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Tax Changes for 2022.
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Platinum Card Talk Member
posted
I thought there was a discussion about this on Card Talk already, but I don't see it.

There is a tax reporting change happening next year. It was added in to one of the Covid relief packages and was mostly not talked about at the time.

Any seller with more than $600 in sales will have an 1099-K form submitted to the IRS regardless of the number of transactions.

The previous rule was a 1099-K would be submitted for sellers with over $20,000 in sales and 200 in transactions.

There is some more information here: https://www.ebaymainstreet.com...ederal-tax-reporting

The eBay Main Street site indicates that sellers who are selling used goods at a loss won't have to pay tax on their sales, but I'm unclear mechanically how that works -- i.e. do you need to keep track of your receipts to prove you sold something at a loss?

Also I'm unclear on what exactly the term 'used' means in terms of our hobby and other collectibles, If you buy something to collect it -- is that item really ever used? I don't know.

I also don't know if/how this would apply to COMC. If you have sales on COMC, but the money remains in COMC do you still get a 1099-K? If you do get a 1099-K how do they account for the fact that you can't actually cash out your COMC for the 'balance' you have on COMC -- you have to pay fees to cash out. If you only get an 1099-K if you cash out of COMC do they account for what year the sales were made it -- i.e. if I sold all the cards, in 2021, but cashed out $650 in 2022 would I get an 1099-K in my 2022 taxes?

Seems like a big mess to me. . . I'm glad I don't sell. . .

That said I am thinking about buying a car in 2022. . . If I sell my current car to Carmax for more than $600 will that trigger a 1099-K? What about if I trade the car in to a dealer?

This message has been edited. Last edited by: webjon,
 
Posts: 5429 | Location: Parts Unknown. | Registered: January 25, 2001Reply With QuoteReport This Post
Gold Card Talk Member
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How do you establish that you sold something for a loss ?

If I sell old childhood toys from the 1970s that have been laying down the basement for 45 years, must I pay taxes on them ? I am assuming it would be a gain if they sell for more than the 1976 purchase price. And who knows what my folks spent back then ?
 
Posts: 4066 | Location: NY | Registered: August 03, 2010Reply With QuoteReport This Post
Diamond Card Talk Member
Picture of Raven
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This is how Congress works. Pass the Bill and then try to figure out what's in it, what it does and what happens after it does it. Big Grin

eBay will fight it, as will lots of other people, and there will have to be clarifications because no one in charge seems to understand the mess all these 1099-Ks will make when generated at such a low amount.

Don't forget, the IRS has the whole year to put the rules for this on the 2022 Returns and the guidance has to be clear enough then as it will impact many more people and hurt eBay in the process, which is eBay's big concern. Wink

This message has been edited. Last edited by: Raven,
 
Posts: 10515 | Location: New York | Registered: November 20, 2007Reply With QuoteReport This Post
Gold Card Talk Member
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We'll have to see what tax preparers are told by the end of next year. You might have to pay the tax on childhood toys sold and you wouldn't be able to declare the original purchase as an expense to offset it.

What if you decide to part out your collection, can you declare an expense for something you bought two years ago, five years ago, or longer if you bought it for your collection but are now cashing out what you can? If you are selling $25-75 cards, you can get to $600 rather quickly. I have a feeling a tax person might say a seller would have to eat the cost on that too (unless you had a receipt - maybe even then if it wasn't for resale?) and pay tax on the sale but would be able to deduct any expenses involved in the sales (Ebay fees, shipping material and postage fees at least).


quote:
Originally posted by Tommy C:
How do you establish that you sold something for a loss ?

If I sell old childhood toys from the 1970s that have been laying down the basement for 45 years, must I pay taxes on them ? I am assuming it would be a gain if they sell for more than the 1976 purchase price. And who knows what my folks spent back then ?
 
Posts: 4482 | Location: San Jose, CA, USA | Registered: December 23, 2002Reply With QuoteReport This Post
Platinum Card Talk Member
Picture of Batman
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The rule for filing a 1099 has been in effect for many years, if you earn or receive over $600 it must be reported. On-line sales have been under the radar for many years but now the IRS has caught up as there are significant taxes to be collected on these type of transactions.

____________________
"The problem, I'm told, is more than medical."
 
Posts: 5795 | Location: Brielle, NJ | Registered: April 03, 2002Reply With QuoteReport This Post
Platinum Card Talk Member
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quote:
Originally posted by catskilleagle:
We'll have to see what tax preparers are told by the end of next year.


Unfortunately by then you are already too late as you are locked in to whatever happens in 2022.

It is also unclear to me how this is supposed to work.

Let's say I buy a card for $1000, and decide to sell it again for $1000 -- just keeping round numbers, and over the reporting limit.

In theory if I receive a 1099-K and do nothing I'm paying income tax on $1000, right? So I end up owing the IRS $200+ for a transaction that netted me 0 (minus expenses). What do you need to file to explain to the IRS that you actually made $0 -- or realistically in this case lost money in fees?

I've just been Googling and am reading on Turbotax.com "Beginning in 2018, you are no longer eligible to take a deduction for hobby expenses." This to me means that if you sell that card for $1000 -- even though you didn't make a time, and are out all the fees, supplies, etc you need to pay income tax on that $1000 unless you are a business.

Also -- it seems like if you are going to owe taxes due to 1099-K forms you also may be on the hook for paying quarterly taxes.
 
Posts: 5429 | Location: Parts Unknown. | Registered: January 25, 2001Reply With QuoteReport This Post
Diamond Card Talk Member
Picture of Raven
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quote:
Originally posted by catskilleagl
What if you decide to part out your collection, can you declare an expense for something you bought two years ago, five years ago, or longer if you bought it for your collection but are now cashing out what you can?
[/QUOTE]

What if you are selling individual cards that you bought in bulk? For example, you buy and break two cases of cards. You have a receipt for how much you paid, but no price for the pieces.

You sell only some of them at different prices, but each card would have an expense value of its fraction of the total price because, after all, you didn't buy them individually or even know what was in the boxes. If you hit an expensive card in bulk and then sold it at market value, where do you begin to set and prove your expense when you may still have most of the cards?

I don't know either. Retail sale profits will be very easy to document, but when you get into collectibles and sellers that may have little to no records it's going to get interesting. Wink
 
Posts: 10515 | Location: New York | Registered: November 20, 2007Reply With QuoteReport This Post
Platinum Card Talk Member
Picture of Batman
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Tax laws can be complicated, but here are the basics. If you buy a card for $1,000 and then sell it for $1,000, then your basis is $1,000 and your taxable gain is zero, so no taxes owed. Assuming you are selling as an individual, you would file a schedule C and report no gain or loss. You might need to prove that you paid $1,000 for the card you resold for $1,000 so keep good records to prove that.

____________________
"The problem, I'm told, is more than medical."
 
Posts: 5795 | Location: Brielle, NJ | Registered: April 03, 2002Reply With QuoteReport This Post
Platinum Card Talk Member
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quote:
Originally posted by Batman:
Tax laws can be complicated, but here are the basics. If you buy a card for $1,000 and then sell it for $1,000, then your basis is $1,000 and your taxable gain is zero, so no taxes owed. Assuming you are selling as an individual, you would file a schedule C and report no gain or loss. You might need to prove that you paid $1,000 for the card you resold for $1,000 so keep good records to prove that.


That makes sense, but that sounds to me like a capital gains situation. . . Maybe that is the way to look at this. . .
 
Posts: 5429 | Location: Parts Unknown. | Registered: January 25, 2001Reply With QuoteReport This Post
Diamond Card Talk Member
Picture of Raven
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Just thought of this because of today's news, but there is another reason for more scrutiny of online sales besides just generating more taxes. We have had a wave of orchestrated smash-and-grab robbery rings operating in certain areas. It started mainly on the West Coast, went to the East Coast and now you hear about incidents in a variety of States. It's like a flash mob attack on a store, only it's professional.

They seem to feel that this merchandise is finding its way to online platforms. So by tightening up the tax reporting on sellers, it will help to document whose doing what and maybe some of these goods can be traced if they were stolen. I don't know how successful that will be, but it's another reason/excuse for more regulations of online sales.
 
Posts: 10515 | Location: New York | Registered: November 20, 2007Reply With QuoteReport This Post
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