New IRS reporting for 2021? 8 8

[Shrevvy]

49 minutes ago, Math Teacher said:

This is what I believe constitutes a loss. I bought the Flash Archives for approximately $39.99 ($49.99 * 0.8). I sold it for $18.75 on Ebay. $18.75 (sale price) - $39.99 (purchase price ) = $21.24 (loss of $21.24). The FMV is determined by the amount you sold it for.

Just like many of us, I am not a tax professional.

This is my point. If you sell used goods (which is exactly what that Flash Archives is), you generally have no federal tax burden. Previously if you sold $1000 of used goods in a year there was no issue. There is no reporting because there is no need to report. Under the new rules, that same $1000 is reported to the IRS. The person selling the goods now has to expend time and/or money to file. Try to sell a used good and attempt to write that off against income, because you cannot. You cannot record that $21 loss on a Flash Archives against income any more than I can record the "loss" I take on selling a used pair of shoes for $20 that I paid $100 for. The IRS can have its cake and eat it too. You are required to pay taxes on a gain, but you cannot deduct a loss (unless against a realized gain from another "collectible"). Unless the rules have changed (and they may have), if you have a collectible loss you can only net that against a collectible gain. No gain? Then no tax benefit from the loss. 

I would be curious to see if the IRS would treat a Flash Archives as a collectible for tax purposes. We think of it as a collectible, but not sure that it would meet the definition for tax purposes. If you sold a Spiderman 252 for a $100 gain and tried to write off a used books sale (Flash Archives) against it, I'm not sure the IRS would allow it. I don't believe the IRS would look that close, but still. 

We are thinking about this in the context of our sliver of the eBay/Paypal universe. I just searched "used shoes" on eBay and 1.5 million listings came up. It is not hard to sell $600 worth of used sports equipment in a year in you have high school kids. Under the new rules, that triggers a 1099. I am sure that far more 1099s will be sent for general used merchandise than for comic books when this goes into effect. Stupid. Guily until proven innocent.

This has very little to do with comic book flippers having to pay their "fair share."

[vodou]

3 minutes ago, Shrevvy said:

If you sell used goods (which is exactly what that Flash Archives is), you generally have no federal tax burden.

Oh man...you gotta show me where in the Tax Code that "special" rule resides  

[MyNameIsLegion]

13 minutes ago, Shrevvy said:

This is my point. If you sell used goods (which is exactly what that Flash Archives is), you generally have no federal tax burden. Previously if you sold $1000 of used goods in a year there was no issue. There is no reporting because there is no need to report. Under the new rules, that same $1000 is reported to the IRS. The person selling the goods now has to expend time and/or money to file. Try to sell a used good and attempt to write that off against income, because you cannot. You cannot record that $21 loss on a Flash Archives against income any more than I can record the "loss" I take on selling a used pair of shoes for $20 that I paid $100 for. The IRS can have its cake and eat it too. You are required to pay taxes on a gain, but you cannot deduct a loss (unless against a realized gain from another "collectible"). Unless the rules have changed (and they may have), if you have a collectible loss you can only net that against a collectible gain. No gain? Then no tax benefit from the loss. 

I would be curious to see if the IRS would treat a Flash Archives as a collectible for tax purposes. We think of it as a collectible, but not sure that it would meet the definition for tax purposes. If you sold a Spiderman 252 for a $100 gain and tried to write off a used books sale (Flash Archives) against it, I'm not sure the IRS would allow it. I don't believe the IRS would look that close, but still. 

We are thinking about this in the context of our sliver of the eBay/Paypal universe. I just searched "used shoes" on eBay and 1.5 million listings came up. It is not hard to sell $600 worth of used sports equipment in a year in you have high school kids. Under the new rules, that triggers a 1099. I am sure that far more 1099s will be sent for general used merchandise than for comic books when this goes into effect. Stupid. Guily until proven innocent.

This has very little to do with comic book flippers having to pay their "fair share."

This seems like just a giant PIA.  If the IRS consistently get a 1099 for millions of individual with anything less than 100% of that amount reported as income, for those that sold at a loss, they have to keep track of it, if and only if they are audited if they declare any amount less than what's in the 1099K.  This seems like a terrible used of everyone's time, including the IRS. Of course, as Voduo suggested, this all gets automated, all bets are off, but it's still a hassle for the taxpayer.  Most won't bother, they will just declare it. for low income households they will just get less of a refund. It could pinch some people on medicaid, medicare, or disability. But it see like it will always raise a flag if a middle income household that does not itemize their deductions (because the standard deduction is still a better for them) and takes the standard deduction is declaring less than the 1099K. 

[Math Teacher]

55 minutes ago, Shrevvy said:

This is my point. If you sell used goods (which is exactly what that Flash Archives is), you generally have no federal tax burden.

Well, if you sell ASM #252, wouldn't that be considered used goods? I read that comic (just like I read the Flash Archives), and I no longer have any use for either of them.

Also, I can't imagine that you can't write off your expenses for selling (tape, boxes, and bubble wrap), along with your Ebay fees. All these contribute toward you receiving less profit. So, if you sell Flash Archives for $17.75, and the Ebay fees are $2.13 for that sale, I think you should pay taxes on the net amount ($15.62), because that's what you got to put in your pocket.

Also, I asked this earlier, but I can't remember the response. Do these new tax rules apply to the 2021 tax year, or to the 2022 tax year?

[Math Teacher]

Here is a tax thread from 2016. I know that some points may no longer be relevant due to changes in the tax code, but some interesting points are made.

 

[awakeintheashes]

21 hours ago, Math Teacher said:

Does this 1099-K go into effect for the 2021 tax year, or does it go into effect for the 2022 tax year?

 

I believe the change to the De Minimis Threshold is effective for tax year 2022, so this change will substantially increase the number of 1099-Ks filed with the IRS in 2023

Quote

Section 9674(a) of the ARPA changes the de minimis threshold for Form 1099-K reporting for TPSOs.  (No de minimis threshold applies with respect to payment card transactions.)  Currently, the de minimis rule under section 6050W(e) provides that a TPSO is required to report on Form 1099-K with respect to third party network transactions of any participating payee only if (1) the amount that would otherwise be reported exceeds $20,000, and (2) the aggregate number of transactions exceeds 200.  The new law replaces this two-step de minimis standard with a single $600 reporting threshold effective for 2022.  Accordingly, a single transaction for more than $600 settled through a TPSO will now be reportable as will multiple transactions that total more than $600.

 

This change will substantially increase the number of 2022 Forms 1099-K filed with the IRS in 2023.  The change to the de minimis threshold also highlights the importance of adhering to the taxpayer identification number (“TIN”) solicitation requirements and imposing backup withholding at the proper time for TPSOs that have not received a TIN from a participating payee, received a facially erroneous TIN, or are otherwise required to impose backup withholding based upon the IRS B notice process. - Covington & Burling's Tax Withholding & Reporting Blog 

 

[Shockmaster]

Has eBay released a statement on this yet?

[Shrevvy]

2 hours ago, vodou said:

Oh man...you gotta show me where in the Tax Code that "special" rule resides  

We are thinking about "used goods" in the context of old comics. Think of it in the context of clothes or appliances or any other consumer good. A woman buys a dress to be in a wedding party for $500 and sells it for $200 when done. No gain, no liability. I sell my old pair of dress shoes for $20 after paying $100. No gain, no liability. All of that could be sold on eBay. All would now generate a 1099 (over $600). There would be zero tax liability, but everyone has to go through the motions to prove you don't owe anything. 

I recently sold a used car. I drove it for years and sold it for less than I paid. There is no federal income tax due. I suppose if I would have taken Paypal as payment, I would now get a 1099 on that.

This change will capture some that have not paid federal income taxes, but should. It will also coerce others to pay taxes they do not owe. It will also hassle those that don't owe taxes. 

Maybe the phrasing was bad. I did not mean to say selling used goods was exempt from taxes. They are not. What I was trying to say is that many people sell used goods when they have got their use from them and sell them for less than they paid. It is not a business and no profit is made. They are just recouping a portion of what was spent and passing along the remaining useful life to the next buyer.

[Shrevvy]

1 hour ago, Math Teacher said:

Well, if you sell ASM #252, wouldn't that be considered used goods? I read that comic (just like I read the Flash Archives), and I no longer have any use for either of them.

 

I was just thinking out loud. You have a gain in the ASM #252. That alone qualifies it for taxes. It has become a "collectible" by virtue that you made money. The IRS wants a piece. 

[awakeintheashes]

50 minutes ago, Shockmaster said:

Has eBay released a statement on this yet?

I haven't seen a statement from eBay, but Etsy has weighed in according to this article (link)

Quote

Etsy is worried that the extra tax reporting may drive some people away from its online marketplace. 

The company, which caters to handmade or vintage products, said that asking people to provide their social security number up front before setting up their shops may create another barrier to entry for some sellers. The company’s goal, it says, is to create the easiest path to entrepreneurship. 

 

[Bookery]

3 hours ago, Shrevvy said:

The IRS can have its cake and eat it too. You are required to pay taxes on a gain, but you cannot deduct a loss (unless against a realized gain from another "collectible").

Yes.  This is the same way it works if one gambles at a casino.  You cannot deduct losses from earned income.  But if you win, then you must report the profit.

[shadroch]

I've a friend who sells used clothes in NYC. A typical week finds him hitting thrift stores and charity shops. Because he buys in bulk on a regular basis, he pays 50 cents to a dollar, and sells them on weekends for $3-$10 each. He briefly had a store but decided it was too much overhead.

He pays taxes and collects sales taxes, and would say he had every bit as real a business as someone selling used comics or records.

[shadroch]

3 minutes ago, Bookery said:

Yes.  This is the same way it works if one gambles at a casino.  You cannot deduct losses from earned income.  But if you win, then you must report the profit.

You can deduct your casino losses from any casino winnings. When I worked on a team in Vegas, we had a guy who regularly swept the sports /horse rooms for losing tickets. I was on a salary plus commission basis but I'm pretty sure what they used the tickets for.

[ttfitz]

39 minutes ago, shadroch said:

You can deduct your casino losses from any casino winnings. When I worked on a team in Vegas, we had a guy who regularly swept the sports /horse rooms for losing tickets. I was on a salary plus commission basis but I'm pretty sure what they used the tickets for.

Yeah, I was about to say the little bit of gambling I ever did was an occasional scratch-off lottery ticket. I always threw the losing tickets in a shoebox just in case I ever had a bigger winner, so I could deduct the losses against it.

[Math Teacher]

1 hour ago, Shrevvy said:

I was just thinking out loud. You have a gain in the ASM #252. That alone qualifies it for taxes. It has become a "collectible" by virtue that you made money. The IRS wants a piece. 

So let's look at it this way. I bought many Alter Ego magazines when I was still collecting. Assuming that I got my 20% discount from my subscription service, I paid $4.75 for Alter Ego #21. If I turn around and sell this in a lot at $1.25 per magazine, I would be losing $3.50 on each magazine. This $1.25 is not taxable, as I lost money when I sold it. Am I understanding this correctly?

Or, I'm currently trying to sell Daredevil #14 - #36 (2012 - 2014) plus Annual #1 (2012). There are twenty-four books in this lot, and I believe the cover price of these books was $2.50. Again, assuming that I got the regular 20% discount from my subscription service, I paid $48 for those 24 books. Currently, my asking price is $15, which is way too high, as only one person has looked at the listing. But, let's say someone goes crazy and buys these books tonight at my asking price. I bought the books for $48 and sold them for $15. This $15 is not taxable, because I lost money when I sold the lot. Again, is this correct?

Or let's go back to my Flash #1 - #4 Archives sale. Each of these were listed for $49.95, so I paid approximately $160. I sold these four books for $75. This $75 is not taxable, because I lost money when I sold them.

So, a person buys a wedding dress for $500, and later sells it for $250. This $250 is not taxable, but no gain was made, according to @Shrevvy. How are my three examples any different than a person who sells a wedding dress at a loss. I bought those four Archive books to read, which I did. I am now trying to pare down my collection, so I no longer need them. I sell them for $75 on Ebay, but that $75 is taxable because it's comic book-related? That makes absolutely no sense to me.

[vodou]

3 minutes ago, Math Teacher said:

This $1.25 is not taxable, as I lost money when I sold it. Am I understanding this correctly?

Correct.

3 minutes ago, Math Teacher said:

This $15 is not taxable, because I lost money when I sold the lot. Again, is this correct?

Correct.

3 minutes ago, Math Teacher said:

This $75 is not taxable, because I lost money when I sold them.

Correct.

4 minutes ago, Math Teacher said:

How are my three examples any different than a person who sells a wedding dress at a loss.

They are not.

 

[Math Teacher]

So, if you sell anything, even a collectible, for a loss, the sale price does not have to be reported to the IRS?

Well, what will happen in 2022? Let's say I sell a bunch of TPBs, over $600 worth, and I get a 1099-K for that. If I sold all those TPBs at a loss, then the amount reported to the IRS will still be $600, even though it should be $0. Good luck finding an accountant that wants to go through that rigamarole to save declaring $600 worth of profits.

Edited March 15, 2021 by Math Teacher

[Dr. Love]

3 hours ago, Math Teacher said:

Also, I can't imagine that you can't write off your expenses for selling (tape, boxes, and bubble wrap), along with your Ebay fees. All these contribute toward you receiving less profit. So, if you sell Flash Archives for $17.75, and the Ebay fees are $2.13 for that sale, I think you should pay taxes on the net amount ($15.62), because that's what you got to put in your pocket.

Wait, it gets worse. Prior to new tax law in 2018 a hobbyist could itemize expenses such as the ones you mention above on Schedule A, misc deductions. But those were discontinued by law. So expenses don't figure into the mix. 

Forget about supplies. But the kicker is, forget about pressing and slabbing and shipping fees as valid avenues to reduce the gross profit.

Tip of the day - if you're even thinking about declaring yourself as a business, best you have a resale certificate. At the very least you won't have to pay sales tax from HA, CL, CC, and Ebay, once you send them your cert.

[MyNameIsLegion]

1 hour ago, Dr. Love said:

Wait, it gets worse. Prior to new tax law in 2018 a hobbyist could itemize expenses such as the ones you mention above on Schedule A, misc deductions. But those were discontinued by law. So expenses don't figure into the mix. 

Forget about supplies. But the kicker is, forget about pressing and slabbing and shipping fees as valid avenues to reduce the gross profit.

Tip of the day - if you're even thinking about declaring yourself as a business, best you have a resale certificate. At the very least you won't have to pay sales tax from HA, CL, CC, and Ebay, once you send them your cert.

wait, how is shipping a specific items not deductible? As it is, Ebay and Paypal take a cut of the shipping cost.  If I sell for $20, COGs is $10,  fees are $2 and shipping is $3 and I net $5 I have to declare $8 as income? WTH?

Edited March 15, 2021 by MyNameIsLegion

[awakeintheashes]

40 minutes ago, MyNameIsLegion said:

wait, how is shipping a specific items not deductible? As it is, Ebay and Paypal take a cut of the shipping cost.  If I sell for $20, COGs is $10,  fees are $2 and shipping is $3 and I net $5 I have to declare $8 as income? WTH?

it is an expense and can be written off. I don’t want to speak for @Dr. Love, but he may have been referring to Collectible Gains Tax and write offs against it. 

Edited March 15, 2021 by awakeintheashes