new 1099-K rules

[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.

[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????

[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 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.

[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.

[Pjere]

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.

Agreed!


Sent from my iPhone using Tapatalk

[chriskim]

Originally Posted by Pjere

Agreed!


Sent from my iPhone using Tapatalk

I agreed not to avoid paying tax.. but what about double taxed?

"If I purchase A tv for $700 in January of 2022 and decided to sell it on November of 2022 for $600 through one of those apps, I will be paying taxes for the $700 when I bought it and I’ll get a 1099K from the IRS on 2023 to pay taxes on the $600 I made off the tv I sold. "

[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...

[swarmee]

Originally Posted by chalupacollects

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...

You're right, I believe it was in a different bill that hasn't passed... yet. But they have been known to make some changes retroactive, and if they need to close the loopholes to pay for the bill, expect it to be revisited.

[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.