New IRS reporting for 2021? 8 8

[Shrevvy]

2 hours ago, Math Teacher said:

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.

That's my point. You will get a 1099 but have no taxable income in the above examples. By giving you the 1099, the IRS says you have income and it is up to you to prove that you do not. Guilty until proven innocent. 

Many will put the full amount of the 1099 "income" on their return and pay taxes on that amount despite having zero taxable income (like your examples above). 

[SBRobin]

On 3/8/2021 at 2:23 PM, Wolverinex said:

I agree that you should always pay your taxes.

However, nickel and diming the little guy is not going to pull us out of this huge deficit. 

 

The huge corporations and billionaires need be taxed appropriately but  they are rich and control the goverment so C’est la vie, n’est pas

To the contrary, it sounds like you only agree you should "always" pay your taxes as long as you are not "the little guy." If you agree everyone should pay taxes then a 1099 makes no difference because you're paying them anyway. The only people this affects are those that are lying on their taxes.

[Dr. Love]

1 hour ago, awakeintheashes said:

it is an expense and can be written off. 

https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-expenses-from-hobby.html

"Hobbies are fun. They can also cost money. Sometimes they can make money. If you have an expensive hobby, can you deduct any of your expenses? Starting in 2018 after the passage of the Tax Cuts and Jobs Act (HR 1, “TCJA”), the short answer is “no.”

For tax purposes, a hobby is an activity you engage in primarily for a purpose other than to make a profit. The IRS commonly classifies inherently “fun” activities like creating art, photography, crafts, writing, antique or stamp collecting, or training and showing dogs or horses as hobbies. Even if you occasionally make money doing such an activity, it is a hobby if your prime motivation is having fun, not earning a profit.'

Because hobbies are not businesses, hobbyists have never been allowed to take the tax deductions to which business people are entitled. However, for decades the tax law did permit hobbyists to claim as an itemized deduction their hobby-related expenses up to the amount of income the hobby earned during the year. This was not a very generous deduction because of the limitations on itemized deductions, but it was better than nothing.

Unfortunately for people who earn income from hobbies, the TCJA completely eliminates the itemized deduction for hobby expenses, along with all other miscellaneous itemized deductions. The prohibition on deducting these expenses goes into effect for 2018 and continues through 2025. This means that taxpayers will not be able to deduct any expenses they earn from hobbies during these years, but they still have to report and pay tax on any income they earn from a hobby! The deduction is scheduled to return in 2026.

Prior to passage of the TCJA, hobby expenses were deductible only as a Miscellaneous Itemized Deduction on IRS Schedule A. This meant they could be deducted only by taxpayers who itemized their personal deductions. Moreover, hobby expenses were deductible only if, and to the extent, they exceeded 2% of the hobbyist’s adjusted gross income (total income minus business expenses and a few other expenses). And, such expenses were deductible only up to the amount of hobby income--if you had no income from a hobby, you got no deduction."

[Shrevvy]

32 minutes ago, SBRobin said:

To the contrary, it sounds like you only agree you should "always" pay your taxes as long as you are not "the little guy." If you agree everyone should pay taxes then a 1099 makes no difference because you're paying them anyway. The only people this affects are those that are lying on their taxes.

No, it does not. That is what is so frustrating. See Math Teacher's example above. He has no taxable income, but will receive a 1099. The IRS says you have income, prove to me you do not. There will be many people like that. Many will be coerced (through fear of facing the wrath of the IRS) to pay taxes they do not owe. It is an over reach.

[WolverineX]

17 minutes ago, SBRobin said:

To the contrary, it sounds like you only agree you should "always" pay your taxes as long as you are not "the little guy." If you agree everyone should pay taxes then a 1099 makes no difference because you're paying them anyway. The only people this affects are those that are lying on their taxes.

Incorrect, everyone should pay their taxes including the little guys. 

However, this new bill is only going to cause a lot of additional paperwork and headache for middle and lower income people  as well as barely impact the deficit.  

If you want to pay off 1.9 trillion dollars, the billionaires and corporations should pay appropriate taxes instead of using shell companies/offshore companies or tax avoidance loop holes through their expensive tax lawyers to avoid paying.  Plus, they gained the most during this pandemic.   That's my point.  

 

 

 

 

 

 

[WolverineX]

It's like people can't appropriately fathom how much a billion really is.

100,000 seconds is 1.1 days

1 million seconds is 11 days

1 billion seconds is 31 YEARS

Billionaires don't need you to defend them. They are rich enough to take care of themselves.  

 

 

 

Edited March 16, 2021 by Wolverinex

[troydivision1]

Question adjacent to a topic in a thread re: manipulating GPA data -
Would it be probable someone will lower their taxes by selling [insert high dollar item here] to a friend at a loss through a documented transaction on eBay?

[awakeintheashes]

27 minutes ago, Dr. Love said:

The IRS commonly classifies inherently “fun” activities like creating art, photography, crafts, writing, antique or stamp collecting, or training and showing dogs or horses as hobbies. Even if you occasionally make money doing such an activity, it is a hobby if your prime motivation is having fun, not earning a profit.'

I’m not saying you’re wrong, and I’ll let the tax lawyers weigh in on this, but that seems like a very hard-to-prove definition.

I can see if you wrote off expenses for consecutive years and could not show a profit, then maybe the IRS will label what you are doing as a hobby, but the definition provided above is very hard to prove. 

[MyNameIsLegion]

33 minutes ago, Shrevvy said:

No, it does not. That is what is so frustrating. See Math Teacher's example above. He has no taxable income, but will receive a 1099. The IRS says you have income, prove to me you do not. There will be many people like that. Many will be coerced (through fear of facing the wrath of the IRS) to pay taxes they do not owe. It is an over reach.

exactly. If Ebay's 1099 says you were paid $1000, and you declare $0 extra income because you were reselling the kids old toys or crib or sports equipments, exactly where is it that you document this?  It's not an itemized deduction. So what substantiates the tax payers assertion they anything to report that's less than the 1099K????? 

[awakeintheashes]

9 minutes ago, MyNameIsLegion said:

exactly. If Ebay's 1099 says you were paid $1000, and you declare $0 extra income because you were reselling the kids old toys or crib or sports equipments, exactly where is it that you document this?  It's not an itemized deduction. So what substantiates the tax payers assertion they anything to report that's less than the 1099K????? 

Your First Question: I believe you’d document it your Schedule C.

Second Question: An audit

Edited March 16, 2021 by awakeintheashes

[THE_BEYONDER]

40 minutes ago, Wolverinex said:

It's like people can't appropriately fathom how much a billion really is.

100,000 seconds is 16 minutes

1 million seconds is 11 days

1 billion seconds is 31 YEARS

Billionaires don't need you to defend them. They are rich enough to take care of themselves.  

 

 

 

How many times does 100,000 go into a million? 

[Math Teacher]

39 minutes ago, Shrevvy said:

Many will be coerced (through fear of facing the wrath of the IRS) to pay taxes they do not owe. It is an over reach.

When we received a tax bill of $26,000+ in 2018, we immediately hired an attorney to help us. The attorney said the IRS routinely sends out these notices without taking any time to look at the documents. And, he said, many people just go ahead and pay the amount because of their fear of the IRS and their wanting to just get it over with.

Our attorney fought for almost 2 years, and we finally got the amount due down to $3,500. We asked our attorney to keep working on it, as he had told us that we didn't owe any money. Well, the IRS continued to apply fines and interest until the amount we owed was $4,400. At that point, our attorney said he didn't see that he could make any further progress, so we just wrote the IRS a check.

Afterwards, I got in contact with my congresswoman, Cindy Axne of Iowa. I told her aide what had been going on. He asked me to come to the office in Council Bluffs so he could photocopy all of our supporting documents. Less than two months later, the IRS sent us a check for $4,400, plus interest. I told Ms. Axne that I believed that the IRS should follow the rule of the land, which is "innocent until proven guilty." She said she had dealt with numerous IRS complaints since she had taken office, and the way the IRS can act is always brought up.

So, if I murder 10 people, I get the benefit of the doubt; I'm innocent until proven guilty. However, if I receive a 1099-K from Ebay stating that I had earned $750 in profit, I have to prove to the IRS that I didn't earn all that as profit.

Look, I understand the IRS has a tough job. None of us enjoy paying taxes, but that's part of living in a civilized society. What I really don't like is how the IRS goes after the little guys who can't afford to pay an attorney to fight on their behalf. However, the big spenders can afford to hire an army of attorneys and drag out the case for years.

[rapid08]

21 hours ago, Math Teacher said:

When we received a tax bill of $26,000+ in 2018, we immediately hired an attorney to help us. The attorney said the IRS routinely sends out these notices without taking any time to look at the documents. And, he said, many people just go ahead and pay the amount because of their fear of the IRS and their wanting to just get it over with.

Our attorney fought for almost 2 years, and we finally got the amount due down to $3,500. We asked our attorney to keep working on it, as he had told us that we didn't owe any money. Well, the IRS continued to apply fines and interest until the amount we owed was $4,400. At that point, our attorney said he didn't see that he could make any further progress, so we just wrote the IRS a check.

Afterwards, I got in contact with my congresswoman, Cindy Axne of Iowa. I told her aide what had been going on. He asked me to come to the office in Council Bluffs so he could photocopy all of our supporting documents. Less than two months later, the IRS sent us a check for $4,400, plus interest. I told Ms. Axne that I believed that the IRS should follow the rule of the land, which is "innocent until proven guilty." She said she had dealt with numerous IRS complaints since she had taken office, and the way the IRS can act is always brought up.

So, if I murder 10 people, I get the benefit of the doubt; I'm innocent until proven guilty. However, if I receive a 1099-K from Ebay stating that I had earned $750 in profit, I have to prove to the IRS that I didn't earn all that as profit.

Look, I understand the IRS has a tough job. None of us enjoy paying taxes, but that's part of living in a civilized society. What I really don't like is how the IRS goes after the little guys who can't afford to pay an attorney to fight on their behalf. However, the big spenders can afford to hire an army of attorneys and drag out the case for years.

The exact same thing happened to me when I sold off my collection in 17. I filed my taxes with the proper documentation as to what in the 1099k was profit vs gross but sure enough I ended up with a notice from the IRS. They wanted an extra 30k out me! I had to hire a $400/hr lawyer and after a year of fighting the IRS said nevermind. My lawyer indicated that it was fairly routine for tax filings to go through some automated algorithm / process that doesn't do a proper job of examining filings however, notices go off that. It's not until much later in the fight that an agent actually looks at the paperwork.  It's pretty gross. Meanwhile billionaires and corporations get to hide their money in the safety of the Cayman islands and nobody bats an eye. This new law is going to create a messy mess show almost for sure.

Edited March 16, 2021 by rapid08

[KPR Comics]

7 hours ago, THE_BEYONDER said:

How many times does 100,000 go into a million? 

Lol.  And how many seconds in a minute?   None of this math is correct.

[MyNameIsLegion]

4 hours ago, rapid08 said:

The exact same thing happened to me when I sold off my collection in 17. I filed my taxes with the proper documentation as to what in the 1099k was profit vs gross but sure enough I ended up with a notice from the IRS. I had to hire a $400/hr lawyer and after a year of fighting the IRS said nevermind. My lawyer indicated that it was fairly routine for tax filings to go through some automated algorithm / process that doesn't do a proper job of examining filings however, notices go off that. It's not until much later in the fight that an agent actually looks at the paperwork.  It's pretty gross. Meanwhile billionaires and corporations get to hide their money in the safety of the Cayman islands and nobody bats an eye. This new law is going to create a messy mess show almost for sure.

so this is exactly what I feared would happen, and this is under the existing rules.  At a $600 threshold can you imagine the chaos? Pretty much if A (the amount of the 1099K) + B (the amount of additional income from the source of the 1099K declared) does not = 2 X A (or more) then they are just going to stick it to you. (I know that sounded clumsy, but it appears that A-B=C (for schedule C doesn't seem to be good enough))  And just how far into the future are you supposed to hold onto these records just in case they come snooping around?  7 years? 10 Years? Jesus.

Edited March 16, 2021 by MyNameIsLegion

[Shrevvy]

9 hours ago, Math Teacher said:

When we received a tax bill of $26,000+ in 2018, we immediately hired an attorney to help us. The attorney said the IRS routinely sends out these notices without taking any time to look at the documents. And, he said, many people just go ahead and pay the amount because of their fear of the IRS and their wanting to just get it over with.

 

That sucks. We have had a few instances like that, but not to your degree. We are going through one now for our business, but at the state level. The IRS letters are very threatening. 

I do not wish that experience upon anyone.

[apollobuzz]

12 hours ago, Wolverinex said:

It's like people can't appropriately fathom how much a billion really is.

100,000 seconds is 16 minutes

1 million seconds is 11 days

1 billion seconds is 31 YEARS

Billionaires don't need you to defend them. They are rich enough to take care of themselves.  

 

 

 

1,000 seconds is about 16 minutes, but yeah, I get your point.

[WolverineX]

11 hours ago, THE_BEYONDER said:

How many times does 100,000 go into a million? 

 

3 hours ago, KPR Comics said:

Lol.  And how many seconds in a minute?   None of this math is correct.

 

4 minutes ago, apollobuzz said:

1,000 seconds is about 16 minutes, but yeah, I get your point.

You are correct.  I typed in too many zeros in my calculator.   100,000 seconds = 1.1 days.  The rest of it is correct.

[the blob]

12 hours ago, Wolverinex said:

Incorrect, everyone should pay their taxes including the little guys. 

However, this new bill is only going to cause a lot of additional paperwork and headache for middle and lower income people  as well as barely impact the deficit.  

If you want to pay off 1.9 trillion dollars, the billionaires and corporations should pay appropriate taxes instead of using shell companies/offshore companies or tax avoidance loop holes through their expensive tax lawyers to avoid paying.  Plus, they gained the most during this pandemic.   That's my point.  

 

 

 

 

 

 

I still haven't figured out how Bloomberg has such a high net worth. His company has $10 billion a year in revenues, but I have no idea what the profits are, I can't imagine even half of that. But i guess that would justify his vauation. I am amazed he can still rent out his terminals for so much per month, and that is 75% of the revenue. You'd think the same information could be gotten cheaper elsewhere. But if you are a trader making billions in trades a year you don't want to cut corners on something like that.

 

[the blob]

12 hours ago, awakeintheashes said:

I’m not saying you’re wrong, and I’ll let the tax lawyers weigh in on this, but that seems like a very hard-to-prove definition.

I can see if you wrote off expenses for consecutive years and could not show a profit, then maybe the IRS will label what you are doing as a hobby, but the definition provided above is very hard to prove. 

that's how they would go after you in the past. show a loss, particularly the majority of the years, and they'd call you a hobby.

so, now, we want to be avoid being called a hobby, at the end of the day you have a $10K 1099 and claim $50 in profits, you might be raising red flags. But $200 or $300? That is 2-3%. That's a pretty normal number for a relatively low profitability business like grocery stores, which are 2.2% -- https://www.biz2credit.com/blog/2020/05/22/grocery-store-profit-margins-and-how-to-calculate-yours/    Given the way most comic shop owners live, I'd think comics are similar low profit centers. Of course, they're imposing a huge record keeping PITA on folks to collect an extra $0-30 in taxes if the person is not a high income earner, maybe $60-90 if they are.

 

 

Edited March 16, 2021 by the blob