Reporting sales of large $$ items

[philliesfan]

When is ebay going to start sending the IRS sales information? Or did they already start? I sell things for a friend and I don't want to be accountable for those sales. Maybe I should have him start an ebay account and list things for him on there.
Bob

[scooter729]

Originally Posted by philliesfan

When is ebay going to start sending the IRS sales information? Or did they already start? I sell things for a friend and I don't want to be accountable for those sales. Maybe I should have him start an ebay account and list things for him on there.
Bob

I believe you will get a 1099 on any sales you have, if you have more than $600 in a year. It used to be if you exceeded $20K of sales and 100 or 200 transactions, but the threshold now is lowered significantly. So you certainly should consider having your friend open a separate account for his activities.

[Aquarian Sports Cards]

Currently auctions in PA are not required to report consignor sales numbers but we are required to keep records for 7 years in case anyone comes looking IRS, Divorce lawyer, estate lawyer etc.

[Jewish-collector]

A related question -

I recently received a message in ebay asked for my tax id # (social security number) because I went above the $600 threshold here in 2021 and ebay says they're required to generate a 1099 for year 2021 due to IRS requirements. My question is I never received this request in previous years when I was above the $600.

Is this request new because they moved me to managed payments in August 2021 or did something else changed ?

I know in the year 2022, the thresholds change to $600, but year 2021 should be the $20,000 and 200 transactions. Correct ? Thanks.

[CTDean]

Originally Posted by Jewish-collector

A related question -

I recently received a message in ebay asked for my tax id # (social security number) because I went above the $600 threshold here in 2021 and ebay says they're required to generate a 1099 for year 2021 due to IRS requirements. My question is I never received this request in previous years when I was above the $600.

Is this request new because they moved me to managed payments in August 2021 or did something else changed ?

I know in the year 2022, the thresholds change to $600, but year 2021 should be the $20,000 and 200 transactions. Correct ? Thanks.

While the Federal threshold for 2021 is $20,000 some states have different thresholds for State income taxes. I'm in Maryland and I understand they use the $600 threshold now.

[Fred]

I'm sorry, if someone told me I'd have to pay taxes on the potential future value of a collectible, I'd tell them to go piss off or that I purchased it expecting it to drop in value and therefore will take the tax loss for it.

Next thing you know someone will come up with an ownership tax, to be paid yearly, for having the privilege of owning some cool cardboard. Guess what - I'll tell them to piss off on that one also.

[BobC]

Originally Posted by Fred

I'm sorry, if someone told me I'd have to pay taxes on the potential future value of a collectible, I'd tell them to go piss off or that I purchased it expecting it to drop in value and therefore will take the tax loss for it.

Next thing you know someone will come up with an ownership tax, to be paid yearly, for having the privilege of owning some cool cardboard. Guess what - I'll tell them to piss off on that one also.

See Post #38, paragraph 4.

[BobC]

Originally Posted by Fred

I'm sorry, if someone told me I'd have to pay taxes on the potential future value of a collectible, I'd tell them to go piss off or that I purchased it expecting it to drop in value and therefore will take the tax loss for it.

Next thing you know someone will come up with an ownership tax, to be paid yearly, for having the privilege of owning some cool cardboard. Guess what - I'll tell them to piss off on that one also.

Actually Fred, such a thing has/does exist. Some states, or other taxinging authorities, may impose what is commonly known as a business personal property tax. In Ohio, where I'm from, they actually had such a tax in effect through around 2005. Luckily it was only on businesses though, but if you were a dealer, you had to add up the value of your card inventory on the last day of every taxable year, and pay a tax on the tangible inventory value. I'm not sure off the top of my head what other states may still have something similar in place.

That may be/have been one of the reasons, depending on where you lived, that you would always see businesses advertising year-end clearance sales. They wanted to clear as much inventory out as they could to pay less property tax.

[BobC]

Originally Posted by CTDean

While the Federal threshold for 2021 is $20,000 some states have different thresholds for State income taxes. I'm in Maryland and I understand they use the $600 threshold now.

And exactly why I suggested talking to a certified tax professional about your specific state.

[BobC]

Originally Posted by philliesfan

When is ebay going to start sending the IRS sales information? Or did they already start? I sell things for a friend and I don't want to be accountable for those sales. Maybe I should have him start an ebay account and list things for him on there.
Bob

Originally Posted by scooter729
I believe you will get a 1099 on any sales you have, if you have more than $600 in a year. It used to be if you exceeded $20K of sales and 100 or 200 transactions, but the threshold now is lowered significantly. So you certainly should consider having your friend open a separate account for his activities.

Originally Posted by Jewish collector
A related question -

I recently received a message in ebay asked for my tax id # (social security number) because I went above the $600 threshold here in 2021 and ebay says they're required to generate a 1099 for year 2021 due to IRS requirements. My question is I never received this request in previous years when I was above the $600.

Is this request new because they moved me to managed payments in August 2021 or did something else changed ?

I know in the year 2022, the thresholds change to $600, but year 2021 should be the $20,000 and 200 transactions. Correct ? Thanks.

The reporting of electronic sales by third parties to the IRS has been around for a few years now, and is accomplished through the filing of Form 1099-K. Form 1099-K is used to report income received from electronic payments such as credit cards, debit cards, PayPal, and other third party payers. In most cases, the payment settlement entity (PSE) will send you a 1099-K by January 31 of the following year. This income needs to be included in your total business earnings, or otherwise be included elsewhere in your return.

Under current law in effect through the end of 2021, the threshold for requiring a PSE to send a 1099-K to the seller and IRS is $20,000 or more of total gross sales for the taxable (calendar) year AND 200 or more total sales transactions. Beginning on January 1, 2022 and going forward, the threshold for required reporting by a PSE of electronic sales activity via form 1099-K is reduced to simply $600 of total gross sales for the taxable (calendar) year and no minimum required number of sales transactions.

If Ebay is asking for your social security/tax ID # now, and saying they are going to then issue and send you and the IRS a 1099-K form for 2021 based on a $600 gross sales threshold, they can do that. Even though the 2021 reporting threshold is still $20,000 of gross sales and 200 transactions, that is just the required minimum threshold. There is no rule or law that says the PSE can't report gross sales below the threshold, and it has always been like that.

It seems to me that Ebay may be starting to use this new reporting threshold early so they can start gathering everyone's tax and reporting data now so that next year (2022) they don't have any issues or problems implementing this when the new threshold really takes effect. You can try contacting Ebay and ask them why they need this tax info now if the new threshold doesn't take effect till 2022, and you aren't going to go over the 2021 sales or transaction threshold. My guess is they'll simply tell you they need the info now so they can start the proper reporting.

And failure to provide them with your proper tax iD information won't necessarily get you kicked off selling on Ebay, but it could ultimately result in the seller being subject to what is known as Backup Withholding. In that case, Ebay would be required to deduct Backup Withholding right off the top of a seller's gross sales, and send that money to the IRS. And I believe the current federal Backup Withholding rate is 24%.

So let's say you don't give Ebay your correct tax reporting ID info and become subject to mandated Backup Withholding. Now you sell something that cost you $75 on Ebay for $100. Ebay is going to take $24 of your money and send it to the IRS, they'll also take their commission and sales fees, and send you whatever is left over. So you probably just lost money. The only way to then get any overpayments from this Backup Withholding back is to file a tax return after the end of the year, claiming the proper income and expenses from your card sales on the return, and treating the Backup Withholding like an estimated federal tax payment or the federal withholding off you W-2 wages. Otherwise, the IRS just keeps the cash.

It is also possible that Ebay could alternatively terminate your ability to sell on their platform if you don't give them your proper tax ID info, but that will be up to them.

And as Scott from Aquarian said, his auction house currently isn't required to report gross sales of consignors to the IRS or his home state of PA. I believe that will be pretty much the same for all the other auction houses out there, at least for now. But that could change in the future. I would not be surprised if in the coming years the government institutes a further requirement of Nominee reporting of sales income by Scott/Aquarian to his consignors, as well as requiring it of all other auction houses and consignment type sellers out there. As Scott said, he's already required to hold onto the sales info to individual consignors for a number of years, so any appropriate tax authority could walk in and demand to see such information. Keep that in mind. (Scott, Sorry for using your and your AH in my example, but since you already posted in this thread, I figured you wouldn't mind. Thanks.)

[Aquarian Sports Cards]

Not at all. I try and explain without giving advice, sometimes I think people hear what they want.

[mrreality68]

Originally Posted by BobC

The reporting of electronic sales by third parties to the IRS has been around for a few years now, and is accomplished through the filing of Form 1099-K. Form 1099-K is used to report income received from electronic payments such as credit cards, debit cards, PayPal, and other third party payers. In most cases, the payment settlement entity (PSE) will send you a 1099-K by January 31 of the following year. This income needs to be included in your total business earnings, or otherwise be included elsewhere in your return.

Under current law in effect through the end of 2021, the threshold for requiring a PSE to send a 1099-K to the seller and IRS is $20,000 or more of total gross sales for the taxable (calendar) year AND 200 or more total sales transactions. Beginning on January 1, 2022 and going forward, the threshold for required reporting by a PSE of electronic sales activity via form 1099-K is reduced to simply $600 of total gross sales for the taxable (calendar) year and no minimum required number of sales transactions.

If Ebay is asking for your social security/tax ID # now, and saying they are going to then issue and send you and the IRS a 1099-K form for 2021 based on a $600 gross sales threshold, they can do that. Even though the 2021 reporting threshold is still $20,000 of gross sales and 200 transactions, that is just the required minimum threshold. There is no rule or law that says the PSE can't report gross sales below the threshold, and it has always been like that.

It seems to me that Ebay may be starting to use this new reporting threshold early so they can start gathering everyone's tax and reporting data now so that next year (2022) they don't have any issues or problems implementing this when the new threshold really takes effect. You can try contacting Ebay and ask them why they need this tax info now if the new threshold doesn't take effect till 2022, and you aren't going to go over the 2021 sales or transaction threshold. My guess is they'll simply tell you they need the info now so they can start the proper reporting.

And failure to provide them with your proper tax iD information won't necessarily get you kicked off selling on Ebay, but it could ultimately result in the seller being subject to what is known as Backup Withholding. In that case, Ebay would be required to deduct Backup Withholding right off the top of a seller's gross sales, and send that money to the IRS. And I believe the current federal Backup Withholding rate is 24%.

So let's say you don't give Ebay your correct tax reporting ID info and become subject to mandated Backup Withholding. Now you sell something that cost you $75 on Ebay for $100. Ebay is going to take $24 of your money and send it to the IRS, they'll also take their commission and sales fees, and send you whatever is left over. So you probably just lost money. The only way to then get any overpayments from this Backup Withholding back is to file a tax return after the end of the year, claiming the proper income and expenses from your card sales on the return, and treating the Backup Withholding like an estimated federal tax payment or the federal withholding off you W-2 wages. Otherwise, the IRS just keeps the cash.

It is also possible that Ebay could alternatively terminate your ability to sell on their platform if you don't give them your proper tax ID info, but that will be up to them.

And as Scot from Aquarian said, his auction house currently isn't required to report gross sales of consignors to the IRS or his home state of PA. I believe that will be pretty much the same for all the other auction houses out there, at least for now. But that could change in the future. I would not be surprised if in the coming years the government institutes a further requirement of Nominee reporting of sales income by Scot/Aquarian to his consignors, as well as requiring it of all other auction houses and consignment type sellers out there. As Scot said, he's already required to hold onto the sales info to individual consignors for a number of years, so any appropriate tax authority could walk in and demand to see such information. Keep that in mind. (Scot, Sorry for using your and your AH in my example, but since you already posted in this thread, I figured you wouldn't mind. Thanks.)

Great information and in the end partner with your tax adviser for your specific situation and state laws

[Jewish-collector]

Thank you Bob !!!

[philliesfan]

Bob C. - Thanks very much for that information. It is very helpful!
Robert

[Yoda]

I believe your profit equation should be: Price sold - Price Paid + expenses = Profit. I certainly take expenses when I file my income taxes for Past Ball Vintage Cards.

[BobC]

Originally Posted by Yoda

I believe your profit equation should be: Price sold - Price Paid + expenses = Profit. I certainly take expenses when I file my income taxes for Past Ball Vintage Cards.

Depends, are you filing and paying taxes on card sales as a Dealer, a Collector/Hobbyist, or as an Investor?

[ValKehl]

Originally Posted by Yoda

I believe your profit equation should be: Price sold - Price Paid + expenses = Profit. I certainly take expenses when I file my income taxes for Past Ball Vintage Cards.

John, I believe a seemingly small, but important, adjustment to your basic profit equation is needed, as follows: Price sold - (Price paid + expenses) = Profit.

[BobC]

Originally Posted by mrreality68

Great information and in the end partner with your tax adviser for your specific situation and state laws

Yes. +1,000,000,....................................... .