New Tax Law Hidden In COVID Relief Bill Will Crush eBay/Paypal Sellers

johnsj12

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I was just skimming this quickly... so it looks like this change to $600 starts in 2022? So does that mean any sales prior to 1/1/2022 won’t qualify, or are sales taking place now (say Jan 2021 through today) qualifying against that $600 for next year’s filing?
Sales of collectibles technically already quality as taxable on the gains but starting in 2022 they will be accompanied by a 1099 once over $600. So the IRS will now be aware of it.
 

DrStrange

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There is a fair amount of misunderstanding in this thread and a chunk of bad advice.

1. If you get a 1099 or other information return, report it on your tax return. Ignoring the 1099 attracts attention and will normally result in action by the taxing authorities.

2. For most of us, this is a trivial burden. Sold a set of chips for $900. Bought those chips for $700. So you report $900 of income and match that to a $700 cost basis. Net $200 in taxable income. Don't remember what you paid or exactly when you bought the chips? Just make a reasonable estimate. Remember that collectables are not eligible for special capital gains treatment. They are ordinary income.

3. Don't create some silly company or partnership like several people have suggested. Report your misc 1099 on your personal tax return unless you really are "in the business of" what ever created the income. Entities have on-going costs. They have their own tax return compliance rules. You might even be needing to send out your own 1099 forms as a company / partnership where as individuals mostly do not need to do these things. You can easily pay a fortune to deal with a trivial 1099 information return.

4. Don't make silly deductions on your taxes. Sure, you are pretty likely to avoid detection. But if somehow the tax man comes calling, the consequences can be severe.

5. 10X this advice if you are in non-compliance vis-a-vis a significant amount of money involved with crypto securities. The Bitcoin crap has a high risk of getting you into an audit, with some risk the audit will turn criminal. You don't want to add another layer of tax "mistakes" to the problems of non-reported income from crypto sources.

This 1099 reporting thing isn't new for traditional business activity. Businesses have had a $600 1099 reporting threshold for a really long time. Paypal, ebay and similar folks got a sweet deal and allowed many, many people to evade paying their owed taxes. This is going to come to an end for almost everyone.

These new tax reporting requirements will have a learning curve. Yes, some folks will have to pay a little bit in taxes. People managing group buys will need to be extra careful to report the transactions - even if you just breakeven, the income and expenses need to be reported.

DrStrange
 

FDLmold

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2. For most of us, this is a trivial burden. Sold a set of chips for $900. Bought those chips for $700. So you report $900 of income and match that to a $700 cost basis. Net $200 in taxable income. Don't remember what you paid or exactly when you bought the chips? Just make a reasonable estimate. Remember that collectables are not eligible for special capital gains treatment. They are ordinary income.
So let's say I get a 1099 for $1500, and the items cost $1600. The IRS is expecting me to report 1500 income, but instead I'm subtracting 100 from it?

Unless there is a business entity set up, I'm not aware of the "cost basis deduction for sold things" space on my 1040. There are plenty of places for me to report the 1500 from the 1099 (Wages perhaps, or Schedule 1), and nowhere to deduct the cost basis. This is not a capital gain or loss, is it?

Before I can agree with you that this is a trivial burden, I need more information. I'd love for somebody to take a 2020 tax return, and tell me exactly how if I got a 1099 for $1500 sales of poker chips, and I have documented $1600 acquisition costs, how do I record that information.
 

ReallyGoodUsername

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So let's say I get a 1099 for $1500, and the items cost $1600. The IRS is expecting me to report 1500 income, but instead I'm subtracting 100 from it?

Unless there is a business entity set up, I'm not aware of the "cost basis deduction for sold things" space on my 1040. There are plenty of places for me to report the 1500 from the 1099 (Wages perhaps, or Schedule 1), and nowhere to deduct the cost basis. This is not a capital gain or loss, is it?

Before I can agree with you that this is a trivial burden, I need more information. I'd love for somebody to take a 2020 tax return, and tell me exactly how if I got a 1099 for $1500 sales of poker chips, and I have documented $1600 acquisition costs, how do I record that information.
Schedule C
 

FDLmold

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"Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity.

Also, use Schedule C to report (a) wages and expenses you had as a statutory employee, (b) income and deductions of certain qualified joint ventures, and (c) certain amounts shown on a Form 1099, such as Form 1099-MISC, Form 1099-NEC, and Form 1099-K."


So we classify selling poker chips as part (c) from the last paragraph? OK I'll buy it. For now. I hope the IRS is prepared to get about 1,000,000 more Schedule C returns for the 2022 tax year. The Democrats will get lucky, too, because people will be getting these surprise 1099s and doing their taxes AFTER the midterm elections. People will be going to their tax preparers and saying a whole lot of "what the fuck?"s when they can't produce documentation of what things cost, yet still have to put the 1099-MISC income from paypal or ebay on their return.


Edited for incorrectness.
 
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DrStrange

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< sigh > Not schedule C. Unless you are "in the business" - say someone like the chip room, or someone similar. If you aren't a vendor on PCF you probably are not in the business.

For most of us, poker chips are collectables. You report the sale of your poker chips on schedule D. Long term gains if held more than a year, short term gains for something held less than a year.

Collectables get screwed in the tax code. You owe taxes on gains. You can't offset gains with collectable losses. < i.e. heads you lose, tails you get nothing > Worse, collectables get taxed at 28% if owned more than a year no matter what tax bracket you are in.

Yes, it sucks. But in practice, hardly worth getting mad about. For most of us the difference is unlikely to exceed a hundred bucks in extra taxes in any given year. Unless you are liquidating all you chips at once, and you have a closet full.

Oh, if you are dead, the pent up taxes vanish. Let your estate sell the chips.

Or . . . . you could just give the chips away. Who knows? I might someday take that advice. -=- DrStrange

PS If we are looking at big bucks, get the advice of a tax accountant. If not big bucks, ask google how to pay taxes on collectables.
 

FDLmold

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Aaaaaaaaaaand there is the answer. Schedule D.

"Line 18

If you checked “Yes” on line 17, complete the 28% Rate Gain Worksheet in these instructions if either of the follow-ing applies for 2020.

blah blah blah, or

You reported in Part II of Form 8949 a collectibles gain or (loss). A collectibles gain or (loss) is any long-term gain or deductible long-term loss from the sale or exchange of a collectible that is a capital asset. Collectibles include works of art, rugs, antiques, metals (such as gold, silver, and platinum bullion), gems, stamps, coins, alcoholic beverages, and certain other tangible property."
 

johnnycnote

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dog-taxes-meme.jpg
 

Schmendr1ck

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America's tax code is broke.
FTFY.

Our tax code has needed a serious overhaul for decades. It's literally impossible for any single human being to know or understand all of it, there are special cases and loopholes everywhere, and the people and organizations who should be paying the most are the ones who benefit from the chaos.

Unfortunately, that overhaul is unlikely to ever happen.
 

philhut

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FTFY.

Our tax code has needed a serious overhaul for decades. It's literally impossible for any single human being to know or understand all of it, there are special cases and loopholes everywhere, and the people and organizations who should be paying the most are the ones who benefit from the chaos.

Unfortunately, that overhaul is unlikely to ever happen.
Not only are some of the organizations benefitting from certain tax laws you may not even be aware about....many of these organizations have even influenced or written the legislation that now exists in many nations. A massive Delete all and flat percentage tax would be so much more efficient....everyone could likely pay significantly less while maintaining revenue by avoiding govt overspending on bureaucracy. By offering deductions and government favoritism to groups, persons or organizations for hundreds of years longer lived nations have created a burdensome overwhelming tax system that really could do with a reboot. In Canada many people pay more than half of their incomes in taxes/fees to one level of government or another. I have come to accept however that until the nations citizens toss the puppets that are lining their pockets off of the public dime while consolidating power instead of honest responsible governance there will be no brave leader to challenge the tax system and force a review, simplification and re-write.
 

johnnycnote

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So then I guess you don't need public roads, public schools, armed forces to protect the country, government agencies to make sure that the drugs you buy are effective and the food you buy isn't poisonous, infrastructure to deliver water and electricity to your home, unemployment and health insurance to cover your when you're between jobs, etc.

Our government provides a lot of services to all of us, and they've gotta pay for it somehow.

Agree, but the point is waste. We could prob do more with less once we strip the waste and mismanagement...

tax meme.jpeg
 

Schmendr1ck

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Agree, but the point is waste. We could prob do more with less once we strip the waste and mismanagement...

View attachment 714735
I'll agree that there is wasteful spending in the government for sure. I've been a government contractor for many years, and I've seen it firsthand. That said, I was responding to a comment that said "taxation is theft," which is patently ridiculous. Taxation pays for a lot of stuff that we need, much of which is just not suitable to be provided by private business. So the answer to wasteful spending in the government is not "eliminate taxes" - that's silly.

Also, there's a great article here that addresses the myth of the $600 hammer from back in the 90s, and the article your meme pointed to is likely a similar situation: https://www.govexec.com/federal-news/1998/12/the-myth-of-the-600-hammer/5271/
 

johnnycnote

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I'll agree that there is wasteful spending in the government for sure. I've been a government contractor for many years, and I've seen it firsthand. That said, I was responding to a comment that said "taxation is theft," which is patently ridiculous. Taxation pays for a lot of stuff that we need, much of which is just not suitable to be provided by private business. So the answer to wasteful spending in the government is not "eliminate taxes" - that's silly.

Also, there's a great article here that addresses the myth of the $600 hammer from back in the 90s, and the article your meme pointed to is likely a similar situation: https://www.govexec.com/federal-news/1998/12/the-myth-of-the-600-hammer/5271
We're in agreement, we need taxes. But taking more while not addressing waste is prob what bugs most people
 
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