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

[Dandor]

Originally Posted by Johnny630

Any electronic payment whether friends and family or goods and services has to be reported as income if it was a sale of a card......it's never changed. I always report friends and family transactions through paypal that were card related. Those funds get directly deposit the funds into my checking account. Why would I not report this ?? Am the dummy who shouldn't been reporting this?

Of course, this is what you are supposed to do. How did you do this though? Did you file a Schedule D or Schedule C with the IRS? If you did this as a "hobby" you probably did it wrong. There are absolutely no deductions for a hobby, even though people take them. If you bought a card for $500 and sold it for $400, you would need to pay taxes on the $400 even though you sold it at a loss. For people that don't believe me, just wait until 2023 and you get a 1099-K form. Good luck trying make any deductions with the hobby form.

[Johnny630]

Originally Posted by Dandor

Of course, this is what you are supposed to do. How did you do this though? Did you file a Schedule D or Schedule C with the IRS? If you did this as a "hobby" you probably did it wrong. There are absolutely no deductions for a hobby, even though people take them. If you bought a card for $500 and sold it for $400, you would need to pay taxes on the $400 even though you sold it at a loss. For people that don't believe me, just wait until 2023 and you get a 1099-K form. Good luck trying make any deductions with the hobby form.

I hire a tax professional. It's worth my piece of mind to hire one and pay him accordingly.

[Dandor]

Originally Posted by Johnny630

I hire a tax professional. I just pay I don't care, it's worth my piece of mind to hire one and pay him accordingly.

I know many "tax professionals" that tell people no 1099-K form, don't worry about it. Just because you hire a tax professional, it doesn't stop an audit from happening. From my experience there is a chance that your tax professional just swept this income under the rug and it is nowhere to be found in a Schedule D or Schedule C.

[Johnny630]

Originally Posted by Dandor

I know many "tax professionals" that tell people no 1099-K form, don't worry about it. Just because you hire a tax professional, it doesn't stop an audit from happening. From my experience there is a chance that your tax professional just swept this income under the rug and it is nowhere to be found in a Schedule D or Schedule C.

It didn't get swept under a rug, it's filed as a business.

[Dandor]

Originally Posted by Johnny630

It didn't get swept under a rug, it's filed as a business.

Schedule C. This is a red flag for the IRS when people use this and declare losses in consecutive years. My advice to people using a Schedule C for card collecting is to always have some type of profit each year, even if you can take more deductions at a loss.

IMO there needs to be a straightforward way to deal with this without a collector needing to be a business or treating cards as a stock with a Schedule D. They need to rework the hobby tax deduction rules and allow card collecting to fall under this umbrella.

Many people will yell and scream that if you sell something online that you should always declare this as income on taxes. Those same people will sell cards at a card show for cash and not declare it as income. They will also purchase items without paying sales tax. The fact is the IRS has made participating in a hobby as a complete nightmare.

[BobC]

Originally Posted by Dandor

Schedule C. This is a red flag for the IRS when people use this and declare losses in consecutive years. My advice to people using a Schedule C for card collecting is to always have some type of profit each year, even if you can take more deductions at a loss.

IMO there needs to be a straightforward way to deal with this without a collector needing to be a business or treating cards as a stock with a Schedule D. They need to rework the hobby tax deduction rules and allow card collecting to fall under this umbrella.

Many people will yell and scream that if you sell something online that you should always declare this as income on taxes. Those same people will sell cards at a card show for cash and not declare it as income. They will also purchase items without paying sales tax. The fact is the IRS has made participating in a hobby as a complete nightmare.

What you are referring to is commonly known as the "Hobby Loss Rule". If someone filing as a Schedule C business on their tax return does not report a profit from the business in at least 3 years out of any 5 consecutive year period, the IRS can come in and question if you are truly running a business or just trying to get a tax deduct for your hobby. If you fall under this, the burden of proof is now on the taxpayer to prove they are in a legit, for profit business. Failure to do so will result in net losses from that supposed business no longer being tax deductible.

As for some of the other points you mentioned.....no comment, you are entitled to your opinions. But the thing is, this "hobby" has grown way beyond what a bunch of simple collectors would normally do, and has cards worth hundreds of thousands, if not millions of dollars, coming out everywhere it seems. As an old-fashioned collector myself, I'm not necessarily happy about it, but just have to accept that our hobby is a big business now. And the government and the IRS have no choice but to treat all the people and enterprises involved in it, as such.

Interesting FYI point maybe. I'd always heard the "Hobby Loss Rule". originally came about from the IRS going after horse farms, where the rich owners never showed any profits and just kept generating big tax loss write-offs year after year.

[BobC]

Originally Posted by Dandor

I know many "tax professionals" that tell people no 1099-K form, don't worry about it. Just because you hire a tax professional, it doesn't stop an audit from happening. From my experience there is a chance that your tax professional just swept this income under the rug and it is nowhere to be found in a Schedule D or Schedule C.

If they do that (ignore and sweep a 1099-K form you did receive, under the rug) without discussing it with you and/or explaining why, you may need to start looking for a new tax professional.

On the other hand, if someone didn't get a 1099-K form, I'd need to know more info before criticizing a tax profession for telling them not to worry about it. For example, what if the tax professional was told by the taxpayer that they really didn't make any money on the cards they sold, or that they lost money. If that is the case, adding the info onto the return likely isn't going to result in any more tax due. But not putting it into the return could save them some tax prep fees. And since the preparer was told there was no 1099-K received, the government probably didn't get one either, and therefore wouldn't be be looking for it on the return. I can see a tax professional telling someone not to worry about not getting a 1099-K form in that case.

[BobC]

Originally Posted by Dandor

Of course, this is what you are supposed to do. How did you do this though? Did you file a Schedule D or Schedule C with the IRS? If you did this as a "hobby" you probably did it wrong. There are absolutely no deductions for a hobby, even though people take them. If you bought a card for $500 and sold it for $400, you would need to pay taxes on the $400 even though you sold it at a loss. For people that don't believe me, just wait until 2023 and you get a 1099-K form. Good luck trying make any deductions with the hobby form.

I don't even know where to start on this one, as there is much wrong, and I'm tired of typing and missing out on some Call of Duty MWII. Go back and read through my other posts in this thread, and/or do a search for other posts of mine in different threads talking about taxes and implications for people in our hobby. There are many, and they are often detailed and very long. But they are pretty much accurate and informative, at least until they change the laws again, which they are constantly doing.