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

[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.

[conor912]

My guess is that a lot of sellers have traditionally operated in the 15-30% overall profit margins. If a large chunk of that now goes to Uncle Sam, it’s hard to see how sellers don’t bail in droves.

[Yoda]

With the IRS in seeming disarray and brutally short-staffed, I wonder how much attention will be paid to capital gains on the sale of baseball cards. I have to believe the IRS with be looking hard at Covid relief funds fraud and where that money went. Who knows.

[Dandor]

I used to sell items like old cell phones and other items I sold at a loss on eBay. Like a garage sale. I am not dealing with eBay anymore with the new rules. Proving I paid $200 for a $50 cell phone sale is impossible and with a 1099-k form the effort of dealing with taxes is not worth my time. Selling a few thousand dollars of items at a loss shouldn't involve me starting a business or calling the IRS and saying everything is itemized on a schedule D.

[bnorth]

You guys are looking at this all wrong. This is a government program to get more business for those poor underpaid tax professionals. Just wait till you don't pay a tax professional a few thousand for that $125 of profit you made selling $1000 worth of old no longer wanted junk on eBay and get audited.

It is a win win for everyone.

[Dandor]

Originally Posted by bnorth

You guys are looking at this all wrong. This is a government program to get more business for those poor underpaid tax professionals. Just wait till you don't pay a tax professional a few thousand for that $125 of profit you made selling $1000 worth of old no longer wanted junk on eBay and get audited.

It is a win win for everyone.

No one will get audited for this. The IRS doesn't care about a few thousand dollars. What will happen is people will ignore the 1099-K and the IRS will just send out a bill for what you owe on taxes on the 1099-K without deductions considered. You can then amend your taxes, but that will be an absolute nightmare. This will be an automated process, especially with the insane amount of 1099-K forms from eBay, PayPal, Etsy, etc...

Now the people who should worry are the ones who skirted taxes who fell under the 200 transaction limits! It is just not $20,000 in sales, it is $20,000 AND 200 transactions! You could have sold $750,000 in cards on eBay and not have a 1099-K form. With this information now, the IRS will look at these big individual sellers that receive 1099-K forms in 2023 and could audit them. This could lead to some people facing big legal issues.

I can't wait until 2023! The 1099-K forms will be entertainment to me!

[BobC]

Originally Posted by bnorth

You guys are looking at this all wrong. This is a government program to get more business for those poor underpaid tax professionals. Just wait till you don't pay a tax professional a few thousand for that $125 of profit you made selling $1000 worth of old no longer wanted junk on eBay and get audited.

It is a win win for everyone.

Actually no. Back during the start of Reagan's second term in office they proposed a major tax bill called the Tax Reform Act of 1986. The first time Reagan appeared on TV to talk about it they had a copy of the proposed new law sitting on a small table next the podium, and the damn thing was well over 1,000 pages thick. It was ultimately passed into law as the Tax Reform Act of 1986. They actually had to create and pass this new law to try and correct and make up for some earlier stupid tax legislation that had gotten passed back in '80-'81, not long after Reagan took office. And typical government way of doing things, they went way too far in the other direction to try and fix their earlier screw-ups, and ended up making things possibly more convoluted and worse than before, and literally ravaged the commercial real estate market nationwide for the next four years or so, and directly led to the downfall of numerous savings and loans businesses and other lendors across the country.

After all that, friends and colleagues I knew in the industry, including myself, all started referring to the newly passed law as the All Employment Act for Accountants and Attorneys of 1986. Now that was a government program that created way more work than anyone ever expected! This new crap will be a pain, but not like that was back in the late '80s.

[JustinD]

Originally Posted by Dandor

I used to sell items like old cell phones and other items I sold at a loss on eBay. Like a garage sale. I am not dealing with eBay anymore with the new rules. Proving I paid $200 for a $50 cell phone sale is impossible and with a 1099-k form the effort of dealing with taxes is not worth my time. Selling a few thousand dollars of items at a loss shouldn't involve me starting a business or calling the IRS and saying everything is itemized on a schedule D.

Bingo, Whenever one of these post goes up the antennas start wiggling on all the virtue signalers all at once and they start answering from a tiny perspective of card dealer and refusing to to think of the collector that has 35-40+ years of collection and no records because it was joy, not business or investment.

[Dandor]

Originally Posted by JustinD

Bingo, Whenever one of these post goes up the antennas start wiggling on all the virtue signalers all at once and they start answering from a tiny perspective of card dealer and refusing to to think of the collector that has 35-40+ years of collection and no records because it was joy, not business or investment.

This really just hurts individual states. Tax is collected on these sales in most states, eBay is taxed for profit, and most people that sell spend that money and pay sales tax again on another item. I get that there are people that skirted the rules, but this is just ridiculous at $600.

[BobC]

Originally Posted by Yoda

With the IRS in seeming disarray and brutally short-staffed, I wonder how much attention will be paid to capital gains on the sale of baseball cards. I have to believe the IRS with be looking hard at Covid relief funds fraud and where that money went. Who knows.

John, you're probably more on point with this than you may think. The trick is to not ignore these 1099-K forms people are going to get, and make sure they are properly being reported on their tax returns so that they match up with IRS info, and don't run afoul and get bounced by the IRS' automated system. It likely won't be triggering tons of audits. And for long time collectors who don't have complete and perfect cost basis data, I suggest using your best and most reasonable estimates for costs and basis, and just be sure to start keeping better records going forward.

Now as for specifically looking hardest for covid relief fraud, I think their biggest problem and concern currently is exactly the same as it is for PSA, trying to catch up on their backlog of work. LOL

[FrankWakefield]

My recollection of the 1986 legislation was that it was called The Tax Reform Act of 1986. I think the simplification act was when President Clinton was in office. BobC, does that sound right, or were there multiple 1986 acts, or what??

[BobC]

Originally Posted by FrankWakefield

My recollection of the 1986 legislation was that it was called The Tax Reform Act of 1986. I think the simplification act was when President Clinton was in office. BobC, does that sound right, or were there multiple 1986 acts, or what??

Ha ha, you might be right Frank, it's getting late and I'm getting old. My point was still valid regarding all the work it created and what we were calling it. I may have to go back and amend my post. Thanks.