New IRS reporting for 2021? 8 8

[fantastic_four]

7 hours ago, vodou said:

8 hours ago, fantastic_four said:

I posted this a few weeks ago--HR Block disagrees with this.  When you enter collectibles losses from the past year into their software it deducts it from your overall income.  If anyone has Turbo Tax I'd be interested to hear if their software does it as well if anyone wants to enter a sample loss in and see if it deducts it from your overall income.

FWIW...Schedule C net loss has unlimited deductibility against ordinary income. It's even true that you can actually be so negative on Schedule C that you can even go negative on your entire joint return (wiping out two incomes). It's magic! and legal!! (as long as your numbers are real and can survive an audit)

Another #win for Schedule C.

Back when I posted someone said you can only deduct $3000 of collectibles losses from overall income.  I tested that in HR Block and it agreed--when I entered a $5000 loss it only deducted $3000 worth of it.  But when I entered a $7000 collectibles gain against a $5000 collectibles loss it did deduct the full loss from the gain, so that $3000 deductible limit only applies to overall income, not collectibles income.

Edited April 16, 2021 by fantastic_four

[fastballspecial]

11 hours ago, manetteska said:

As @fastballspecial said, unless you are doing it wrong, at the simplest level, you are making money/profit selling comics. Those comics from a collection you sold for $0.10 may be a loss, but the rest you sold for a profit make up for that loss and then some.

Once you have your "profit" (which I'll dumb down to Sold Price - Purchase Price), it's all about the deductions. Depending on the state, filings, etc. this can be a myriad of things and can include (but also may not include): comic boxes, bags and boards, shipping supplies, convention admission, food at the convention, and on and on.

On top of that, you have the human factor. Person A can take a "profit" of $1000 and deduct that into $500 profit. Person B can take a "profit" of $1000 and deduct that into $5 profit. For some, this is due to smart accounting and tracking of expenses; for others, this is less of that and more of not owing.

 

[vodou]

On 4/16/2021 at 10:56 AM, vodou said:

FWIW...Schedule C net loss has unlimited deductibility against ordinary income. It's even true that you can actually be so negative on Schedule C that you can even go negative on your entire joint return (wiping out two incomes). It's magic! and legal!! (as long as your numbers are real and can survive an audit)

Another #win for Schedule C.

 

21 hours ago, VikramK said:

By the way - this is why my CPA was saying expenses can’t be counted unless I go the 1099/corp route:

 

https://kb.drakesoftware.com/Site/Browse/15800/1040-Hobby-Expenses

The Tax Cuts and Jobs Act implementations beginning tax year 2018 disallow expenses incurred by hobbies. Income must still be reported. Per the Schedule C instructions, "...a sporadic activity or a hobby does not qualify as a business. To report income from a non-business activity, see the instructions for Schedule 1 (Form 1040), line 8, or Form 1040-NR, line 21." This is Schedule 1, line 21 in Drake18. 

 

Correct, all correct.

That's why I suggested those of you with a tax liability (under current and future tax law) under $1,000 should not bother, just pay the bill and understand "they" rigged the thing against you. Tough luck. The whining...ya'll are trying to pick up nickels in front of steamroller. My Schedule C advice is geared more toward those that were skating all along (perhaps just under the former $20,000 and 200 transactions threshold for 1099-K?) and now can't skate as easily (or at all), thus have a decent tax liability already, and should put the time and (short) money into formalizing the thing as a Schedule C "business". I'll also suggest that with an expansion of reporting under 1099-K there is a reasonable argument to be made for expanding one's personal filing to include the reciprocal Schedule C. If the IRS disagrees with you...you will not go to jail for this! They'll just tell you. Now this last part is just for those that enjoy a new challenge and want to take a run at it for that reason, not because saving $250 in taxes one year makes any sense against digging into tax code for a few weeks. However, if you're already paying someone else to do your taxes, unless exceptionally complex (meaning: he's saving you 10x what you're paying him or you're earning 10x what he is by working more hours at a higher rate than his) then...it's not cost effective, the headache, know thyself and this ain't you to begin with  

17 hours ago, fantastic_four said:

Back when I posted someone said you can only deduct $3000 of collectibles losses from overall income.  I tested that in HR Block and it agreed--when I entered a $5000 loss it only deducted $3000 worth of it.  But when I entered a $7000 collectibles gain against a $5000 collectibles loss it did deduct the full loss from the gain, so that $3000 deductible limit only applies to overall income, not collectibles income.

You're talking Schedule D. Your comment has nothing to do with Schedule C. Got back to first quote (me) above.

[WEBHEAD]

23 PAGES......much of this is about ebay and other venues..... so if we sell all out books on CGC  are they going to send us a 1099?   I think the small time hobby collector still gets a pass IMHO

[ADAMANTIUM]

1 hour ago, WEBHEAD said:

23 PAGES......much of this is about ebay and other venues..... so if we sell all out books on CGC  are they going to send us a 1099?   I think the small time hobby collector still gets a pass IMHO

PayPal will send you one more that likely for selling on goods and services.......

[Frost451]

I quit selling on eBay for good in 2021. It’s not just the new tax laws, their fees are stupid high.  13.5% fee on top of 28% capital gains tax.  Do the math there, you sell high value comic let’s say hulk  181 9.0 and it sells for $13,000 that eBay fee is $1755. Let’s also assume you bought it last year when prices were still reasonable for $5500.  You end up with $5745 profit that you then have to pay a 28% tax on which is $1608.60 so your actual profit is $4136.40  so between the government and eBay they are taking $3363.30 out of your pocket.  Like that’s almost half your profit gone.  At that point what’s the point of even selling.   Flippers will be in for a real surprise when they go to file their 2021 taxes and end up getting a 1099.  Also they don’t know what you paid for your items and so are reporting the entire amount of the transaction to the IRS.  

[shadroch]

Twenty three pages and people still aren't getting it. Impressive.

[WolverineX]

On 4/16/2021 at 10:52 AM, manetteska said:

As @fastballspecial said, unless you are doing it wrong, at the simplest level, you are making money/profit selling comics. Those comics from a collection you sold for $0.10 may be a loss, but the rest you sold for a profit make up for that loss and then some.

Once you have your "profit" (which I'll dumb down to Sold Price - Purchase Price), it's all about the deductions. Depending on the state, filings, etc. this can be a myriad of things and can include (but also may not include): comic boxes, bags and boards, shipping supplies, convention admission, food at the convention, and on and on.

On top of that, you have the human factor. Person A can take a "profit" of $1000 and deduct that into $500 profit. Person B can take a "profit" of $1000 and deduct that into $5 profit. For some, this is due to smart accounting and tracking of expenses; for others, this is less of that and more of not owing.

Nice.  I'm  going to get my corporate lawyers to incorporate my business in Ireland and tax domiciled in Bermuda to get the tax free loophole that Google uses to make their 13 billion profit tax free.  Seems like a better move...

https://www.irishtimes.com/business/technology/google-used-double-irish-to-shift-75-4bn-in-profits-out-of-ireland-1.4540519

Edited April 18, 2021 by Wolverinex

[WEBHEAD]

How will Paypal know a sale in CGC is a sale?   it just shows up as a payment to you?     I  have 180 slabs  I have no idea what I paid for them....this is going to end up being a read herring  

 

[Key Largo Comics]

1 hour ago, WEBHEAD said:

How will Paypal know a sale in CGC is a sale?   it just shows up as a payment to you?     I  have 180 slabs  I have no idea what I paid for them....this is going to end up being a read herring  

 

They aren't going to know. They will just send you a 1099 for all of your sales proceeds.

[jharvey]

13 hours ago, Frost451 said:

I quit selling on eBay for good in 2021. It’s not just the new tax laws, their fees are stupid high.  13.5% fee on top of 28% capital gains tax.  Do the math there, you sell high value comic let’s say hulk  181 9.0 and it sells for $13,000 that eBay fee is $1755. Let’s also assume you bought it last year when prices were still reasonable for $5500.  You end up with $5745 profit that you then have to pay a 28% tax on which is $1608.60 so your actual profit is $4136.40  so between the government and eBay they are taking $3363.30 out of your pocket.  Like that’s almost half your profit gone.  At that point what’s the point of even selling.   Flippers will be in for a real surprise when they go to file their 2021 taxes and end up getting a 1099.  Also they don’t know what you paid for your items and so are reporting the entire amount of the transaction to the IRS.  

Except for the fact that eBay has a maximum cap on fees for a single transaction; except for the fact that most people won't pay the 28% rate because you actually pay the LOWER of 28% or your ordinary income tax rate (based on your tax bracket); except for the fact that if you file a Sch C you can deduct expenses; except for the fact that if you file a Sch C you can take a 20% QBI deduction. Your math is way, way off sir.

[snitzer]

15 hours ago, ADAMANTIUM said:

PayPal will send you one more that likely for selling on goods and services.......

Exactly how it works now in states where this nonsense is already present. PayPal issues it.

[OuterBanks]

18 hours ago, WEBHEAD said:

23 PAGES......much of this is about ebay and other venues..... so if we sell all out books on CGC  are they going to send us a 1099?   I think the small time hobby collector still gets a pass IMHO

I haven’t gotten 1099’s from consignment - I suppose if someone uses multiple auction houses and consignment you could go under the radar but I’d still think that’s risky because there are anti money laundering schemes in place that track all transactions > $10k into your checking account

[OuterBanks]

14 hours ago, Frost451 said:

I quit selling on eBay for good in 2021. It’s not just the new tax laws, their fees are stupid high.  13.5% fee on top of 28% capital gains tax.  Do the math there, you sell high value comic let’s say hulk  181 9.0 and it sells for $13,000 that eBay fee is $1755. Let’s also assume you bought it last year when prices were still reasonable for $5500.  You end up with $5745 profit that you then have to pay a 28% tax on which is $1608.60 so your actual profit is $4136.40  so between the government and eBay they are taking $3363.30 out of your pocket.  Like that’s almost half your profit gone.  At that point what’s the point of even selling.   Flippers will be in for a real surprise when they go to file their 2021 taxes and end up getting a 1099.  Also they don’t know what you paid for your items and so are reporting the entire amount of the transaction to the IRS.  

 

^^This - 

And imagine if you had put that into a tax deferred IRA or done a “reverse ROTH” (reverse ROTH means you pay ZERO taxes) and bought the S&P500 - up more than 70% from the lows of last year.  Collectible suck as an investment because of the fees & taxes (the cap gain is actually 31% if you earn more than 200K total income).  

I suspect the collectors market will pop if the IRS pays a lot of attention to it.  I got a feeling they won’t though. I don’t think even the capital gains tax stuff is happening - sounds it like it died in the Senate.

 

[manetteska]

2 hours ago, WEBHEAD said:

How will Paypal know a sale in CGC is a sale?   it just shows up as a payment to you?     I  have 180 slabs  I have no idea what I paid for them....this is going to end up being a read herring  

 

Wrong. No red herring here. 

[manetteska]

13 hours ago, shadroch said:

Twenty three pages and people still aren't getting it. Impressive.

I’d hope the guy who had a couple-few chats with the IRS gets it. 

[Vince G]

I have only been selling for a few years now but even though none of the online sites have sent me a 1099, I went ahead and reported anyway to be on the safe side.  The advice I'd been given as a small time collector/seller/buyer (hobbyist, not a business) is that as long as you show a gain, you probably won't run into a problem.  Then again, for many sellers, especially those who are buying and selling all the time, this rule/guidance may not apply.  And yes, of course, any transaction over 10k is automatically reported so that definitely needs to be on your return.  It can certainly be a nightmare to dig through records and determine exactly how much you paid for individual books but in some cases, estimating total cost might be the way to go.  Any books held for more than 1 year are considered long term and are taxed at the long term capital gain rate of 15% (or i believe 20% in certain instances).

[WEBHEAD]

well since I buy more then I sell.....let's see how all the auction sites who charge fees that are so ridiculous  I ask it again someone sends me $$$ for a book on this site.  There is no marker that it is a comic, it might be a loan from a friend, Then again I think most of those chattering are in business  You'd think that Ebay CGC Paypal would advise everyone. Except for this thread it's all I've heard/

[Vince G]

11 minutes ago, WEBHEAD said:

well since I buy more then I sell.....let's see how all the auction sites who charge fees that are so ridiculous  I ask it again someone sends me $$$ for a book on this site.  There is no marker that it is a comic, it might be a loan from a friend, Then again I think most of those chattering are in business  You'd think that Ebay CGC Paypal would advise everyone. Except for this thread it's all I've heard/

I think private sales give you more leeway, meaning, you can probably get away without reporting pending how you are receiving the funds.  Then again, I am not entirely sure.  My one big transaction was done on a private sale.  It was over 10k, so I absolutely felt I needed to report that and be completely accurate in that reporting.  No problem thus far.

[Vince G]

15 minutes ago, WEBHEAD said:

well since I buy more then I sell.....let's see how all the auction sites who charge fees that are so ridiculous  I ask it again someone sends me $$$ for a book on this site.  There is no marker that it is a comic, it might be a loan from a friend, Then again I think most of those chattering are in business  You'd think that Ebay CGC Paypal would advise everyone. Except for this thread it's all I've heard/

Oh, and side note.  My tax preparer, who has been doing this for 30+ years, tells me most people don’t report this type of income.  The irs can’t audit everyone, but she says that even though it’s not likely that any individual would be the target of an audit, it’s still a roll of the dice.  Her advice, better to report and show a gain, even a small gain if possible.  Again, every situation will be unique so it’s buyer beware on this advice.