Ebay tax reporting drops from $20,000 to $600

[BobC]

Originally Posted by G1911

Technically, it doesn't change our taxes. It IS a titanic shifting of the burden of proof, to an effective guilty until proven innocent with how these 1099's work. Getting reimbursed for things will become a pain in the ass, especially if the bank account monitoring eventually gets through. I will have to record and itemize every penny from every dinner with my friends, etc when that happens.

It's not like I have receipts for my purchase price of every card I've bought in my life. It's going to be a pain when, while being 100% honest on my taxes, I won't be able to prove it because I can't prove my profit on a card I bought in 1999 with cash at a show, if I remember the purchase price.

It is not really a matter of guilt, just proper reporting for tax purposes. And no, things like garage sales are NOT going to suddenly be stalked by IRS and state tax agents, nor are they going to accept and act on calls from people reporting those having garage sales. Garage sales are what are considered as "casual sales" and are generally not subject to income or sales tax laws. By their nature, they are considered to not be indicative of an ongoing business operation, and therefore don't need to be reported or monitored. In the past, the thresholds for things like 1099-K reporting were considered the point when one went from not operating a business to now operating a business, but there never had been a truly defined point that marked when someone's true intent was to operate as a business, and that has not changed..

Ebay is only the platform for these sales, and the new 1099-K reporting threshold isn't being imposed on Ebay, just those third-party payment services like Paypal, Venmo, or Zelle. Only Ebay sales using payment services like these get included in 1099-K reporting, not sales using checks, MOs, or credit cards. It is all about the government having access to your records if they want/need to go checking you out. It wasn't suddenly saying anyone doing $600 or more in casual sales is now considered to be in a viable, ongoing business.

And the $600 threshold goes hand in hand with the reporting threshold for non-employee, independent contractor, compensation, which has been at $600 for decades. That used to be reported on 1099-MISC forms until recently when they broke out such reporting a few years ago on the new 1099-NEC forms.

Anyway, the new 1099-K reporting is tied into the same reason that 1099-NEC forms do not have to be issued to people/businesses that operate as corporations. If you hire Joe Blow to plow your driveway, and cut him a check in payment, as an individual he can go to his bank and simply endorse and cash the check and walk out with his money. That cashed check never shows up in Joe Blow's bank account records or activities, or on his bank statement. However, if he incorporated his snow plowing business, you'd maybe make the check out to Joe Blow, Inc. In that case, if he takes it to his bank and endorses the check, under banking laws and regulations they can't just give him the money. He actually has to deposit that check into the corporation's bank account first, and can then write a check to himself personally, or otherwise transfer the money to himself. Regardless of what he does, that deposit will now show up in his corporate bank account records and on the corporate bank account statement. The IRS can then come in whenever they want and demand to see the corporate bank account records, and simply see the deposit and question if it was reportable income for tax purposes. And that is why a 1099-MISC or -NEC isn't required to be sent to a corporation, regardless of how much more over $600 someone may have paid a corporation for their services in any given year.

Well, when it comes to Paypal (and I assume similarly for other payment services like Zelle or Venmo), you generally have your account linked to an actual bank account you can draw money out of to then make payments through Paypal. But if someone sends you money through Paypal, it doesn't necessarily get deposited into your bank account. It sits in your Paypal account till you can have it transferred into your bank account, or use it to make Paypal payments to others. And as long as you never formally deposit anything back into your bank account, it also never shows up up on/in your bank account's records or statements, which the IRS can demand to see. It is similar to an individual non-employee getting paid by a check, but just cashing it at their bank instead of depositing it into their bank account, and thereby not create a traceable record of it in their name that the IRS can easily find. So to get after this potentially hidden income/business activity, they've taken to imposing this same $600 reporting threshold on third-party payment activity, like through Paypal.

Unfortunately in doing so, this reporting doesn't indicate whether you are operating an actual business, or just clearing out stuff from a garage or attic. I imagine the IRS' stance for anyone receiving these 1099-K forms after the lowering of the reporting threshold in 2022 will be that recipients are formally in an ongoing business, unless they report and show otherwise on their tax returns. And this distinction can be very important to someone who is not a card dealer, but a collector or investor instead, who maybe only sells thing occasionally to fund other purchases, or maybe to cash in when when a particular card/item suddenly jumps in value out in the marketplace. The reporting differences can be great, and I've already gone over them in more detail in other threads/posts of mine you can go look up. Suffice it to say here that I believe the biggest differences between reporting as a dealer versus reporting as a collector or investor, are whether your net profits from card sales are treated as ordinary or capital gain income, and whether or not those net profits may also be subject to self-employment tax.

Bottom line is, if you get one of these 1099-K forms, do not just ignore it. And if you try doing your taxes yourself after getting one of these 1099-K forms for the first time, and really don't know what you're doing and/or what I'm talking about, do yourself a big favor and at least seek out the advice and help from a qualified tax professional. Even if it ends up costing you some fees, chances are it will save you much more in time, expense, and aggravation over the long run.

[CTDean]

All eBay sales will show up on your 1099K's. I'm in Maryland and it is one of the states that use the $600 figure this year. I just printed my Paypal 1099K for January thru June 2021. In June I went to eBay managed payments and will be getting an eBay 1099K for June thru December 2021 sales. The 1099K's will include all eBay sales for the year no matter the payment method used by the buyer through paypal or eBay's managed payments. Here the $600 in a year is the only factor, the number of sales has no meaning.

[Directly]

The report in my Tax link was actually for 2020 generated yesterday Jan 25, 2022--I assume a updated 1099K report will be coming soon for the year 2021-

[BobC]

Originally Posted by Directly

The report in my Tax link was actually for 2020 generated yesterday Jan 25, 2022--I assume a updated 1099K report will be coming soon for the year 2021-

If nothing else, try contacting them to see if they can tell you what's up. It is always possible they could even be delayed in reporting and not be able to have them for you till sometime in February, or even later. Good luck.

[CTDean]

Bob,
The paypal 1099K includes all money coming into your account for sales. You can buy with your funds, let it set, or transfer to your bank if you want. Your 1099K will include every dollar coming into your account no matter how it goes out.

[BobC]

Originally Posted by CTDean

Bob,
The paypal 1099K includes all money coming into your account for sales. You can buy with your funds, let it set, or transfer to your bank if you want. Your 1099K will include every dollar coming into your account no matter how it goes out.

Yes I know and understand that, and never said 100% of a person's sales through Paypal (unless they are F&F transfers which aren't considered as sales) don't count towards their 1099-K reporting. I was merely trying to point out to people that if someone never transferred sales money they got through Paypal back into their bank account, that sales money never shows up on their bank account statement or in their personal bank records, where the IRS can easily go and find it. And that was a main reason why they imposed the lower reporting threshold on Paypal and other third-party payment venues. If you go back and carefully re-read what I wrote, you should be able to get my point.

These are very complicated tax laws and reporting requirements, and despite my often writing novel length posts to try and explain them, I still can't begin to cover all the nuances and exceptions. Just trying to be helpful and give members some advice when it comes to our hobby and taxes. And that's why I most often end such posts suggesting people get in touch with a qualified tax professional for more specific help and guidance, especially one knowledgeable about the state they're in.

[Dewey]

Thanks, Bob. Very helpful.

[BobC]

Originally Posted by Dewey

Thanks, Bob. Very helpful.

You're welcome. If you do end up getting some professional tax help, hopefully this thread, and other posts I've made in the past will allow you to save on a half-hour to an hour's worth of billable fees where your accountant/tax preparer doesn't have to try explaining all this stuff to you from scratch. LOL

[Tyruscobb]

The eBay baseball card buying and selling experience has gradually deteriorated, especially over the past few years. First, purchasing cards became more expensive when states began collecting sales taxes.

Second, the new required managed payment system has decreased sellers. I personally know a few small sellers that refused to give eBay their banking information and no longer sell their cards on it now.

Third, this new 1099 standard will push even more sellers out the door. I know sellers always should’ve reported their profits, but now big brother is really watching. This will scare some sellers off, and create headaches for others.

Fourth, at some point in the future, eBay plans on lowering the authentication amount to just $250.00. This will undoubtedly increase my wait time. The seller will have to ship the raw $250 card to the grader, it will probably sit at the grader’s place for a while, and then the grader will eventually mail it to me when it certifies the card is authentic. How long will this entire process take? Who wants to now wait two months to receive a raw $250 eBay card purchase? No thanks.

[BobC]

Originally Posted by Tyruscobb

The eBay baseball card buying and selling experience has gradually deteriorated, especially over the past few years. First, purchasing cards became more expensive when states began collecting sales taxes.

Second, the new required managed payment system has decreased sellers. I personally know a few small sellers that refused to give eBay their banking information and no longer sell their cards on it now.

Third, this new 1099 standard will push even more sellers out the door. I know sellers always should’ve reported their profits, but now big brother is really watching. This will scare some sellers off, and create headaches for others.

Fourth, at some point in the future, eBay plans on lowering the authentication amount to just $250.00. This will undoubtedly increase my wait time. The seller will have to ship the raw $250 card to the grader, it will probably sit at the grader’s place for a while, and then the grader will eventually mail it to me when it certifies the card is authentic. How long will this entire process take? Who wants to now wait two months to receive a raw $250 eBay card purchase? No thanks.

Brent, In response to your four points I think - yup, yup, yup and yup!

But don't forget cards are not the biggest and main thing sold on Ebay. This new reporting compliance effects all the Ebay sellers, and all the other sellers on all the other online sales venues and platforms out there as well. And since most people selling online use the third-party payment services like Paypal, Venmo, and Zelle to transact business, these sellers may still be reported for their sales, regardless of where they move to sell. All of which can see a resurgence and return back to shows and flea markets, and more people running cash businesses and using checks, which I'd actually enjoy seeing. (But then watch them start pushing that $600 reporting limit on personal bank account activity again as well.)

And don't think that everyone may start jumping to cryptocurrencies to try to get around these tax reporting rules. I believe enhanced 1099-B reporting requirements for cryptocurrency activity and transactions are already in place and slated to take effect in 2024 or 2025 (forget now).

Maybe we baby boomers aren't so dumb after all in not necessarily fully embracing all the new-fangled technology and other supposed advances in doing everything online. If I pay by cash or check, I don't have to worry as much about a credit card being hacked, or an online payment service being comprised. And if I can go to shows to actually see and examine what I'm thinking of buying, I don't need it in any damn TPG holder to tell me it is real, or what condition it is in. LOL

[Michael B]

Bob,

Thank you for writing all you do. I am amazed at all of the incessant hand-wringing everyone does over something that has essentially been there all along. I sold on Ebay for many years and never had any problem. You sell, you profit, you pay your taxes. That is not hard to understand. If you are making a concerted effort to try and obey the law you will have no problems. The IRS bogeyman is not hiding in your bushes watching your every move.

There are plenty of opportunities to reduce the liability which seem to be lost in the conversation. What is the basis of the item? Honest, best guess will work. No one is going to pore over 10 year old issues of Baseball Card magazine to find out that you overstated how much you paid for an item by 75¢. There are also packing materials, postage, other supplies (pens), roundtrip mileage to the post office, subscriptions to any site or publication which helps you price your items and ebay fees. Also the expenses of travelling to a show - hotels, admission, food, gas (or mileage), tolls, parking, etc. If you are attending a show to purchase items to eventually sell the expenses to attend the show are part of the deduction equation. These travel expenses can also be incurred by going to flea markets, antique shows, stamp/coin shows, yard sales. Plenty of people have posted new acquisitions on this board that they found at a yard sale and then intend to sell. There were expenses over the money paid for the item that are part of the true cost.

I may be oversimplifying the facts, but I learned from a former work acquaintance who was an attorney/accountant that it is important to pay attention to what you are spending to acquire something you intend to sell for a profit.

[BobC]

Originally Posted by Michael B

Bob,

Thank you for writing all you do. I am amazed at all of the incessant hand-wringing everyone does over something that has essentially been there all along. I sold on Ebay for many years and never had any problem. You sell, you profit, you pay your taxes. That is not hard to understand. If you are making a concerted effort to try and obey the law you will have no problems. The IRS bogeyman is not hiding in your bushes watching your every move.

There are plenty of opportunities to reduce the liability which seem to be lost in the conversation. What is the basis of the item? Honest, best guess will work. No one is going to pore over 10 year old issues of Baseball Card magazine to find out that you overstated how much you paid for an item by 75¢. There are also packing materials, postage, other supplies (pens), roundtrip mileage to the post office, subscriptions to any site or publication which helps you price your items and ebay fees. Also the expenses of travelling to a show - hotels, admission, food, gas (or mileage), tolls, parking, etc. If you are attending a show to purchase items to eventually sell the expenses to attend the show are part of the deduction equation. These travel expenses can also be incurred by going to flea markets, antique shows, stamp/coin shows, yard sales. Plenty of people have posted new acquisitions on this board that they found at a yard sale and then intend to sell. There were expenses over the money paid for the item that are part of the true cost.

I may be oversimplifying the facts, but I learned from a former work acquaintance who was an attorney/accountant that it is important to pay attention to what you are spending to acquire something you intend to sell for a profit.

All true. One of my all-time mantras has always been:

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

As for the comments about the importance of expenses, that is also very true. But the exact types and amount of expenses you end up deducting can vary greatly depending on whether or not you file your tax return and report the sale of your cards as a dealer, as an investor, or as just a pure hobby collector. Can actually make a big difference.

[Michael B]

Originally Posted by BobC

All true. One of my all-time mantras has always been:

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

As for the comments about the importance of expenses, that is also very true. But the exact types and amount of expenses you end up deducting can vary greatly depending on whether or not you file your tax return and report the sale of your cards as a dealer, as an investor, or as just a pure hobby collector. Can actually make a big difference.

Yes, I fully agree, that is why I said I was oversimplifying it. If you can get in the mindset of paying attention to the costs and expenses your are much more prepared when you do have to file. I first experienced the approach working as a freelance legal researcher travelling to multiple courthouses around Mass. When I was selling on ebay I was a full time salaried employee of a large corporation, but I was prepared to note the said costs and expenses and it went very smoothly. My accountant who has done my taxes for 33 years said I was doing it properly. LIke you, I am also old school. Rather than an accounting program I wrote everything down in a notebook and totalled each page as I finished it. My selling paid for a destination wedding and two week honeymoon in Australia among other things.

[Michael B]

Originally Posted by BobC

All true. One of my all-time mantras has always been:

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

As for the comments about the importance of expenses, that is also very true. But the exact types and amount of expenses you end up deducting can vary greatly depending on whether or not you file your tax return and report the sale of your cards as a dealer, as an investor, or as just a pure hobby collector. Can actually make a big difference.

Yes, I fully agree, that is why I said I was oversimplifying it. If you can get in the mindset of paying attention to the costs and expenses your are much more prepared when you do have to file. I first experienced the approach working as a freelance legal researcher travelling to multiple courthouses around Mass. When I was selling on ebay I was a full time salaried employee of a large corporation, but I was prepared to note the said costs and expenses and it went very smoothly. My accountant who has done my taxes for 33 years said I was doing it properly. Like you, I am also old school. Though for me than an accounting program I wrote everything down in a notebook and totaled each page as I finished it. My selling paid for a destination wedding and two week honeymoon in Australia among other things.

[BobC]

Originally Posted by CTDean

All eBay sales will show up on your 1099K's. I'm in Maryland and it is one of the states that use the $600 figure this year. I just printed my Paypal 1099K for January thru June 2021. In June I went to eBay managed payments and will be getting an eBay 1099K for June thru December 2021 sales. The 1099K's will include all eBay sales for the year no matter the payment method used by the buyer through paypal or eBay's managed payments. Here the $600 in a year is the only factor, the number of sales has no meaning.

Sorry for any misunderstanding, I believe Ebay's managed payment plan/system is considered somewhat on par with other payment platforms like Paypall, Zelle, etc. And therefore they'll report on all sales through that platform. I do not sell on Ebay and only know they are in the middle of eventually getting all Ebay sellers to adopt and be on their managed payment program. My understanding was that not all Ebay sellers had been forced to switch yet, and for those that hadn't, Paypal was still the primary payment venue/option being used, and that only payments through Paypal would be included in their 1099-K reporting (not including F&F payments).

This just highlights how confusing and complicated, as well as how inaccurate this reporting may be. As you mentioned, your 1099-K only included all Ebay sales starting in June through the year end, after you had switched to Ebay's managed payment system. Before that switch though, I'm assuming that any payments you had received that did not come through Paypal, are not showing up on a 1099-K.

And this also points out how tax laws and reporting can vary greatly by state.

[Jewish-collector]

fyi - They did change some states thresholds recently. These nine states have lower 1099-K threshold limits different from federal requirements. They will produce 1099-K if you conduct business in these nine states.

State Threshold Effective
AR $2500.00 2020
DC $600.00 2020
IL 4 CC Trans + $1,000.00 2020
MA $600.00 2018
MD $600.00 2020
MS $1,000.00 2020
NJ $1,000.00 2020
VT $600.00 2018
VA $600.00 2020

[BobC]

Originally Posted by Jewish-collector

fyi - They did change some states thresholds recently. These nine states have lower 1099-K threshold limits different from federal requirements. They will produce 1099-K if you conduct business in these nine states.

State Threshold Effective
AR $2500.00 2020
DC $600.00 2020
IL 4 CC Trans + $1,000.00 2020
MA $600.00 2018
MD $600.00 2020
MS $1,000.00 2020
NJ $1,000.00 2020
VT $600.00 2018
VA $600.00 2020

Yup, I usually try to remind people that state laws can (and do) vary from federal laws, and can be all over the place. So you always have to pay particular attention to whatever state(s) you are in when it comes to taxes as well.

[Dead-Ball-Hitter]

Bob C., really appreciate your ongoing clarification of the tax law. Something to think about when we go to sell our long-time collections. I think most guys want to be law-abiding, its just tough to figure out when we can net expenses, what forms to fill out, etc.

I always hated that my Paypal 1099-K INCLUDED dollars collected for sales tax that were NEVER PAID to me - ebay collected the tax that the buyer paid, yet it shows up on my 1099!!! Ahhhg! What a mess...

So I should pay income tax or capital gains on the sales tax ebay collected??!!?

[BobC]

Originally Posted by Dead-Ball-Hitter

Bob C., really appreciate your ongoing clarification of the tax law. Something to think about when we go to sell our long-time collections. I think most guys want to be law-abiding, its just tough to figure out when we can net expenses, what forms to fill out, etc.

I always hated that my Paypal 1099-K INCLUDED dollars collected for sales tax that were NEVER PAID to me - ebay collected the tax that the buyer paid, yet it shows up on my 1099!!! Ahhhg! What a mess...

So I should pay income tax or capital gains on the sales tax ebay collected??!!?

Quick answer is you get to deduct the sales tax if included on the 1099-K, along with also being able to deduct the Ebay fees you paid, assuming they were included as part of the 1099-K reported income as well. You get to deduct the direct costs related to the sales of your cards, along with your cost basis in the cards sold, regardless of whether or not you report the sales as a dealer, investor, or a collector. You are potentially able to deduct a lot more business related expenses, but only if you file as a dealer operating a business.

[G1911]

Originally Posted by BobC

It is not really a matter of guilt, just proper reporting for tax purposes. And no, things like garage sales are NOT going to suddenly be stalked by IRS and state tax agents, nor are they going to accept and act on calls from people reporting those having garage sales. Garage sales are what are considered as "casual sales" and are generally not subject to income or sales tax laws. By their nature, they are considered to not be indicative of an ongoing business operation, and therefore don't need to be reported or monitored. In the past, the thresholds for things like 1099-K reporting were considered the point when one went from not operating a business to now operating a business, but there never had been a truly defined point that marked when someone's true intent was to operate as a business, and that has not changed..

Ebay is only the platform for these sales, and the new 1099-K reporting threshold isn't being imposed on Ebay, just those third-party payment services like Paypal, Venmo, or Zelle. Only Ebay sales using payment services like these get included in 1099-K reporting, not sales using checks, MOs, or credit cards. It is all about the government having access to your records if they want/need to go checking you out. It wasn't suddenly saying anyone doing $600 or more in casual sales is now considered to be in a viable, ongoing business.

And the $600 threshold goes hand in hand with the reporting threshold for non-employee, independent contractor, compensation, which has been at $600 for decades. That used to be reported on 1099-MISC forms until recently when they broke out such reporting a few years ago on the new 1099-NEC forms.

Anyway, the new 1099-K reporting is tied into the same reason that 1099-NEC forms do not have to be issued to people/businesses that operate as corporations. If you hire Joe Blow to plow your driveway, and cut him a check in payment, as an individual he can go to his bank and simply endorse and cash the check and walk out with his money. That cashed check never shows up in Joe Blow's bank account records or activities, or on his bank statement. However, if he incorporated his snow plowing business, you'd maybe make the check out to Joe Blow, Inc. In that case, if he takes it to his bank and endorses the check, under banking laws and regulations they can't just give him the money. He actually has to deposit that check into the corporation's bank account first, and can then write a check to himself personally, or otherwise transfer the money to himself. Regardless of what he does, that deposit will now show up in his corporate bank account records and on the corporate bank account statement. The IRS can then come in whenever they want and demand to see the corporate bank account records, and simply see the deposit and question if it was reportable income for tax purposes. And that is why a 1099-MISC or -NEC isn't required to be sent to a corporation, regardless of how much more over $600 someone may have paid a corporation for their services in any given year.

Well, when it comes to Paypal (and I assume similarly for other payment services like Zelle or Venmo), you generally have your account linked to an actual bank account you can draw money out of to then make payments through Paypal. But if someone sends you money through Paypal, it doesn't necessarily get deposited into your bank account. It sits in your Paypal account till you can have it transferred into your bank account, or use it to make Paypal payments to others. And as long as you never formally deposit anything back into your bank account, it also never shows up up on/in your bank account's records or statements, which the IRS can demand to see. It is similar to an individual non-employee getting paid by a check, but just cashing it at their bank instead of depositing it into their bank account, and thereby not create a traceable record of it in their name that the IRS can easily find. So to get after this potentially hidden income/business activity, they've taken to imposing this same $600 reporting threshold on third-party payment activity, like through Paypal.

Unfortunately in doing so, this reporting doesn't indicate whether you are operating an actual business, or just clearing out stuff from a garage or attic. I imagine the IRS' stance for anyone receiving these 1099-K forms after the lowering of the reporting threshold in 2022 will be that recipients are formally in an ongoing business, unless they report and show otherwise on their tax returns. And this distinction can be very important to someone who is not a card dealer, but a collector or investor instead, who maybe only sells thing occasionally to fund other purchases, or maybe to cash in when when a particular card/item suddenly jumps in value out in the marketplace. The reporting differences can be great, and I've already gone over them in more detail in other threads/posts of mine you can go look up. Suffice it to say here that I believe the biggest differences between reporting as a dealer versus reporting as a collector or investor, are whether your net profits from card sales are treated as ordinary or capital gain income, and whether or not those net profits may also be subject to self-employment tax.

Bottom line is, if you get one of these 1099-K forms, do not just ignore it. And if you try doing your taxes yourself after getting one of these 1099-K forms for the first time, and really don't know what you're doing and/or what I'm talking about, do yourself a big favor and at least seek out the advice and help from a qualified tax professional. Even if it ends up costing you some fees, chances are it will save you much more in time, expense, and aggravation over the long run.

I think you may have replied to the wrong person, as I didn't talk about garage sales at all, or most of what you are talking about. I know how PayPal works...

Garage sales and face to face absolutely are affected though - I don't have proof of what I paid (and thus, to calculate my profit form an eBay sale) from a face to face transaction 20 years ago, or often even memory of what it was myself. As I am taxed on PROFIT, it's going to be a total pain in the ass at best to survive auditing, as I can't prove what I paid at a Card Show 15 years ago to then calculate from an eBay sale next month.

As to your last paragraph, If I have to hire a professional to make sure I don't get !@#$% by the state over a few eBay sales that I wasn't cheating about on my taxes in the first place, well.... That's exactly why this is a problem and ridiculous. It is a shift of the burden of the proof, and creates a ton of headaches. After losing 45%+ of my sale price when I can't show what I originally paid, and then hiring a professional, there's even less reason to sell. Its not much more profitable than burning my duplicates in the fireplace.

[BobC]

Originally Posted by G1911

I think you may have replied to the wrong person, as I didn't talk about garage sales at all, or most of what you are talking about. I know how PayPal works...

Garage sales and face to face absolutely are affected though - I don't have proof of what I paid (and thus, to calculate my profit form an eBay sale) from a face to face transaction 20 years ago, or often even memory of what it was myself. As I am taxed on PROFIT, it's going to be a total pain in the ass at best to survive auditing, as I can't prove what I paid at a Card Show 15 years ago to then calculate from an eBay sale next month.

As to your last paragraph, If I have to hire a professional to make sure I don't get !@#$% by the state over a few eBay sales that I wasn't cheating about on my taxes in the first place, well.... That's exactly why this is a problem and ridiculous. It is a shift of the burden of the proof, and creates a ton of headaches. After losing 45%+ of my sale price when I can't show what I originally paid, and then hiring a professional, there's even less reason to sell. Its not much more profitable than burning my duplicates in the fireplace.

My apologies as I wasn't so much responding just to you, but also trying to explain the what's and why's of a lot of these crazy new laws and changes to everyone that may not know much about all this, or have not heard about it already.

And as to saying everyone has to hire a tax professional to do their taxes now, I'm really not suggesting that is what everyone necessarily do. I'm merely saying that depending on one's knowledge and experience, and their own unique and personal tax situation, and this huge change in tax reporting becoming effective now, this is actually a critical point in many people's hobby/collecting activities to finally think about and decide how they want to be treated going forward. Since a lot of people are finally going to be forced to start reporting parts of their "hobby" activities on their tax returns, doesn't it make sense for them to think about if they want to be considered as a dealer, or maybe as an investor, or just a plain hobby collector, or even possibly a mix of all three? And if they're not sure exactly what that all means, or what they want to do, or how they may want to be considered and treated going forward, doesn't it make sense to at least talk to someone that might be able to help them to understand the differences and the pros and cons of choosing one way of being treated over another? And then maybe help to explain/show to them how their choice(s) actually gets put into their tax return. You need or want to hear that from someone with some actual tax experience, not some of the yahoos who occasionally will post on here that will tell you to just do what they say and you'll be fine, and act like they know all the answers because they heard it from so-and-so's cousin, or saw something online last night. So even if you don't want to have to hire a tax preparer, at least maybe ask around to hopefully find someone you can talk to about how to proceed going forward tax-wise. Maybe think of it like this. Someone starting out in a business usually needs to sit down and decide what kind of business do they want to start. Do they go forward as a sole proprietor, or maybe they file to become an LLC. And then again, maybe they decide it is better to incorporate, but then should they elect to file their taxes as an S-Corp, or maybe leave the taxation as a C-Corp. And then, how does that fit in with their regular job(s), other businesses, and investments, and then all the same questions for their spouse if married, and on and on. Beginning to get my drift?

Anyway, sorry again. My response was not solely directed at just your post.

[G1911]

Originally Posted by BobC

My apologies as I wasn't so much responding just to you, but also trying to explain the what's and why's of a lot of these crazy new laws and changes to everyone that may not know much about all this, or have not heard about it already.

And as to saying everyone has to hire a tax professional to do their taxes now, I'm really not suggesting that is what everyone necessarily do. I'm merely saying that depending on one's knowledge and experience, and their own unique and personal tax situation, and this huge change in tax reporting becoming effective now, this is actually a critical point in many people's hobby/collecting activities to finally think about and decide how they want to be treated going forward. Since a lot of people are finally going to be forced to start reporting parts of their "hobby" activities on their tax returns, doesn't it make sense for them to think about if they want to be considered as a dealer, or maybe as an investor, or just a plain hobby collector, or even possibly a mix of all three? And if they're not sure exactly what that all means, or what they want to do, or how they may want to be considered and treated going forward, doesn't it make sense to at least talk to someone that might be able to help them to understand the differences and the pros and cons of choosing one way of being treated over another? And then maybe help to explain/show to them how their choice(s) actually gets put into their tax return. You need or want to hear that from someone with some actual tax experience, not some of the yahoos who occasionally will post on here that will tell you to just do what they say and you'll be fine, and act like they know all the answers because they heard it from so-and-so's cousin, or saw something online last night. So even if you don't want to have to hire a tax preparer, at least maybe ask around to hopefully find someone you can talk to about how to proceed going forward tax-wise. Maybe think of it like this. Someone starting out in a business usually needs to sit down and decide what kind of business do they want to start. Do they go forward as a sole proprietor, or maybe they file to become an LLC. And then again, maybe they decide it is better to incorporate, but then should they elect to file their taxes as an S-Corp, or maybe leave the taxation as a C-Corp. And then, how does that fit in with their regular job(s), other businesses, and investments, and then all the same questions for their spouse if married, and on and on. Beginning to get my drift?

Anyway, sorry again. My response was not solely directed at just your post.

I get your drift, but I don't think it makes any reasonable sense for a few hundred dollars in sales of duplicate cards a year. I shouldn't need to treat selling $600-$20,000 of cards in 12 months like I'm starting a business. I shouldn't need to hire a professional to help me consider incorporating and in what way for selling $800 of dupes in 12 months. It makes sense to hire a professional to help make the right decisions if I'm starting a business, I'm making real money. Holding a digital garage sale for tiny amounts of money? No. That makes absolutely no sense whatsoever to get a professional to give me this advice and bill me over such a tiny sum of money. After Uncle Sam gets his half and the professional gets their cut for their hours, I won't make a penny myself for all that time and risk. At least throwing the $800 in dupes into my fireplace might warm me for 15 minutes.

This is a great advertisement for exactly why these regulations are a giant pain.

[bobbyw8469]

Originally Posted by G1911

I get your drift, but I don't think it makes any reasonable sense for a few hundred dollars in sales of duplicate cards a year. I shouldn't need to treat selling $600-$20,000 of cards in 12 months like I'm starting a business. I shouldn't need to hire a professional to help me consider incorporating and in what way for selling $800 of dupes in 12 months. It makes sense to hire a professional to help make the right decisions if I'm starting a business, I'm making real money. Holding a digital garage sale for tiny amounts of money? No. That makes absolutely no sense whatsoever to get a professional to give me this advice and bill me over such a tiny sum of money. After Uncle Sam gets his half and the professional gets their cut for their hours, I won't make a penny myself for all that time and risk. At least throwing the $800 in dupes into my fireplace might warm me for 15 minutes.

This is a great advertisement for exactly why these regulations are a giant pain.

I laughed like heck at this. My feelings exactly.

[puckpaul]

Originally Posted by G1911

I think you may have replied to the wrong person, as I didn't talk about garage sales at all, or most of what you are talking about. I know how PayPal works...

Garage sales and face to face absolutely are affected though - I don't have proof of what I paid (and thus, to calculate my profit form an eBay sale) from a face to face transaction 20 years ago, or often even memory of what it was myself. As I am taxed on PROFIT, it's going to be a total pain in the ass at best to survive auditing, as I can't prove what I paid at a Card Show 15 years ago to then calculate from an eBay sale next month.

As to your last paragraph, If I have to hire a professional to make sure I don't get !@#$% by the state over a few eBay sales that I wasn't cheating about on my taxes in the first place, well.... That's exactly why this is a problem and ridiculous. It is a shift of the burden of the proof, and creates a ton of headaches. After losing 45%+ of my sale price when I can't show what I originally paid, and then hiring a professional, there's even less reason to sell. Its not much more profitable than burning my duplicates in the fireplace.

+1, this is a nuisance and an unnecessary requirement for small $ transactions for most of us. Hopefully we can vote some people in that can change this.

[BobC]

Originally Posted by puckpaul

+1, this is a nuisance and an unnecessary requirement for small $ transactions for most of us. Hopefully we can vote some people in that can change this.

Good luck with that, because the alternative is to raise current taxes or create new taxes to bring in the money they need/want. It is a given that for politicians it is better to enforce the tax laws already in place, and seek better compliance. Passing new taxes and/or raising existing taxes rates can lead to political suicide as well.

[sb1]

Bob,

I frequently see you refer to a person as being an "investor" for their taxable status. I have not seen this as an option, one is either in the business of buying and selling OR a collector in the eyes of the IRS. I believe some collectors will believe that by calling themselves investors they believe that their gains will be treated as either short or long-term capital gains and not the higher "collectible" rate. I do know that many collectors use the capital gains rate when figuring their taxes and have never had it questioned.

Can you enlighten us on how one would qualify as an investor in the eyes of the IRS and not fall under the collectible tax rate??

[BobC]

Originally Posted by sb1

Bob,

I frequently see you refer to a person as being an "investor" for their taxable status. I have not seen this as an option, one is either in the business of buying and selling OR a collector in the eyes of the IRS. I believe some collectors will believe that by calling themselves investors they believe that their gains will be treated as either short or long-term capital gains and not the higher "collectible" rate. I do know that many collectors use the capital gains rate when figuring their taxes and have never had it questioned.

Can you enlighten us on how one would qualify as an investor in the eyes of the IRS and not fall under the collectible tax rate??

Scott,

Look at all the talk we have nowadays where cards end up being discussed in the Wall Street Journal, investment news shows, and the like. In the past, cards would likely not ever have been considered as investments, but times have recently changed. Though there is no hard and fast rule or measure to definitively say whether your cards are collectibles or investment assets, I don't think the IRS can just ignore anymore that sports cards can in fact be investments.

To show and help prove to an IRS agent that your cards are investment assets, you want to be able to show how you keep track of what you have, how you keep and store things, and if you ever do sell cards, the frequency, volume, and reasons behind such sales, and so on. All of this can be used and combined to help develop and establish a narrative where, if you ever do get questioned by the IRS, you can present what you're doing as an investment activity. In a much more simplistic way of maybe looking at this, an investor is more likely to keep their cards in a bank safe deposit box, or maybe PWCC or Goldin's vaults. A hobby collector is more likely to have their collectible items sitting in a display case, hanging on a wall, or otherwise exhibited in a man cave. You get the drift.

And I believe someone can be more than just one of these types. You can have a dealer, who maintains separate business and inventory records, also have a separate and distinct personal collection he proudly displays in his man cave at home, as well as maybe some '52 Mantles and early Ruth cards he picked up over the years that are sitting in a safe deposit box and are being left to appreciate till sold at some future date. The more records, details, and data you can present to an IRS agent (on the very slim chance you ever did get questioned and audited), the more likely they are to agree with your tax returns and your treatment of the cards you sold.

In the end, an IRS agent could still argue against your claim that your cards are investments, but as long as you don't end up selling them for what could turn out to be a non-deductible capital loss, you pretty much end up with the same tax results regardless of whether you reported them as collectibles or investments. I say this because there isn't a specific statement, determination or claim in the Internal Revenue Code or IRS rulings yet, to my knowledge, that still wouldn't maybe consider the underlying definition of a sports card as a collectible to override whether the card is treated as a collectible or investment for purposes of determining if a gain from its sale is subject to the 28% max collectibles tax rate, as opposed to the max 20% long term capital gains rate on regular investments (ie: stocks and bonds). I'm assuming the IRS will expect the 28% max rate, even if a card is considered as an investment for now. So to me, for now, the main advantage of assuming a card is sold as an investment is the ability to potentially deduct and carry forward any losses generated by its sale. Need more research to be done or info collected.

I hope this helps, and again is maybe a good reason to discuss such things with your personal tax advisors. They may not agree exactly with all my thinking, but they'll know much more of your personal and tax situation, and if there any other issues or considerations for you personally that I certainly am not aware of. Hope this helps.

[Kzoo]

Originally Posted by puckpaul

+1, this is a nuisance and an unnecessary requirement for small $ transactions for most of us. Hopefully we can vote some people in that can change this.

At the current rate, this is very likely later this year.

[Dandor]

Originally Posted by BobC

Ebay is only the platform for these sales, and the new 1099-K reporting threshold isn't being imposed on Ebay, just those third-party payment services like Paypal, Venmo, or Zelle. Only Ebay sales using payment services like these get included in 1099-K reporting, not sales using checks, MOs, or credit cards. It is all about the government having access to your records if they want/need to go checking you out. It wasn't suddenly saying anyone doing $600 or more in casual sales is now considered to be in a viable, ongoing business.

I agree with everything what you said, besides this paragraph. Some great information BTW with so much misinformation out there.

eBay has a mandatory managed payments program now. Nothing is fed through third-party payment services anymore. So, eBay will be sending out 1099-K forms through these new regulations.

[parkplace33]

Lots of talk about this subject.

Might I suggest that if you are worried about paying taxes on selling cards, the easiest thing is to not sell cards?

[Dandor]

Originally Posted by parkplace33

Lots of talk about this subject.

Might I suggest that if you are worried about paying taxes on selling cards, the easiest thing is to not sell cards?

I wish more people would trade! That is what I have been doing for the past six months. I buy or trade, nothing to worry about.

[BobC]

Originally Posted by Dandor

I wish more people would trade! That is what I have been doing for the past six months. I buy or trade, nothing to worry about.

Unfortunately, even if you just trade cards, you're still considered to have engaged in a reportable, taxable transaction per the Internal Revenue Code (IRC) and IRS rules. The IRS just hasn't figured out how to catch people doing and not reporting it yet.

And if you were thinking a trade isn't taxable under the old Like-Kind Exchange rules of IRC Section 1031, those only currently apply to real estate transactions, not cards.

[G1911]

Originally Posted by parkplace33

Lots of talk about this subject.

Might I suggest that if you are worried about paying taxes on selling cards, the easiest thing is to not sell cards?

REMOVED per policy.

[parkplace33]

Originally Posted by G1911

REMOVED per policy.

Sorry, not following. What policy?

[christopher.herman]

I am very grateful for all this tax information from our knowledgeable and experienced board members.

My personal takeaway is that I will not be selling anything online with a paper trail for the calendar year 2022. I will circle back to this thread in early 2023 when y'all got this figured out. I need less headaches and fighting with the IRS over the value of old and brittle card stock is not the hill I want to die on. My collection is a marathon....

My card buying will definitely be affected (and already has) if I'm not able to unload dupes, cards no longer of interest or cards that have appreciated significantly that I am willing to let go.

In the meantime (shameless plug coming), I am currently buying old and brittle W514 and W515-2 strip cards. Links to my needs lists in my signature.

[insidethewrapper]

The only difference I see in 2022 with the new tax law is that prices will increase by non-dealers ( non- businesses ). If you sold a product for $20 and you didn't pay taxes on it before ( you should have), so now raise the price to $ 23 and pay taxes on it and it won't be different from 2021 to 2022.

[BobC]

Originally Posted by Dandor

I agree with everything what you said, besides this paragraph. Some great information BTW with so much misinformation out there.

eBay has a mandatory managed payments program now. Nothing is fed through third-party payment services anymore. So, eBay will be sending out 1099-K forms through these new regulations.

Yes, I know. I already addressed and went into more detail about this back in Post #22 in this thread. I was originally speaking in more general terms about third-party payment platforms, and expanded what I had been saying to include Ebay's managed payment system as well in that later Post#22. Just goes to show how confusing and complicated this can all be.