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#1
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Schedule C is appropriate if you are a dealer. It could be that they intend to poke at that a bit, just to make you prove that your approach to buying and selling meets the usual indicia of acting as a dealer.
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Trying to wrap up my master mays set, with just a few left: 1968 American Oil left side 1971 Bazooka numbered complete panel |
#2
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Thank you, my friend. I need the help. (read as HELP!!!!!!!!!!!!!!!!!!!!!!!!!!!) ---Brian Powell Last edited by brian1961; 03-06-2024 at 12:59 PM. |
#3
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Did you realize significant capital gains from the sale of baseball cards in 2021? If so that might have been the red flag that prompted the audit.
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Not really. I had enough sales to trigger a 1099, but offsetting auction purchases and PSA fees....
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#5
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It wasn't a full blown audit, but I also had the IRS question my schedule C for my baseball card revenue a few years back, and I basically just downloaded my ebay sales and sent it to them, and that was enough to satisfy the IRS in that case.
I don't know about your case, Bobby, but I think in general from what I've read here, is that if year after year, you are always reporting losses on your schedule C for your business, that's going to be a red flag for the IRS and get you audited. I'm not a CPA, so I probably have no clue what I'm talking about, but the IRS probably figures that if your business is always losing money, you would just close up shop and not continue anymore unless you are using it as an illegal tax shelter. Again, this is probably not you, and it just may have been an unlucky draw in this case. |
#6
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#7
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Yep. IRC Section 183(d) provides a safe harbor. If your business has net income for 3 of the last 5 years, then it meets the safe harbor to be a business and not a hobby.
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Trying to wrap up my master mays set, with just a few left: 1968 American Oil left side 1971 Bazooka numbered complete panel |
#8
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If you read the instructions to form 8949, there are some instructions that specifically speak to the sale of collectibles, and how the action gets reported.
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Trying to wrap up my master mays set, with just a few left: 1968 American Oil left side 1971 Bazooka numbered complete panel |
#9
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What kind of sales did you do in 2021
Dollar amount Last edited by notfast; 03-07-2024 at 04:25 AM. |
#10
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Ugh
The pitfalls of collecting and/or investing
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Thanks all Jeff Kuhr https://www.flickr.com/photos/144250058@N05/ Looking for 1920 Heading Home Ruth Cards 1917-20 Felix Mendelssohn Babe Ruth 1921 Frederick Foto Ruth Joe Jackson Cards 1916 Advertising Backs 1910 Old Mills Joe Jackson 1914 Boston Garter Joe Jackson 1915 Cracker Jack Joe Jackson 1911 Pinkerton Joe Jackson Shoeless Joe Jackson Autograph |
#11
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Not a surprise. Lower dollar and middle class tax returns are more likely to be audited than wealthy tax returns because small fry are easier to go after. You don't pick a fight with an 800# gorilla when you can beat up a spider monkey instead.
Your situation is unique and fact-driven, so there is no advice you can get here that will be worthwhile except to hire either an accountant or an attorney with audit defense experience. Sorry, but that's the reality of it. That said, I do have a few casual thoughts on the issues that part-time dealers face in general: If there is a hobby vs. business challenge, did you follow the requirements of your state for doing business? For nearly all states, that would include applying for a resale permit and collecting and remitting sales taxes. If you did that, the odds of being labeled a hobby fall drastically. One other thing to remember when dealing with tax authorities is that testimony is evidence. Just because you do not have a piece of paper does not mean you have no evidence of what you paid for a card. You will be surprised at how well you can recall card deals. I know I was recently when I bumped into a dealer who'd sold me some cards a decade earlier. I remembered exactly which cards I got from him. I can't remember to put away my shoes but the details of buying a 1967 Ken Holtzman signed card a decade earlier, yup. Finally, preparation is key. Get your records in order and gather your thoughts in advance of meeting with the auditor and be ready to respond. Do not think you can outwit or anticipate the issue raised. You can't. You just have to play it where it lays.
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Read my blog; it will make all your dreams come true. https://adamstevenwarshaw.substack.com/ Or not... Last edited by Exhibitman; 03-07-2024 at 10:58 AM. |
#13
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Also, is it a full audit, or are they doing a line-item audit? Usually done through the mail.
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#14
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Sent from my SM-S906U using Tapatalk |
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![]() ![]() Last edited by bnorth; 03-08-2024 at 02:54 PM. |
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But I'm a hobbyist.
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