Selling over $600 requires you to pay taxes on it (Not spam I swear)

[nexus]

I don't know how Etsy works, but I think this is going to be a hit to eBay listings. EBay hasn't been doing itself any favors, especially with its latest policy. I won't sell there any more because the extra tax paperwork isn't worth a few thousand dollars. I'll either stick to Forums and Facebook groups or stop selling altogether and just leave things in storage. This is clumsy legislation that doesn't really take into account that the folks who will be most hurt are home businesses and folks selling as a side gig, not to mention people who are reluctantly selling possessions because they need the money. I think folks were seeing these headlines about people selling sports cards and Pokemon collectibles for $50-$100K. Then when they looked at how much money was passing through eBay and Etsy annually, it stuck out like a big fat red thumb. The bean counters probably kept lowering the ceiling in order to hit some arbitrary tax revenue target, which is how they arrived at $600. I do think that number will probably be revised back up to $5K- $10K or so in the future as awareness grows and some of the fallout becomes apparent. I hate taxes as much as the next person, but politics aside, countries need revenue to operate (how that revenue is spent is another issue). The pandemic has been costly and lawmakers have also needed to make up the lost revenue from the 2018 tax cut from somewhere. I personally think the simplest solution would have been a flat, across-the-board .25% or .5% online sales tax. It would have generated significantly more revenue, helped brick & mortar businesses, and evenly spread around the tax burden. However, that would have meant taking on a much more powerful lobby and a well funded opposition campaign, not to mention ticking off big campaign contributors. This is how you get sloppy legislation that takes the path of least resistance.

 

[SwedishHeat]

Good news, the implementation of the new reporting is being delayed.

https://www.irs.gov/newsroom/irs-an...96zb--JK-rMhggBOzONoKrToucZRMGM1fEkfXUT3ScX9g
That gives us more time to contact your local representative and encourage them to pass legislation to raise the threshold back to what it was.

 

[Gipetto0812]

Thanks for sharing @SwedishHeat

If I read that correctly, the original $20k threshold is back in effect until the delay is over? If so, that's great to hear given that I haven't sold any of my collection yet. I wouldn't be in the $20k range, but certainly over $600. Will need to hop on that asap before the delay is over

 

[MeatHookGekko]

This didn't used to be a concern because very few of us collectors made over $20k in profit, so nothing was ever reported. But with this new provision, it WILL be reported to the IRS, so there's a possibility that you're going to have to start paying tax on any profits you make selling online.

My thoughts on handling this ( kind of ) would be to start listing on Craigslist. Face to face and cash. I know some people have items that are considered "large ticket", i.e. pretty rare stuff and would be worth quite a bit. In those cases, find a public place in daylight and don't go alone. This is probably more useful to those in dense urban areas ( think NY )

Otherwise, in a place like this, do small trades. Items for items, build rapport. Then ask for USPS Money Orders for later sales. Offer to pay for the stamp and money order processing cost plus another discount for time and trouble.

This may end up killing the entire loose parts market for 1/6th before it's all over. When Ebay kept changing policies to wipe out small sellers, they also wiped out an entire class of bidders too. Think about it, when any of you sold on Ebay, like little things or occasional things, you were on site and more likely to bid on stuff.

 

[SwedishHeat]

Thanks for sharing @SwedishHeat

If I read that correctly, the original $20k threshold is back in effect until the delay is over? If so, that's great to hear given that I haven't sold any of my collection yet. I wouldn't be in the $20k range, but certainly over $600. Will need to hop on that asap before the delay is over

The thing is, you still owe tax on the income this year, same as last year and the year before.

You always owed taxes, no matter how much you sold. The difference now is the IRS will be notified if you sell $600 or more, instead of $20,000, but that won't take effect until sometime later.

You used to be able to say "Oh, gee, I owed taxes on that? I had no idea, I'm so sorry" The new legislation made it so basically everyone would get a notice saying "You sold $XX, make sure you repot that as income and pay taxes on that"

From what I'm reading it seems like enough payment processors, (PayPal, CashApp, Zelle, etc) are confused about how to report and implement this process. Hopefully, it will be pushed back indefinitely and never be fully implemented, sorta like the Real ID.

 

[svnmelter]

This is great news for the time being, but they sure need to revert the threshold to what it originally was.

 

[Brett Banner]

The thing is, you still owe tax on the income this year, same as last year and the year before.

You always owed taxes, no matter how much you sold. The difference now is the IRS will be notified if you sell $600 or more, instead of $20,000, but that won't take effect until sometime later.

You used to be able to say "Oh, gee, I owed taxes on that? I had no idea, I'm so sorry" The new legislation made it so basically everyone would get a notice saying "You sold $XX, make sure you repot that as income and pay taxes on that"

This is true!

Thanks for sharing @SwedishHeat

If I read that correctly, the original $20k threshold is back in effect until the delay is over? If so, that's great to hear given that I haven't sold any of my collection yet. I wouldn't be in the $20k range, but certainly over $600. Will need to hop on that asap before the delay is over

You only need to report net profit from sales for hobby income. Let’s say you have a collection you purchased over the years for exactly $20,000 and then sell it for $20,500 (after deducting things like all your PP and shipping fees) then you’d only report $500 to the IRS. Better make sure you’ve kept records of all your original purchases and prices though.

 

[SwedishHeat]

You only need to report net profit from sales for hobby income. Let’s say you have a collection you purchased over the years for exactly $20,000 and then sell it for $20,500 (after deducting things like all your PP and shipping fees) then you’d only report $500 to the IRS. Better make sure you’ve kept records of all your original purchases and prices though.

I think this is the one of the many reasons why the delay was implemented. There is no guidance on what to do if you don't have records. If I'm thinning my collection and I'm selling off lots of old POTF2 figures that I bought at varying prices from $5 to $15, I have no receipts and I don't remember which ones cost what. What then?

It's not been explained to me how I record my profit or loss. A quick search suggest that I use the Schedule D form to report proceeds and costs. So, realistically, I'm just going to make it up. I probably spent $1,000 on figures, and I sold them off in lots for a total of $500.

And what really irks me about this situation is that businesses can use losses to reduce their taxable income, but if I take a loss selling off toys, I can't do the same thing.

 

[Gipetto0812]

This is true!


You only need to report net profit from sales for hobby income. Let’s say you have a collection you purchased over the years for exactly $20,000 and then sell it for $20,500 (after deducting things like all your PP and shipping fees) then you’d only report $500 to the IRS. Better make sure you’ve kept records of all your original purchases and prices though.

Thanks for this. I actually do keep most of my recipes (either physically or digitally) since I’m self employed. So this will be relatively simple (though time consuming) for me to do

 

[All Might]

I was questioning whether I would even bother paying it. Glad it was delayed, never should have been implemented to begin with. They steal enough and send the money to their own pockets or overseas as is.

 

[generalszabo]

How are they ever going to enforce this? How do they know what we paid for something?

 

[noheddardstark]

How are they ever going to enforce this? How do they know what we paid for something?

eBay and other payment processors will report it to the IRS and issue you a 1099-K. So the IRS will certainly know. However, as other posters have noted, it will be your job to report the original cost basis and other expenses to calculate the true profit (or loss).

 

[generalszabo]

eBay and other payment processors will report it to the IRS and issue you a 1099-K. So the IRS will certainly know. However, as other posters have noted, it will be your job to report the original cost basis and other expenses to calculate the true profit (or loss).

Yeah it's the original price I'm talking about, as it's based on profit. If we make a loss on some pieces, can you then deduct that from your profits? Doesn't make sense to me

 

[noheddardstark]

Yeah it's the original price I'm talking about, as it's based on profit. If we make a loss on some pieces, can you then deduct that from your profits? Doesn't make sense to me

Yes, if you sell a figure for less than it’s cost basis, then that can be subtracted from any earnings as a loss. Ideally you should have records to prove the original value in case of an audit. But…chances of an audit are probably slim.

 

[Bleah]

Good news, the implementation of the new reporting is being delayed.

https://www.irs.gov/newsroom/irs-an...96zb--JK-rMhggBOzONoKrToucZRMGM1fEkfXUT3ScX9g
That gives us more time to contact your local representative and encourage them to pass legislation to raise the threshold back to what it was.

I remember talking to my tax person about this and she didn't have any idea how to deal with it at that time and seemed to not want to deal with it at all.

When I wrote to my local representative, one answer I got was it was meant more for the rich that don't properly report their income or gains. I'm thinking which rich person would bother selling their small personal stuff on the secondary market and chasing the market value. My observation with such rich entities would be to dump their items at a consignment party for cheap. I've also observed such entities just sell their personal stuff at a loss. I'm sure there may be some that go after the market value but given the ratio of rich entities compared to middle income combined with low income entities are far much smaller, I just can't buy that stupid reasoning. I mean if they're earning big figures from their primary means of income, I just can't picture them trying to put much resources to sell and avoid paying taxes on 20K gains in eBay or whatever similar market.

 

[devilof76]

when was the last time the middle class had good health care or wages?

Before the Affordable Housing crash. 2008-ish.

 

[Sweet Rabbit]

when was the last time the middle class had good health care or wages?

About 2019…