Crypto in Ahs?

[swarmee]

Originally Posted by Lorewalker

I was not aware any of them were accepting crypto.

Goldin Auctions & Gemini Introduce Crypto to Booming Sports Collectibles Market

[sycks22]

Forget crypto, how about all AH's accepting paypal, credit cards or zelle. Welcome to the 21st century where nobody uses checks anymore. Over 50% of AH's are great, but a lot still need to start accepting different forms of payment.

[Aquarian Sports Cards]

Originally Posted by sycks22

Forget crypto, how about all AH's accepting paypal, credit cards or zelle. Welcome to the 21st century where nobody uses checks anymore. Over 50% of AH's are great, but a lot still need to start accepting different forms of payment.

The reason PP, CC and Zelle aren't accepted isn't technology based it's Chargeback based.

[prestigecollectibles]

I accept Zelle and so does REA and Lelands. You can't do a chargeback.

Originally Posted by Aquarian Sports Cards

The reason PP, CC and Zelle aren't accepted isn't technology based it's Chargeback based.

[BobC]

Originally Posted by prestigecollectibles

I accept Zelle and so does REA and Lelands. You can't do a chargeback.

Robert,

So what is your outfit going to do when you get the 1099-K from Zelle? Do they break down the reported total Zelle sales and end up sending out 1099s reporting respective sales to each consignor (and the IRS) for the consignor's actual share of auction proceeds they receive? Or does your outfit not get that much in the way of Zelle payments (yet) so the 1099 sales amount reported to your company by Zelle ends up being less than the actual amount of commissions/fees they actually earned for the year, so the just report their actual commission/fees income and as long as it ends up being greater than what's on Zelle's 1099-K to them for that same year, they don't do or report anything else to any consignors or the IRS?

[prestigecollectibles]

I don't get that many sales with Zelle, but according to their website they don't issue a 1099 or report anything. It is like sending a wire transfer, but with some limitations and no fees.

https://www.zellepay.com/faq/does-ze...than%20%24600.

Does Zelle® report how much money I receive to the IRS?

Zelle® does not report transactions made on the Zelle Network® to the IRS. The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle Network®.

Originally Posted by BobC

Robert,

So what is your outfit going to do when you get the 1099-K from Zelle? Do they break down the reported total Zelle sales and end up sending out 1099s reporting respective sales to each consignor (and the IRS) for the consignor's actual share of auction proceeds they receive? Or does your outfit not get that much in the way of Zelle payments (yet) so the 1099 sales amount reported to your company by Zelle ends up being less than the actual amount of commissions/fees they actually earned for the year, so the just report their actual commission/fees income and as long as it ends up being greater than what's on Zelle's 1099-K to them for that same year, they don't do or report anything else to any consignors or the IRS?

[oldjudge]

If an auction house takes bitcoin and such I assume they convert it as soon as they can. They are in the business of providing a platform for sales, not in speculating in cryptocurrency.

[BobC]

Originally Posted by prestigecollectibles

I don't get that many sales with Zelle, but according to their website they don't issue a 1099 or report anything. It is like sending a wire transfer, but with some limitations and no fees.

https://www.zellepay.com/faq/does-ze...than%20%24600.

Does Zelle® report how much money I receive to the IRS?

Zelle® does not report transactions made on the Zelle Network® to the IRS. The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle Network®.

Now that is interesting to hear and know. I have never personally worked with or used Zelle, but was under the impression it operated similarly to Paypal, Venmo, and other similar third-party Payment Settlement Entities (PSEs). And that therefore it is also subject to these 1099-K reporting requirements. But that is only for reporting payments for goods and services using such third-party payment network services. Is this specific Zelle Network(R) only for personal and not any type of business use then, and thus exempt from any 1099-K reporting requirements? I'll have to look into that.

And apparently Zelle did catch some loophole so its payments are exempt from 1099-K reporting. Goood news to know.

[BobC]

Originally Posted by sycks22

Forget crypto, how about all AH's accepting paypal, credit cards or zelle. Welcome to the 21st century where nobody uses checks anymore. Over 50% of AH's are great, but a lot still need to start accepting different forms of payment.

You are aware of the new 1099-K reporting threshold starting in 2022 is now $600, right? That reporting requirement is on third-party payment platforms like Paypal, Zelle, Venmo, etc. So if AHs start accepting such payment services, they are going to get hit with 1099s going to them. And since the bulk of that money they will be receiving 1099s for actually belongs to their consignors, to properly get that reported sales income off their taxes returns they're going to have to start giving 1099s to their consignors. That will be a big hit, won't it? Can you imagine being the first AH to start reporting their consignor's sales to the IRS, and what that could do to their future consignments? Especially if other AHs don't follow suit. They won't have to worry about their customers complaining that they can't easily pay with Paypal, Zelle, Venmo, and so on. Their customers will end up bidding with other AHs because the consignments will start going elsewhere.

[Aquarian Sports Cards]

Originally Posted by BobC

You are aware of the new 1099-K reporting threshold starting in 2022 is now $600, right? That reporting requirement is on third-party payment platforms like Paypal, Zelle, Venmo, etc. So if AHs start accepting such payment services, they are going to get hit with 1099s going to them. And since the bulk of that money they will be receiving 1099s for actually belongs to their consignors, to properly get that reported sales income off their taxes returns they're going to have to start giving 1099s to their consignors. That will be a big hit, won't it? Can you imagine being the first AH to start reporting their consignor's sales to the IRS, and what that could do to their future consignments? Especially if other AHs don't follow suit. They won't have to worry about their customers complaining that they can't easily pay with Paypal, Zelle, Venmo, and so on. Their customers will end up bidding with other AHs because the consignments will start going elsewhere.

This seems like a misunderstanding of the statutes, at least according to the PAA. Me taking Paypal has nothing to do with my consignors. If I paid THEM in paypal that would be a completely different issue. The IRS has assured the Pennsylvania Auctioneers Association that as long as an auctioneer is not a payment processor (and no writing checks to a consignor does not make one a payment processor) they are not covered by the new guidelines. We have been told that basically auction status has not changed. That being said, consignors, pay your taxes!!!

[Lorewalker]

Originally Posted by Aquarian Sports Cards

This seems like a misunderstanding of the statutes, at least according to the PAA. Me taking Paypal has nothing to do with my consignors. If I paid THEM in paypal that would be a completely different issue. The IRS has assured the Pennsylvania Auctioneers Association that as long as an auctioneer is not a payment processor (and no writing checks to a consignor does not make one a payment processor) they are not covered by the new guidelines. We have been told that basically auction status has not changed. That being said, consignors, pay your taxes!!!

Exactly, Scott. If you report your sales then who cares if ya get a 1099 or not.

It is a bit annoying but I know a few guys who are "collectors" who sell on eBay and do deals outside of the site and are taking in hundreds of grand a year with gift payments, which are not reported. They do not report the sales or pay the resulting income tax.

[BobC]

Originally Posted by Aquarian Sports Cards

This seems like a misunderstanding of the statutes, at least according to the PAA. Me taking Paypal has nothing to do with my consignors. If I paid THEM in paypal that would be a completely different issue. The IRS has assured the Pennsylvania Auctioneers Association that as long as an auctioneer is not a payment processor (and no writing checks to a consignor does not make one a payment processor) they are not covered by the new guidelines. We have been told that basically auction status has not changed. That being said, consignors, pay your taxes!!!

Scott,

If you have everyone paying you via Paypal, goods and services, for say a total of $5M for the year, and your company earned and is entitled to a 20% sales commission, that means you actually earned $1M for the year. But the 1099-K you get from Paypal is going to say you actually earned $5M for the year, so the IRS is going to be looking for at least that $5M amount to be reported as gross revenue on your company's tax return. So what do you call the $4M reduction you end up reporting on the company's tax return? It technically isn't a tax deductible expense as it was never truly your company's income to begin with. And what do you tell an IRS agent, if one comes knocking on your door, if they come asking you to prove the $4M you claimed as a deductible expense? You can't just keep consignor's names and info a secret from the IRS.

I already understand how you are technically not required as an auction house to give 1099s to your consignors since your AH didn't pay the consignors for any services. You are just acting as an agent on behalf of your consignors, and collecting and remitting their auction winnings to them, net of your fees/commissions. But if acting as an agent for your consignors means Paypal reports all the 1099-K payments to your auction company, and your auction company then redistributes those payments among your consignors, that means your auction company is acting as a nominee/middleman to all your consignors, which then technically makes your auction company the Payment Settlement Entity (PSE) for your consignors. And PSEs are exactly what Paypal, Zelle, Venmo, and the like are. That basically means your auction company should be taking whatever may be reported to you on a 1099-K form from say Paypal, and then turn around and file nominee 1099-K forms to break down and report the Paypal proceeds that ended up being paid to each consignor every year. That 1099-K nominee form reporting would then act as the documentation and backup support for the $4M deduction I spoke about on your company's tax return.

Ebay works with, or through, Paypal to see that every applicable Seller on Ebay will get the appropriate 1099-K form after the end of the year. Why would something like this apply to Ebay, but technically not to you and your auction house? Accepting payments through these third-party PSEs (Paypal, Zelle, Venmo, etc.) suddenly puts your auction house into a nominee reporting situation when you act as a middleman for your consignors, and redistribute PSE payments to them. This is totally different from requiring AHs to report ALL consignor sales through the AH, it only applies to reporting sales using third-party PSEs to send payments through.

Not sure what other AHs that do accept Paypal, Venmo, Zelle, etc. are doing or going to be doing about this going forward. I can see the tax authorities using the recently amended 1099-K reporting threshold changes to start going after AHs though. Prior to this year (2022) a consignor technically would have had to consign and have sales in excess of $20K AND have sold 200 or more items through an AH, which then got paid via Paypal or some other third-party PSE, before you'd have to send them a 1099-K form. But this year, and going forward, all a consignor needs is one sale of $600 or more, and they technically should be getting a 1099-K from someone. Chances are extremely few, if any, consignors were hitting that 200 transaction threshold in prior years, so no one was getting too concerned about AHs and 1099-K reporting for consignors. That has dramatically changed with the lowered $600 sales reporting threshold, and no minimum number of required sales transactions.

Might be something to really think about and talk over with your own tax accountant before jumping into accepting third-party PSE services for getting paid.

[Aquarian Sports Cards]

Originally Posted by BobC

Scott,

If you have everyone paying you via Paypal, goods and services, for say a total of $5M for the year, and your company earned and is entitled to a 20% sales commission, that means you actually earned $1M for the year. But the 1099-K you get from Paypal is going to say you actually earned $5M for the year, so the IRS is going to be looking for at least that $5M amount to be reported as gross revenue on your company's tax return. So what do you call the $4M reduction you end up reporting on the company's tax return? It technically isn't a tax deductible expense as it was never truly your company's income to begin with. And what do you tell an IRS agent, if one comes knocking on your door, if they come asking you to prove the $4M you claimed as a deductible expense? You can't just keep consignor's names and info a secret from the IRS.

I already understand how you are technically not required as an auction house to give 1099s to your consignors since your AH didn't pay the consignors for any services. You are just acting as an agent on behalf of your consignors, and collecting and remitting their auction winnings to them, net of your fees/commissions. But if acting as an agent for your consignors means Paypal reports all the 1099-K payments to your auction company, and your auction company then redistributes those payments among your consignors, that means your auction company is acting as a nominee/middleman to all your consignors, which then technically makes your auction company the Payment Settlement Entity (PSE) for your consignors. And PSEs are exactly what Paypal, Zelle, Venmo, and the like are. That basically means your auction company should be taking whatever may be reported to you on a 1099-K form from say Paypal, and then turn around and file nominee 1099-K forms to break down and report the Paypal proceeds that ended up being paid to each consignor every year. That 1099-K nominee form reporting would then act as the documentation and backup support for the $4M deduction I spoke about on your company's tax return.

Ebay works with, or through, Paypal to see that every applicable Seller on Ebay will get the appropriate 1099-K form after the end of the year. Why would something like this apply to Ebay, but technically not to you and your auction house? Accepting payments through these third-party PSEs (Paypal, Zelle, Venmo, etc.) suddenly puts your auction house into a nominee reporting situation when you act as a middleman for your consignors, and redistribute PSE payments to them. This is totally different from requiring AHs to report ALL consignor sales through the AH, it only applies to reporting sales using third-party PSEs to send payments through.

Not sure what other AHs that do accept Paypal, Venmo, Zelle, etc. are doing or going to be doing about this going forward. I can see the tax authorities using the recently amended 1099-K reporting threshold changes to start going after AHs though. Prior to this year (2022) a consignor technically would have had to consign and have sales in excess of $20K AND have sold 200 or more items through an AH, which then got paid via Paypal or some other third-party PSE, before you'd have to send them a 1099-K form. But this year, and going forward, all a consignor needs is one sale of $600 or more, and they technically should be getting a 1099-K from someone. Chances are extremely few, if any, consignors were hitting that 200 transaction threshold in prior years, so no one was getting too concerned about AHs and 1099-K reporting for consignors. That has dramatically changed with the lowered $600 sales reporting threshold, and no minimum number of required sales transactions.

Might be something to really think about and talk over with your own tax accountant before jumping into accepting third-party PSE services for getting paid.

I don't want to get into it here, but what you're saying and what my accountant AND my professional association say differ very greatly from what you are saying.

[BobC]

Originally Posted by Aquarian Sports Cards

I don't want to get into it here, but what you're saying and what my accountant AND my professional association say differ very greatly from what you are saying.

No problem or issue, just pointing some things out that can be found on and in IRS sites, forms, and instructions. I just think there are potentially two very distinct and separate reporting issues in play regarding AHs and 1099 reporting. And I agree that one clearly does not require AHs to report respective sales by consignors through them on 1099 forms, just as your accountant and professional association have said.

The other potential issue though is a bit more abstract and not so clear cut as it does not involve the 1099 reporting of ALL auction house sales by a consignor. It only involves the 1099 reporting of AH sales that were paid for using a very distinct and defined type of third-party payment system, like Paypal and Venmo (but not Zelle); or possibly credit/debit cards, or the like. And the concept of nominee 1099 reporting by middlemen is a long known and established concept and practice that the IRS can look to in verifying deductions by individuals/businesses on their tax returns, and for which non-compliant individuals/businesses may be subject to fines and penalties for, or potentially even the loss of deductibility for such items.

Look at it another way. You are set up at the National, and have an account and one of those portable credit card machines so you can remotely accept credit card payments. Meanwhile, your good buddy and long-time friend is set up one aisle away, and comes running over to you to ask a huge favor. He's got a potential customer looking at a high five-figure purchase, but he can't take credit cards. So he begs you to let the buyer run the purchase through your CC machine and system, which you agree to, and forward him the money after the funds clear to you (net of the service fee for handling the transaction of course). End of the year comes and whatever CC system/plan you use sends you a 1099 reporting your gross sales for the year, including the sale you passed through for your buddy at the National. You are technically supposed to issue and send your buddy a nominee 1099 then to report the sale that was actually his, so that sales revenue appropriately ends up on his tax return, and you can deduct it from the sales revenue on your own tax return. Failure to do so, IF EVER CAUGHT BY THE IRS, could result in fines/penalties to you for not properly filing the appropriate information reporting documents, or maybe worst case scenario, you get stuck paying income tax on your friend's actual sale. Not likely to happen, but also not impossible that it couldn't. Same overall concept when an AH accepts Paypal goods and services payments on behalf of their consignors.

The IRS clearly does not catch a vast amount of errors, inconsistencies, and outright tax evasion and fraud on probably millions of tax returns filed with them every year. But with ever increasing uses of technology, and more and more stringent requirements and reporting thresholds, they are constantly getting better at catching this stuff. This newly lowered $600 reporting threshold, for 1099-K reporting, starting this year, will give them even more tax data to analyze and look at now. And it will also likely resort in many individuals and businesses that were previously not on the IRS' radar screen to suddenly start showing up. As usual, I'm merely passing along tax information that may be relevant to people and businesses involved in certain aspects, or in different sectors, of our hobby/industry. I do not judge others for how they report (or don't report) things on their tax returns, and leave it up to them to decide for themselves what they ultimately want/decide to do. I hope you, and maybe other AH personnel and owners on here, may find something I've shared helpful in the long run.

[Lorewalker]

Originally Posted by swarmee

Goldin Auctions & Gemini Introduce Crypto to Booming Sports Collectibles Market

Thanks. Stopped looking at Goldin once they launched the new site.

[brianp-beme]

Try dislodging Crypto from your AH...a proctologist's nightmare!

Brian (a mind is a terrible thing to waste)