual sale included on the 1099-K you get as a separate item sold on the appropriate Form 8949, that then ties back to Schedule D, and all gets included in your tax return as a type of capital gain or loss then. It may be more work having to list each individual sale as a capital gain/loss through Schedule D, but at least it will keep you from having to also pay self-employment tax on the income you would have otherwise reported as business income on Schedule C.

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

[orioles70]

AVOIDING taxes is perfectly legal.
EVADING taxes is illegal.
There is a difference.

Sent from my SM-N950U using Tapatalk

[swarmee]

Originally Posted by BobC

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

Based on the post you responded to, I think bnorth was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

Edit: thought it was originally posted by someone else.

[cammb]

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.

wtf????

[Gorditadogg]

Originally Posted by orioles70

AVOIDING taxes is perfectly legal.
EVADING taxes is illegal.
There is a difference.

Sent from my SM-N950U using Tapatalk

Thank you Judge Landis.

Sent from my SM-G955U using Tapatalk

[Gorditadogg]

Originally Posted by swarmee

Based on the post you responded to, I think Peter was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

That's how I read it too. Still, a lot of good information in BobC's post.

Sent from my SM-G955U using Tapatalk

[Rich Falvo]

Originally Posted by orioles70

AVOIDING taxes is perfectly legal.
EVADING taxes is illegal.
There is a difference.

Sent from my SM-N950U using Tapatalk

One of the lessons I remember most from my graduate accounting classes.

[birdman42]

Quote:
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.

Originally Posted by cammb

wtf????

Tomato, tomahto.
Avoiding taxes--> perfectly legal, and encouraged (in some cases, even required)
Evading taxes--> criminal activity

Keep track of your costs, and report everything completely. Be a Boy Scout.

Not to play the scare card, but the conventional view is that you need to keep tax records for three years. That's how long the IRS has to begin an examination, But if they see a continuing pattern, they can go back farther--almost certainly farther than you've kept records.

I know there are quite a few people on this forum who are thinking, "Criminal? Whatchu talkin' 'bout, Willis?" The question is, how big a fish are they going to have to catch for you to get religion? The IRS knows that if they catch a whale everyone from the sharks down to the minnows is paying attention.

Full disclosure, my status as an enrolled agent, and so my livelihood, depends on being squeaky clean with my taxes. I even report the cash tips I get as a volunteer bartender at my local town theater.

Bill

[BobC]

Originally Posted by sb1

Bob,

Won't this require most to now file a schedule C as a business in regards to the 1099?

Also for those selling used items on ebay, of which their basis is higher than the price realized(think used clothing or other household goods), do they now have a loss to offset other income? Or... since they sold the items for less than the original cost, has a "taxable event" actually occurred?

And another thought. For those selling collectibles, it appears this 1099 will be lumped in and figured at the filers AGI marginal rate? Otherwise in the past it would/should have been filed as a collectible sale. So going forward those in the lower brackets would be far ahead.


Just more food for thought.

Maybe!!!

Look at what I said in post #19 about maybe reporting such sales as a business through Schedule C, or otherwise as a type of capital/loss through Schedule D. Having sales reported on a 1099-K doesn't automatically make you a business, even though that may be the initial assumption of others, like the IRS. Another good reason to file and be sure to report your 1099-K activity yourself, the way you want and should be treated. Not leave it up to the IRS to initially treat you how they think you a should be.

I've mentioned multiple times on this forum how someone can be a dealer/seller/flipper in business to make money now, an investor ultimately looking to cash in on items acquired at some point down the road, or a true collector/hobbyist who never really got into cards to make money at all. And I would argue that it is potentially possible for someone to be all three at the exact same time. Would depend on how well they segregate and keep records for different parts of the card inventory/collection they own.

And each one of these three different options has a different tax outcome and/or treatment. For simplicity, a dealer would likely use Schedule C to report their sales activity (unless the set up a formal business to run it through, like an LLC or corporation), while an investor or a collector would normally report their sales through Schedule D of their personal tax returns (with the individual sales details reported on the applicable Forms 8949).

Regardless of whichever way they decide to report it, someone now getting a 1099-K for sales will definitely have more work to do in preparing their taxes if they never reported anything for such sales before.

As for your second question regarding selling items for a loss, if they report as a dealer in business using Schedule C, they can offset the ordinary loss against all other income on their current year return, and potentially carry over, or back, any excess current year loss, depending on the rules and their actual situation. If they report the loss as an investor on Schedule D, it is a capital loss and is first netted against any capital gains on their return. If they end up with a net capital loss after offsetting the current year capital losses (and any capital losses carried forward from prior years) against their current year capital gains, they can deduct up to $3,000 of that excess net capital loss against all other taxable income on their current year return, with any remaining excess net capital loss then carried forward to future years (with no time limit). However, if they report the loss as a collector on Schedule D, they actually just report the result of such capital loss sale as $0, with no current year offset against capital gains or other income, and certainly no carry forward capital loss to future tax years.

You still want to report any loss sales on your tax return that were included on a 1099-K form you receive. Remember if you don't those sales, the IRS will assume 100% of what you did receive was taxable income to you, even if the sale was for a loss.

Now I'm not exactly sure what you're asking about in your third question in the second to last paragraph of your post. If you sell a collectible you still get to deduct your tax basis in the item sold, along with direct costs to sell it, from the sales price, and you should only pay tax on the net amount you ended up profiting on from that sale. You don't just include the entire amount on your 1099-K as taxable income. Plus, AGI stands for Adjusted Gross Income, and basically includes all the income you're reporting on your return, but this isn't what you pay taxes on. You still have other deductions you take off your AGI, like the Standard Deduction or your Itemized Deductions, to come up with your Net Taxable Income amount, which is what you do end up paying your income taxes on then. And the tax you actually end up paying is then based on the tax rate schedule for your particular filing status (married filing jointly, single, etc.)

Anything you sell as a dealer, or that results in a short term capital gain (owned and held less than 12 months) that is sold by an investor or a collector, is treated like all other ordinary income (wages, interest, etc.) and is subject to being taxed at up to the highest marginal rate you end up at based on whatever tax rate schedule is applicable for you. However, if you sell an item at a profit as either an investor or a collector, and you owned and held that item for one year or more before selling it, that profit is considered as a long term capital gain. And because baseball cards and memorabilia are considered collectibles, the long term capital gain tax on the profits from such sales is capped at 28%. So basically you add the net income from the sales of such collectible LTCGs in with all your other taxable income to be able to determine what the highest marginal income tax bracket is that you end up being in. As long as it doesn't exceed 28%, you pretty much just pay whatever the tax comes out to be. But if you end up in a top bracket over 28%, you go back and refigure your taxes so the amount on the LTCG from just the collectible sales doesn't end up being taxed at over a 28% rate. Don't know if this exactly answers your last question, but is a simplistic overview of how LTCGs on collectibles is supposed to work and how they get taxed.

[theshleps]

Originally Posted by GaryPassamonte

The enforcement of these 1099 rules could have a large impact on the material that sells through auction houses, particularly high dollar items. We could go back to the days when direct sales and trading dominated the landscape.

I believe since AH pay by check or ACH they aren't effected yet. Someone please correct me if wrong

[Dead-Ball-Hitter]

Paypal has issued these in my state for a few years (MA has greater reporting requirements). Its a pain at tax time. This resulted in me no longer selling as I don’t want the tax hassle and I do want to file an honest return.

Wondering, do auction houses also issue 1099’s? Do other large consignors? Or is just an ebay/pp requirement?

[BobC]

Originally Posted by swarmee

Based on the post you responded to, I think bnorth was questioning whether or not to take deductions on the $2000 (in your example) or just pay the full tax owed on it. He wasn't talking about not claiming it at all.

Edit: thought it was originally posted by someone else.

Wasn't exactly sure what he meant either, as he mentioned just paying the tax, or getting an accountant to help. I thought he may have been referring back to what Bill/birdman42 had said earlier about the IRS sending a letter and tax bill to people who wouldn't properly be reporting their 1099-K info on their returns, and just paying that IRS tax bill as opposed to hiring an accountant/tax preparer to prepare and file their return correctly to begin with.

Even if my interpretation of his question was wrong, my post is still relevant to show people they are probably better off getting an accountant/tax preparer to help them properly file if they can't do so themselves. At least for the first year they get a 1099-K.

[BobC]

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.

I've always told clients I wouldn't mind paying a million dollars in income taxes every year, because they haven't figured out how to take 100% of my income yet, and that means I'd also made a helluva lot more money than what I had to pay.

[BobC]

Originally Posted by Gorditadogg

Thank you Judge Landis.

Sent from my SM-G955U using Tapatalk

Al, I don't think Landis had anything to do with taxes.

[BobC]

Originally Posted by Gorditadogg

That's how I read it too. Still, a lot of good information in BobC's post.

Sent from my SM-G955U using Tapatalk

Not sure either, see post #30.

[BobC]

Originally Posted by orioles70

AVOIDING taxes is perfectly legal.
EVADING taxes is illegal.
There is a difference.

Sent from my SM-N950U using Tapatalk

Exactamundo!

What I've always told my clients:


Tax evasion is a crime,
but tax avoidance is your Constitutional and God given right!!!

[pawpawdiv9]

Question!!!!!
Alert- i saw this on the other platform(PSA) saying its not 600 dollars, but now 10K. according to a link someone there posted. I have not gathered the details on this yet.
Or maybe its about the inflow to your bank account. I'm at a lost in this stuff. Maybe its a different/separate thing.
Thread:https://forums.collectors.com/discus...es-down#latest
Link: https://abcnews.go.com/Politics/bide...ry?id=80665505

[sb1]

That is the banking inflows and outflows on an annual basis and neither have been adopted at this point as the bill has never gone thru. It was not in the past few versions but could be reinserted into the bill again, if and when they try to pass it.

[bnorth]

Originally Posted by BobC

Not so sure you want to do that.

Say you get a 1099-K for $2,000, and the items you sold cost you $1,000. That means you profited and should be paying income tax on just $1,000. But if you include nothing in your return, the IRS automatically assumes the entire $2,000 reported to them is ALL taxable profit, refigures your taxes with this added income, and bills you for the difference that you didn't pay them when you originally filed your tax return. And of course they will also tack on interest and penalty charges to your tax bill as well.

And since the 1099-K is mainly for reporting transactions from the sales of goods and services, I can also see the IRS assuming this unreported income as coming from a business you run. In which case the IRS may simply assume you are self-employed, and charge you self-employment tax (social security and Medicare tax) on top of the delinquent income taxes as well. And the IRS pretty much shares info with all the states that have income taxes, so depending on where you live, you may end up hearing from your home state as well. And in some locations there can even be city income taxes involved. So there can end up being more than one letter. Lots of fun.

Depending on your situation, you could decide to report such 1099-K activity as a business, and include the reported sales on a Schedule C business reporting form in your tax return. But if you don't want to report your sales as a business, you would probably need to report each individual sale included on the 1099-K you get as a separate item sold on the appropriate Form 8949, that then ties back to Schedule D, and all gets included in your tax return as a type of capital gain or loss then. It may be more work having to list each individual sale as a capital gain/loss through Schedule D, but at least it will keep you from having to also pay self-employment tax on the income you would have otherwise reported as business income on Schedule C.

Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.

All I am saying is if you have a easy tax form and can do it yourself it would be cheaper to just pay the extra tax on all your sales than hire a accountant to pay the amount you really need to. Accountants doing taxes with many different forms are very expensive in my many years of experience

I am in no way saying cheat on your taxes. I have been audited by everyone state level and the IRS. It sucks but I had an amazingly honest accountant and I never owed anybody anything when they were done with me. I have done some sketchy stuff in life but cheating on taxes isn't one of them.

[h2oya311]

Bob - thanks for all of your insight. Very, very informative post and I really appreciate how well you've laid things out.

[BobC]

Originally Posted by birdman42

Quote:
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.



Tomato, tomahto.
Avoiding taxes--> perfectly legal, and encouraged (in some cases, even required)
Evading taxes--> criminal activity

Keep track of your costs, and report everything completely. Be a Boy Scout.

Not to play the scare card, but the conventional view is that you need to keep tax records for three years. That's how long the IRS has to begin an examination, But if they see a continuing pattern, they can go back farther--almost certainly farther than you've kept records.

I know there are quite a few people on this forum who are thinking, "Criminal? Whatchu talkin' 'bout, Willis?" The question is, how big a fish are they going to have to catch for you to get religion? The IRS knows that if they catch a whale everyone from the sharks down to the minnows is paying attention.

Full disclosure, my status as an enrolled agent, and so my livelihood, depends on being squeaky clean with my taxes. I even report the cash tips I get as a volunteer bartender at my local town theater.

Bill

Great advice by Bill/birdma42. I'll just embellish what he's saying a little bit.

Every person has the ability to go back and amend a tax return they've filed. You have until three years after the later of the date the return was originally due (usually April 15th of the following year) or the date it was actually filed. The IRS has the exact same time period in which your return is considered "open" and they can go back to review and audit it. Its commonly referred to by some as a statute of limitations. So as Bill/birdman42 said, that's why you tell people to hold onto their tax records for at least three years.

I actually tell my clients to hold onto their tax info for at least for four years, because I'm always afraid they'll mess up and throw things away too early, based on their return not being due till the following year. For example, your 2021 tax return isn't due yet till 4/15/22, and three years from then takes you till 4/15/25, which would be earliest that the statute of limitations would possibly be up, and beyond which the IRS can no longer audit your 2021 return. I can easily see someone thinking they'll hold onto their tax info for three years after 2021, so to them that means 2022-2023-2024, and come January, 2025 they clean house and throw their 2021 tax data out. Unfortunately, their 2021 tax year is still open to the IRS, but now their records are gone.

And I really more often tell clients to hold onto their tax info for a return they are filing for at least seven years. As Bill/birdman42 had said, there are occasions when the statute of limitations can extend beyond the normal three year period after a return was originally filed or due. This primarily occurs when the IRS discovers that the taxable income on a return was under reported by 25% or more on a previously filed return. In that case the statute of limitations for the IRS going back on a return gets doubled from three to six years, after the later of the returns original due date, or the date it was filed. And thus the reason I more likely tell people to hold on to their tax return info for at least seven years.

And by the way, the info we're talking about throwing away is to support what is reported on the tax returns. You should try to keep copies of all your actual tax returns and W-2s indefinitely. You never know when you might have to prove something to the Social Security Administration, or maybe domestic relations court for a marriage gone bad, as just a couple possible examples for why you want to keep them.

[Seven]

All I'm picturing in my head are two people meeting at an undisclosed location, in the middle of the night, exchanging a bag of cash for some high priced card and both driving away afterwards.

[BobC]

Originally Posted by sb1

That is the banking inflows and outflows on an annual basis and neither have been adopted at this point as the bill has never gone thru. It was not in the past few versions but could be reinserted into the bill again, if and when they try to pass it.

Exactly right. And just shows how the government is trying to clamp down even more on cash and currently other non-reported transaction activity. In case you haven't heard, they are still trying to figure out how to pay for the BBB program, and it has been talked about significantly increasing the IRS' budget so that among everything else they need to do, they can hire more auditors to go after the insane amount of taxes they estimate aren't currently being paid, but that should be.

Goes along with everything else the government seems to be doing to discourage the use of cash anymore, like the asset forfeiture rules. I remember back to when Rosen (Mr. Mint) used to have those adds showing a suitcase full of money he had to pay for your cards you were looking to sell. I could just see the cops today waiting for him outside a major show, or the National, with a drug sniffing dog that detects the smell of marijuana coming from his suitcase, so they could just ytake it. I've read somewhere that virtually all currency that has been in circulation for even just a short period of time has likely come into contact with someone using marijuana, or even worse drugs, and that once that happens, the scent stays on the currency so the drug sniffing dogs can still detect it.

Don't respond on this public forum here if you still do, but I've often wondered if things like these asset forfeiture incidences and proposed changes to cash activity in our bank accounts being reported to the government has got some people thinking twice, or even three times, about taking out large sums of cash to take to shows to buy/sell cards anymore, or depositing large sums of cash into their account from something they sold. The opportunities have been way down because of the pandemic, but as time goes by and things hopefully keep opening further up, I can see that maybe being a concern for some, if not many, people going forward.

[BobC]

Originally Posted by bnorth

All I am saying is if you have a easy tax form and can do it yourself it would be cheaper to just pay the extra tax on all your sales than hire a accountant to pay the amount you really need to. Accountants doing taxes with many different forms are very expensive in my many years of experience

I am in no way saying cheat on your taxes. I have been audited by everyone state level and the IRS. It sucks but I had an amazingly honest accountant and I never owed anybody anything when they were done with me. I have done some sketchy stuff in life but cheating on taxes isn't one of them.

Ben, My bad then as I wasn't quite sure what you meant. But what I (and birdman42) was saying is still pertinent and should be useful to everybody, so its all good. Just be careful, and even if you do your return yourself, you may still want to try running a question or two that you may have by someone that knows better. While it may cost you more to have an accountant/tax preparer help you by preparing and initially filing your tax return, I can almost guarantee you it would likely cost you even more to then bring somebody in to help straighten things out with the IRS after the fact if you prepare and file it yourself, but unfortunately mess something up. Good luck.

[BobC]

Originally Posted by h2oya311

Bob - thanks for all of your insight. Very, very informative post and I really appreciate how well you've laid things out.

Thanks, I hope myself, and Bill/birdman42, are able to help someone out. If nothing else, it is info everyone can use to make better decisions for themselves, or at least know what they may now have to start keeping track of to give to their tax preparers.

Hopefully that way no one will have their tax preparers yelling at them when they walk in and drop their tax info off on April 14th. LOL

[ngrow9]

This has been a very helpful discussion, thanks to everyone! One quick question: what type of records must one keep to document purchase prices, etc.? If I maintain a document showing what I paid for the card and what it sold for, is that sufficient? Or do I literally need to print and keep the receipt for every card I ever purchase off eBay, if I want to be completely thorough?

[Gorditadogg]

Originally Posted by BobC

Al, I don't think Landis had anything to do with taxes.

But he had a lot to do with baseball

[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.

[drmondobueno]

I have tried to talk with my taxman about all this several times the last few months and have not received the courtesy of a return call. Leave it to Net54 to clarify.

Peace out.

[investinrookies]

Originally Posted by ngrow9

This has been a very helpful discussion, thanks to everyone! One quick question: what type of records must one keep to document purchase prices, etc.? If I maintain a document showing what I paid for the card and what it sold for, is that sufficient? Or do I literally need to print and keep the receipt for every card I ever purchase off eBay, if I want to be completely thorough?

I have wondered this as well. I keep a nice excel document of every purchase noting cost basis, sale price and net proceeds after fees. Also has the purchase and sale dates. Is that sufficient or I do i need receipts of prices paid to prove cost basis?


Sent from my iPhone using Tapatalk

[Rich Klein]

"It appears non-commercial transactions will be included; there's no mention of a distinction in the IRS instructions for completing the form. In one way this is going to be a shock to some people. We have a church client that receives most of its monthly contributions through Zelle. On the other hand, if there were a distinction we might see parties such as PP clamping down on the use of F&F. I see the PP page mentioned above, but there's no mention of F&F transactions being exempt. And again, the IRS instructions for the form don't appear to allow for an exemption for non-commercial transactions. I'd really, really like to be wrong about this, but I believe I'm correct."

Just a note, and I don't know if this is true for Zelle, but when I set up pay pal for our synagogue's card show, I set it up with Pay Pal as a non-profit and sent in the 501C form we received when we 1st began. So if the church did not set it up as a non-profit, they need to fix that ASAP.

I also give out donation sheets to our vendors (in the past since our last show thanks to COVID was March 2020) and anyone who donates us cards or prizes who wishes to receive those notes. I have had a couple of major donators need the 501-C form as well for their tax preparers and that has been sufficient for their needs. So I would presume if the prep work by the church was done correctly then there should be no real effect on them

Rich


Bill[/QUOTE]

[BobC]

Originally Posted by ngrow9

This has been a very helpful discussion, thanks to everyone! One quick question: what type of records must one keep to document purchase prices, etc.? If I maintain a document showing what I paid for the card and what it sold for, is that sufficient? Or do I literally need to print and keep the receipt for every card I ever purchase off eBay, if I want to be completely thorough?

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.