new 1099-K rules

[BobC]

Originally Posted by chriskim

Saw this on FB.. of course, it could be fake news...


A friendly reminder that starting 2022, you’ll be taxed on your cashapp, Venmo, PayPal and Zelle for any transactions totaling up to over $600. That is one $600 or six hundred $1 transactions. So if you have a side hustle…… don’t use those apps. You're probably wondering why I encourage you to move to cash. 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. If that does not sound ridiculous then I don’t know what to tell you. If I can’t write off my taxes for the Tv on the initial purchase, I should not have to pay taxes again on it for selling it. But the government has your best interest at hand. Tax the rich right?!? Good luck on your side hustle for all my friends that have it. Instead of “taxing the rich” they are really taxing the middle class more. But hey…. The government is for the people. I’m sure they just want to make sure you do your finances correctly. Tax the taxes to tax the tax. Got it . Of course if you are well off, you wont care but if you care about your friends that are not well off and their side hustle is what puts food on their table, then maybe you should care.#LGBFJB ~reposted from another post~

There seems to be something missing from this FB item that you're posting as it mentions paying tax on a $700 purchase, and then again on a subsequent $600 sale of the item you previously bought. Not so sure it is fake news as much as much as it may be misguided thinking (or total ignorance on the part of the FB poster).

You don't pay income tax when you purchase something, so could the tax they're referring to on the $700 TV purchase maybe be sales or use tax? If you purchase a TV like this through Ebay, you'll get dinged for the sales tax, based on where you live, if applicable. But that has nothing to do with using PP, Venmo, or Zelle. That would automatically be charged if you used Ebay for the purchase. And assuming you aren't a formal business buying and selling TVs, any sales tax you paid when you bought the TV technically is deductible, because that sales tax would be added to the $700 cost basis you paid to acquire it, and then offset against what you later sold it for.


And then it mentions owing tax on the entire $600 you get for subsequently selling the same TV you bought earlier that year for $700, and how it gets reported to you on a 1099 now because your sale went through PP, Venmo, or Zelle. If that is the case, you sold something for less than you paid for it, so there's no profit to end up paying income tax on. You'd just need to show on your return that you didn't make money on it. And if the poster was referring to sales tax, it isn't the seller that pays it, it would be on the buyer.

This FB poster is either totally ignorant of the rules, or deliberately trying to be a jerk by giving people bad tax related information. Either way, it just shows how you have to be careful and watch what you read and believe online or wherever anymore, and why it can be extremely critical to have knowledgeable help and guidance in regards to taxes from someone you can trust. Especially over the past few, and coming years, with all the continually changing tax rules, and more to come.

And this new 1099-K reporting threshold just highlights some of the biggest problems the government and we the taxpayers face. The government is trying to get the taxes due and owed from all the operating businesses (legal and illegal) out there, but realizes much of it isn't being reported. Now the government doesn't really look at people having a garage sale or selling some miscellaneous clutter at a flea market once in a while as being in business, and truly doesn't care (or really want) to bother and tax them on any such activities. But in trying to get people actually running ongoing businesses, or even side hustles, that aren't being properly reported, the government ends up doing things, like lowering reporting thresholds for sales on third-party platforms like PP, Venmo, and Zelle to just $600. It will definitely get a lot of previously non-reported businesses to start reporting, or force them to find new ways to transact business that the government isn't already closely monitoring. Unfortunately, these lowered reporting thresholds also grab and affect tons of everyday people that really aren't running ongoing businesses, but now have to go through all the work and hassle these new reporting requirements are putting them, and their tax preparers, through. It is going to be a PITA for a lot of people that get these 1099-Ks next year, that didn't know they were coming.