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]

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

[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

[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.

[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?

[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.

[chalupacollects]

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

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

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

[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.

[orioles70]

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

Sent from my SM-N950U using Tapatalk

[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

[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.

[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.

[BobC]

Originally Posted by Gorditadogg

But he had a lot to do with baseball

Yes he did! LOL

[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.

[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.

[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 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.