Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:04 pm

So, just to get my facts straight on this: are we absolutely, positively sure that this is a blanketed, all-encompassing move affecting all users of online payment processing companies regardless of their business status? As in this affects the guy on ebay with a history of 14000 sales just the same as it does the guy who opened an ebay account yesterday just to sell his $600 tuba that he no longer plays?
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:18 pm

If we can keep the politics out of this thread, it might not get nuked and may be beneficial in getting the word out and helping people prepare.

There are those that will say you can't keep politics out of a thread like this. But you can. Keep to topics of how to file the tax, how to prepare for the tax, what deductions can be used. Talk about how this will affect how we sell and buy. How it will affect the industry as a whole. Where you can sell elsewhere. Etc.

If you want to talk politics there is the "Soap Box" area where a thread can be created. Trust me, I get it, There is a lot of politics surrounding this, but if we discuss it here the thread will likely get deleted, and any good that may come from it will be lost.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:22 pm

jimbles wrote:
Wed Apr 07, 2021 10:04 pm
So, just to get my facts straight on this: are we absolutely, positively sure that this is a blanketed, all-encompassing move affecting all users of online payment processing companies regardless of their business status? As in this affects the guy on ebay with a history of 14000 sales just the same as it does the guy who opened an ebay account yesterday just to sell his $600 tuba that he no longer plays?
According to all that I have read and listened to, yes it affects everyone and all payment processors. A handful of states already had such provisions in place for state taxes, and now it is in place for all via Federal taxes. I suspect more states will begin to lower their threshold to match it for state taxes as well. That said things could change. Ebay is currently lobbying for some changes.

Currently (for most states) you need 200 transactions and $20,000 in sales to generate a 1099-k. Now starting in 2022 it is just $600 in sales regardless of the amount of transactions.

Here is a news article about it if you would like to verify it elsewhere: https://www.cnbc.com/2021/03/26/its-goi ... sales.html
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:32 pm

I was expecting this to happen because some States already enacted the $600 threshold. My State is currently at $20K, which I guess is considered the federal limit before a 1099. A few years ago I went over the 20K amount. I went through every eBay sale that year and tried to determine what I paid for each item. I just had a small profit once all fees (eBay/PayPal) and expenses (postage/shipping supplies) were deducted. If you're a collector, you are going to have some high profit items and a lot of things that are selling for way below what you originally paid. I think most people will find they barely break even. My expenses seem to be around 30% for each sale and that doesn't factor in the amount I paid to originally purchase the item.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:33 pm

https://www.cnbc.com/2021/03/26/its-goi ... sales.html

This is more or less how it was always supposed to work. Capital gains are taxable. Selling things at a loss, garage sale style, are not. If you're flipping action figures as part of the hobby *and* you're selling them for more than you paid, that's always been taxable. As someone else noted, I've already had to deal with this, but, honestly, it doesn't come up that often and it's just added to your taxable income, it's not that big of a deal, imo. Pitching this as some strike against low-income people trying to make rent is super weird, to me. Like, are a lot of people living paycheck to paycheck investing and flipping high end collectables that appreciate significantly while they're struggling to make rent?

There will absolutely be some people who get caught up in this and owe a little more than they might have otherwise, but there's a knee-jerk anti-tax reaction that just feels very out of proportion to what is happening. If you're selling off random shit at a loss to cover your rent, you're still not going to need to claim that income, just like before. If you're flipping Hot Toys and making a bunch of money on them, you're going to need to report that profit just like you were always supposed to.

I'd also be very interested to see how many people this actually impacts with any regularity. I think that people are overestimating the number of people who are flipping things for profit on ebay with any regularity. I've definitely sold things for a profit on ebay before, and I had to report income when I moved and sold a ton of LEGO sets, but, otherwise, I don't sell that much stuff on ebay, especially not at a profit. Maybe I'm the weird one? Is everyone but me out there flipping toys for profit all the time and bringing home that sweet capital gains?
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:56 pm

mrboshek wrote:
Wed Apr 07, 2021 10:32 pm
I was expecting this to happen because some States already enacted the $600 threshold. My State is currently at $20K, which I guess is considered the federal limit before a 1099. A few years ago I went over the 20K amount. I went through every eBay sale that year and tried to determine what I paid for each item. I just had a small profit once all fees (eBay/PayPal) and expenses (postage/shipping supplies) were deducted. If you're a collector, you are going to have some high profit items and a lot of things that are selling for way below what you originally paid. I think most people will find they barely break even. My expenses seem to be around 30% for each sale and that doesn't factor in the amount I paid to originally purchase the item.
This is what I am most interested in. Are you allowed to make approximations on what you paid for each item, or do you have to have reciepts to prove it? I keep a list of all toys/hobby items I purchase every month to help me keep on budget. I have it going back for years, would something like that count? I don't know if it would because it would be so easy to fudge. I don't have receipts except possibly email receipts for things purchased online, and I would have to really dig for those. I may have to start keeping receipts with a not on what is on them (file them by month or something), but who wants to do that and track all of that for a hobby?

I estimate that on average 33% of everything I sell goes to taxes, fees, and shipping. Just doing some quick math and looking at what Ebay says I made versus what actually gets deposited (I'm on managed payments). That's before I take into account mileage, packing materials, and what I originally paid for the item. With those taken into account I bet I break even or barely make a profit. Most of what I sell goes for less than what I paid (after shipping/fees) with a few exceptions that help make up the difference.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 10:57 pm

I think the point was that the dollar amount is now $600. That just seems like such a weird cutoff for something like this. $600 for the year isn't that different than a garage/moving sale amount. Granted the tax on $600 isn't that much so those who do sell $600 worth of stuff would barely notice it at the end of the year, but I guess it just seems strange to go after the tax on $600 because it's such a small amount. Plus, someone who's selling $600 worth of stuff a year clearly isn't operating a business where they are selling new stuff, they are selling stuff similar to a garage sale. Basically stuff they have already purchased and paid sales tax on previously.

$600 hardly feels like that sweet capitol gains money. The federal limit of 20k noted above seems to make more sense. 20k feels like intent to make some decent side money.

$600 is really easy to come up with in sales on ebay. I cleaned my closet and came up with $600 worth in sales. I think it was two years ago I thinned out my 3.75" SW collection. I unloaded all my old POTF2 vehicles and some other new ones. I lost money on some, made money on others, but documenting which vehicles I made and lost money on? That's a lot of effort when it's just $600 worth of items stretching back 20 years. I'd imagine most people would just be like "whatever, it's not that much money" when they get their 1099. So I guess it makes sense to send out 1099's on $600...because everyone will just roll over and pay it rather than do the work to itemize everything. And with a lot of people working in that range, I guess they are tapping into a lot of small amounts of tax revenue....but an awful lot of those small amounts. It all adds up.

I'm not going to worry about it too much, I'll just cross that bridge when I get to it, but it definitely feels like the 20k number should the focus.

EDIT: Just to add more on that SW stuff I sold. I purchased a lot of items for $600 on craigslist. The guy needed to unload it all at once so I ended up with some duplicate items. So how does that work? I mean, he unloaded them all at a massive loss and I definitely made money on the items but it's not like we had a receipt for the deal. And the whole point of me buying the lot was that he had some rare items I wanted and I was stuck with the rest.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:18 pm

christianpyro wrote:
Wed Apr 07, 2021 10:22 pm
Here is a news article about it if you would like to verify it elsewhere: https://www.cnbc.com/2021/03/26/its-goi ... sales.html
So... follow up to this article. Companies like eBay are now looking into the possibility of requiring a social security number in order to get the tax form info? Holy christ. No one, and I mean NO ONE, should be dumb enough to comply with that one. Given how flagrantly disinterested companies have shown themselves to be with consumer data protection, this is just a recipe for disaster.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:22 pm

jimbles wrote:
Wed Apr 07, 2021 11:18 pm
christianpyro wrote:
Wed Apr 07, 2021 10:22 pm
Here is a news article about it if you would like to verify it elsewhere: https://www.cnbc.com/2021/03/26/its-goi ... sales.html
So... follow up to this article. Companies like eBay are now looking into the possibility of requiring a social security number in order to get the tax form info? Holy christ. No one, and I mean NO ONE, should be dumb enough to comply with that one. Given how flagrantly disinterested companies have shown themselves to be with consumer data protection, this is just a recipe for disaster.
That's actually not new. If you sell a decent amount on Ebay or Paypal they will contact you and not allow you to sell more until you provide them with your SS# in case they need to send tax documents. Once you reach a certain dollar amount in sales for a given year they contact you.

But with the new threshold so low, I assume just about every seller will now be required to submit their SS#
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:24 pm

Like Maverick said, it’s the low threshold that makes me angry more than anything else. Because the wonks who designed this legislation knew there is a large group of people who will not itemize because the standard deduction is greater, or the hassle involved with tracking receipts.

As domu implied, this is not a reason to vote someone out of office or make generalizations about political parties, because the bill was not about this single measure. In fact, my guess is that the $600 threshold was probably some means tested compromise by Democrats intended to offset the cost of stimulus payments in the long run. But it pisses me off that when it came to paying for the stimulus, the lower class and middle class should be burdened by a tax increase, side hustle or not.

It is a strike against low-income people trying to make rent, because the threshold is low enough to include almost everyone ($600 a year is not a lot), when it didn't need to. It was an intentional reach to extract more from the tax base after/during a particularly trying time. And yes, a lot of people were selling their belongings during the pandemic to make rent money. Heck, a lot of people started selling their nudes to make rent money.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:31 pm

christianpyro wrote:
Wed Apr 07, 2021 11:22 pm
jimbles wrote:
Wed Apr 07, 2021 11:18 pm
christianpyro wrote:
Wed Apr 07, 2021 10:22 pm
Here is a news article about it if you would like to verify it elsewhere: https://www.cnbc.com/2021/03/26/its-goi ... sales.html
So... follow up to this article. Companies like eBay are now looking into the possibility of requiring a social security number in order to get the tax form info? Holy christ. No one, and I mean NO ONE, should be dumb enough to comply with that one. Given how flagrantly disinterested companies have shown themselves to be with consumer data protection, this is just a recipe for disaster.
That's actually not new. If you sell a decent amount on Ebay or Paypal they will contact you and not allow you to sell more until you provide them with your SS# in case they need to send tax documents. Once you reach a certain dollar amount in sales for a given year they contact you.

But with the new threshold so low, I assume just about every seller will now be required to submit their SS#
Exactly. It becomes a more enticing target for attack, thus more valuable for time spent going after it. The sheer volume of identity credentials will be staggering with that low of a requirement. And frankly, as an admitted left wing crazy person, I don't trust corporate enterprise for beans when it comes to these types of things.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:39 pm

jimbles wrote:
Wed Apr 07, 2021 11:31 pm
Exactly. It becomes a more enticing target for attack, thus more valuable for time spent going after it. The sheer volume of identity credentials will be staggering with that low of a requirement.... I don't trust corporate enterprise for beans when it comes to these types of things.
Do you know about the SolarWinds attack? I barely trust the government with my identifying information any more.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Wed Apr 07, 2021 11:53 pm

Samael13 wrote:
Wed Apr 07, 2021 10:33 pm
https://www.cnbc.com/2021/03/26/its-goi ... sales.html

This is more or less how it was always supposed to work. Capital gains are taxable. Selling things at a loss, garage sale style, are not. If you're flipping action figures as part of the hobby *and* you're selling them for more than you paid, that's always been taxable. As someone else noted, I've already had to deal with this, but, honestly, it doesn't come up that often and it's just added to your taxable income, it's not that big of a deal, imo. Pitching this as some strike against low-income people trying to make rent is super weird, to me. Like, are a lot of people living paycheck to paycheck investing and flipping high end collectables that appreciate significantly while they're struggling to make rent?

There will absolutely be some people who get caught up in this and owe a little more than they might have otherwise, but there's a knee-jerk anti-tax reaction that just feels very out of proportion to what is happening. If you're selling off random shit at a loss to cover your rent, you're still not going to need to claim that income, just like before. If you're flipping Hot Toys and making a bunch of money on them, you're going to need to report that profit just like you were always supposed to.

I'd also be very interested to see how many people this actually impacts with any regularity. I think that people are overestimating the number of people who are flipping things for profit on ebay with any regularity. I've definitely sold things for a profit on ebay before, and I had to report income when I moved and sold a ton of LEGO sets, but, otherwise, I don't sell that much stuff on ebay, especially not at a profit. Maybe I'm the weird one? Is everyone but me out there flipping toys for profit all the time and bringing home that sweet capital gains?
Right, capital losses aren't taxable. But capital gain income is calculated separately from primary active business income, before everything is compiled to reach the total taxable income, so it does matter if someone's reselling efforts are an active business or capital gains/losses. So, whether it's an active business or a passive business/hobby. And like you said, capital gains have been taxable. But requiring a 1099 at the very low threshold of $600 is new, especially when many places were still using the $20K one. That's a huge difference. I understand they realize a lot is slipping through the cracks, and it is, but something like $5K seems more reasonable than $600. A lot of people may be caught unawares by this two years from now when it'll be time to file for the first time with this in place, and it'll cause a lot more headaches. I mean, overall, I agree with you, I just feel they misjudged on where to set the cutoff.
christianpyro wrote: This is what I am most interested in. Are you allowed to make approximations on what you paid for each item, or do you have to have reciepts to prove it? I keep a list of all toys/hobby items I purchase every month to help me keep on budget. I have it going back for years, would something like that count? I don't know if it would because it would be so easy to fudge. I don't have receipts except possibly email receipts for things purchased online, and I would have to really dig for those. I may have to start keeping receipts with a not on what is on them (file them by month or something), but who wants to do that and track all of that for a hobby?

I estimate that on average 33% of everything I sell goes to taxes, fees, and shipping. Just doing some quick math and looking at what Ebay says I made versus what actually gets deposited (I'm on managed payments). That's before I take into account mileage, packing materials, and what I originally paid for the item. With those taken into account I bet I break even or barely make a profit. Most of what I sell goes for less than what I paid (after shipping/fees) with a few exceptions that help make up the difference.
You should only need actual evidence if you are unlucky enough, or draw suspicion, to be audited. Which is why keeping receipts, in general, is typically a good idea. But what about that one figure you bought for $12 about 15 years ago that you managed to sell on eBay that, for whatever reason, goes for crazy money now? You still have that receipt after all this time? Only the most disciplined (i.e., anal-retentive) keep paper records of such (at the time, anyway) trivial purchases stretching over such lengthy periods of time. Again, it would only really matter though if you were extremely unlucky, or blatantly being dodgy. Otherwise you can only do what you can do, and approximate to the best of your knowledge/memory.
maverick10126 wrote: I think the point was that the dollar amount is now $600. That just seems like such a weird cutoff for something like this. $600 for the year isn't that different than a garage/moving sale amount. Granted the tax on $600 isn't that much so those who do sell $600 worth of stuff would barely notice it at the end of the year, but I guess it just seems strange to go after the tax on $600 because it's such a small amount. Plus, someone who's selling $600 worth of stuff a year clearly isn't operating a business where they are selling new stuff, they are selling stuff similar to a garage sale. Basically stuff they have already purchased and paid sales tax on previously.

$600 hardly feels like that sweet capitol gains money. The federal limit of 20k noted above seems to make more sense. 20k feels like intent to make some decent side money.

$600 is really easy to come up with in sales on ebay. I cleaned my closet and came up with $600 worth in sales. I think it was two years ago I thinned out my 3.75" SW collection. I unloaded all my old POTF2 vehicles and some other new ones. I lost money on some, made money on others, but documenting which vehicles I made and lost money on? That's a lot of effort when it's just $600 worth of items stretching back 20 years. I'd imagine most people would just be like "whatever, it's not that much money" when they get their 1099. So I guess it makes sense to send out 1099's on $600...because everyone will just roll over and pay it rather than do the work to itemize everything. And with a lot of people working in that range, I guess they are tapping into a lot of small amounts of tax revenue....but an awful lot of those small amounts. It all adds up.

I'm not going to worry about it too much, I'll just cross that bridge when I get to it, but it definitely feels like the 20k number should the focus.

EDIT: Just to add more on that SW stuff I sold. I purchased a lot of items for $600 on craigslist. The guy needed to unload it all at once so I ended up with some duplicate items. So how does that work? I mean, he unloaded them all at a massive loss and I definitely made money on the items but it's not like we had a receipt for the deal. And the whole point of me buying the lot was that he had some rare items I wanted and I was stuck with the rest.
Yeah, this is kinda where I'm at on this. And that's the general idea: lots of small amounts. Still, the $600 threshold is a bit extreme.

One other thing to keep in mind though is how few people itemize their deductions these days. Just a few years ago it was about 65-70% took the standard deduction and about 30-35% itemized instead. Since the TCJA, it's become more lopsided, since one of the aims of that legislation was to encourage more standard claims and less itemized ones, in an attempt to "simplify" the tax process. They encouraged it by drastically increasing the standard deduction, and making it much harder to include various things as itemized deductions--thus keeping the typical itemized total lower. So in the last few years, it's been about 80-85% taking the standard, and only 15-20% itemizing. And itemizing has always been more a tactic of the wealthier crowd, so just even more so now.

So unless you're pretty sure you can still come out ahead of the standard through itemizing, it's probably not worth all the hassle anyway.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Thu Apr 08, 2021 12:06 am

supreme-d wrote:
Wed Apr 07, 2021 11:24 pm
Like Maverick said, it’s the low threshold that makes me angry more than anything else. Because the wonks who designed this legislation knew there is a large group of people who will not itemize because the standard deduction is greater, or the hassle involved with tracking receipts.
It's the same exact threshold as everything else, they did not just pick a number out of their ass.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Thu Apr 08, 2021 12:21 am

christianpyro wrote:
Wed Apr 07, 2021 10:56 pm
mrboshek wrote:
Wed Apr 07, 2021 10:32 pm
I was expecting this to happen because some States already enacted the $600 threshold. My State is currently at $20K, which I guess is considered the federal limit before a 1099. A few years ago I went over the 20K amount. I went through every eBay sale that year and tried to determine what I paid for each item. I just had a small profit once all fees (eBay/PayPal) and expenses (postage/shipping supplies) were deducted. If you're a collector, you are going to have some high profit items and a lot of things that are selling for way below what you originally paid. I think most people will find they barely break even. My expenses seem to be around 30% for each sale and that doesn't factor in the amount I paid to originally purchase the item.
This is what I am most interested in. Are you allowed to make approximations on what you paid for each item, or do you have to have reciepts to prove it? I keep a list of all toys/hobby items I purchase every month to help me keep on budget. I have it going back for years, would something like that count? I don't know if it would because it would be so easy to fudge. I don't have receipts except possibly email receipts for things purchased online, and I would have to really dig for those. I may have to start keeping receipts with a not on what is on them (file them by month or something), but who wants to do that and track all of that for a hobby?

I estimate that on average 33% of everything I sell goes to taxes, fees, and shipping. Just doing some quick math and looking at what Ebay says I made versus what actually gets deposited (I'm on managed payments). That's before I take into account mileage, packing materials, and what I originally paid for the item. With those taken into account I bet I break even or barely make a profit. Most of what I sell goes for less than what I paid (after shipping/fees) with a few exceptions that help make up the difference.
I approximated the amounts paid for each item because I didn't have receipts for every figure. I downloaded the eBay spreadsheet and added my own column for the price I paid for each item. Most items were fairly recent and I had to hope the IRS would understand modern action figures tend to have a mostly standard retail price, if they were to question my numbers. This occurred during the 2016 tax year. I filed with my Mom's accountant that year. She did not include an item by item break down on the tax return. It was pretty much Gross sales - Expenses - Retail Price = Net Sales. She kept a copy of my spreadsheet, any receipts I could gather, and any purchase records I could pull from my online accounts from stores like bbts and Amazon, just in case they should be questioned. So far, so good.

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