New IRS reporting for 2021? 8 8

[awakeintheashes]

7 minutes ago, the blob said:

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.

That's what I thought. Nothing has changed on this front, correct?

Edited March 16, 2021 by awakeintheashes

[the blob]

1 minute ago, awakeintheashes said:

That's what I thought. Nothing has changed on this front, correct?

https://www.kiplinger.com/article/retirement/t054-c000-s004-retirees-no-tax-deduction-for-hobby-losses.html

In sum, yes and no. I am guessing now any year where claimed expenses wipe out all sales could create the claim you are a hobby. I think the net of this is folks who do a few thousand in sales a year and get a 1099 should probably claim some profits, and, if necessary, pay a few bucks in taxes. Like I say above, there is no reason to assume high profit margins when you have entire industries like supermarkets operating on a 2% margin. 

I'm just annoyed, for a solid 5 or so years I paid $200-300 a month for a storage room, but that was almost 15 years ago. Realistically, every book i kept in storage then should have those costs attached to their cost basis. documenting this is a whole other issue. and that's the problem with all of this.

[awakeintheashes]

1 minute ago, the blob said:

documenting this is a whole other issue. and that's the problem with all of this.

Agree. That's where the real issue is here. 

[the blob]

I wonder if two activities can get merged? I am a budding portrait painter of imaginary psychotic clowns. Those art materials cost money. Needless to say, there isn't a market for my masterpieces. Not yet at least. Should clowns and comics all be merged into one business, creating even more deductions, or do i have to keep the clowns and comics separate? Does it help if the original inspiration for the clowns was the Joker?

[Dr. Love]

2 hours ago, the blob said:

 there is no reason to assume high profit margins

Unfortunately, for comics, the default assumption is unbelievable profit, since the default cost of goods is the cover price. That, or you've got an invoice verifying the purchase price. It's one or the other...IF you get called on it.

[awakeintheashes]

15 minutes ago, Dr. Love said:

Unfortunately, for comics, the default assumption is unbelievable profit, since the default cost of goods is the cover price. That, or you've got an invoice verifying the purchase price. It's one or the other...IF you get called on it.

I guess there is an upside from my collection being sold off a long time ago. For almost everything I've purchased to rebuild it, I've kept the documentation.  

[the blob]

18 minutes ago, Dr. Love said:

Unfortunately, for comics, the default assumption is unbelievable profit, since the default cost of goods is the cover price. That, or you've got an invoice verifying the purchase price. It's one or the other...IF you get called on it.

tell that to all the $4.99 cover price comics getting sold for $1-$2... I have comics in old bags with crazy price stickers on them, does that count?

[the blob]

19 minutes ago, Dr. Love said:

Unfortunately, for comics, the default assumption is unbelievable profit, since the default cost of goods is the cover price. That, or you've got an invoice verifying the purchase price. It's one or the other...IF you get called on it.

if your primary buying venue is ebay or here then you have paypal purchase records

[Darkwing7869]

5 hours ago, the blob said:

if your primary buying venue is ebay or here then you have paypal purchase records

eBay purchase records only date back a couple years at best. Paypal I believe is 3 years. Everything prior to that is not recoverable as far I as know. 

[rapid08]

I used ebay emails dating back 10 years to do my accounting. I think ebay still sends you emails when you buy and sell something 

[blazingbob]

Just another nickel and dime notice to pay for those who make more money on unemployment then working - We received your State Unemployment Insurance rate notice from your state and updated your account. Your NY rate was updated from 0.6% to 2.1%, effective on 1/1/2021

[jimjum12]

If you plan on continuing, and your state is one that collects sales taxes, You should look into getting a business license for home based internet sales. This will relieve you of paying sales tax on your inventory. In many states, just claiming you have a business is not enough. Around here the License for gross sales below 50K is only around 50 dollars. As it goes above 100K it becomes percentage based. 

  Many things can be written off, and remember, the write offs are applied to the profit rather than the gross, so their effect can be helpful. You can write off internet, office space, gas, expenses while going to shows, supplies, shipping, Accounting expenses, the cost of the Business License, off street labor ... but you DO need receipts or records. Using a checkbook or card, dedicated to the business only, helps. I got an unexpected 1099 about ten years ago and was terrified and started scrambling ... very little resources that I could find that shed much light. I'm used to it now, and sometimes my friend's go "... bummer, you had to PAY taxes'" ... but in my mind, I know that means I made money.... plus helped fix a couple of potholes.  GOD BLESS...

-jimbo(a friend of jesus)

[jcjames]

Edit

Edited March 17, 2021 by jcjames
Edit

[jcjames]

2 hours ago, jimjum12 said:

If you plan on continuing, and your state is one that collects sales taxes, You should look into getting a business license for home based internet sales. This will relieve you of paying sales tax on your inventory. In many states, just claiming you have a business is not enough. Around here the License for gross sales below 50K is only around 50 dollars. As it goes above 100K it becomes percentage based. 

  Many things can be written off, and remember, the write offs are applied to the profit rather than the gross, so their effect can be helpful. You can write off internet, office space, gas, expenses while going to shows, supplies, shipping, Accounting expenses, the cost of the Business License, off street labor ... but you DO need receipts or records. Using a checkbook or card, dedicated to the business only, helps. I got an unexpected 1099 about ten years ago and was terrified and started scrambling ... very little resources that I could find that shed much light. I'm used to it now, and sometimes my friend's go "... bummer, you had to PAY taxes'" ... but in my mind, I know that means I made money.... plus helped fix a couple of potholes.  GOD BLESS...

-jimbo(a friend of jesus)

Useful info as always. Thank y'sir. 

 

[WoWitHurts]

On 3/15/2021 at 7:49 PM, 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.  

 

 

 

 

 

 

Anytime the word Fairness comes up in government someone is in trouble lol.

[ProcessedMeatMan]

Would an actual receipt be necessary to prove a purchase or sale? 

I've tracked every comic related purchase I've made for the last six years in Excel. But I don't save receipts. I just mark what I bought, date, purchase price, etc and if I sell something, record the date, sale location, sold price, fees and shipping costs. I keep an annual tally with a goal of at least breaking even. I rarely turn a profit. 

I'll probably be fine with this tax thing, but I buy and sell a lot. Sometimes large purchases, sometimes cash. If I don't have individual receipts for those, I assume my little excel sheet won't matter to an IRS agent without documentation?

[ttfitz]

14 hours ago, the blob said:

In sum, yes and no. I am guessing now any year where claimed expenses wipe out all sales could create the claim you are a hobby. I think the net of this is folks who do a few thousand in sales a year and get a 1099 should probably claim some profits, and, if necessary, pay a few bucks in taxes. Like I say above, there is no reason to assume high profit margins when you have entire industries like supermarkets operating on a 2% margin. 

In a rational world, it would make sense that when the threshhold for issuing a 1099-K dropped from $20k in sales to $600 in sales, the likelihood is that a lot of those issued would be for the occasional "online garage sale" type people, and the IRS would recognize that a lot of the time, that's going to be a zero profit venture. After all, the IRS page on the 1099-K says "A Form 1099-K includes the gross amount of all reportable payment transactions." (emphasis added)

OTOH, this is the IRS we are talking about, so maybe not a rational world. OTOOH, spending time messing around with a bunch of $600 1099-K people doesn't seem to be a productive use of resources. 

[ttfitz]

4 hours ago, jimjum12 said:

Around here the License for gross sales below 50K is only around 50 dollars. As it goes above 100K it becomes percentage based. 

About 25 years ago, here in Prince William County, VA, I had to get a business license when I started self-employed consulting, and it was from dollar one. It has changed over the years, and now if you have gross receipts under $500,000, you still are supposed to have a license, but at no cost. That would have been a whole lot easier to deal with, along with much cheaper.

[MyNameIsLegion]

2 hours ago, ProcessedMeatMan said:

Would an actual receipt be necessary to prove a purchase or sale? 

I've tracked every comic related purchase I've made for the last six years in Excel. But I don't save receipts. I just mark what I bought, date, purchase price, etc and if I sell something, record the date, sale location, sold price, fees and shipping costs. I keep an annual tally with a goal of at least breaking even. I rarely turn a profit. 

I'll probably be fine with this tax thing, but I buy and sell a lot. Sometimes large purchases, sometimes cash. If I don't have individual receipts for those, I assume my little excel sheet won't matter to an IRS agent without documentation?

this right here....

[rapid08]

16 hours ago, ProcessedMeatMan said:

Would an actual receipt be necessary to prove a purchase or sale? 

I've tracked every comic related purchase I've made for the last six years in Excel. But I don't save receipts. I just mark what I bought, date, purchase price, etc and if I sell something, record the date, sale location, sold price, fees and shipping costs. I keep an annual tally with a goal of at least breaking even. I rarely turn a profit. 

I'll probably be fine with this tax thing, but I buy and sell a lot. Sometimes large purchases, sometimes cash. If I don't have individual receipts for those, I assume my little excel sheet won't matter to an IRS agent without documentation?

I'm not a lawyer so don't take this as advice but I did ask my lawyer that question since there were few books I had lost track of but he said IRS would be ok with estimates. Again, my filing was done as a hobbyist and not a business so take what I said with a grain of salt. I'm pretty sure if the IRS can establish that you are a business then they would require documentation for a full audit.

Again, I'm not a lawyer and what I said should not be considered legal advice

Edited March 17, 2021 by rapid08