1099

[mylissa]

Hello, just started selling on eBay this February 2022, heard about the n ew tax and stopped. I am very frustrated by others on this site accusing people on not claiming income. I have no problem paying taxes on the thought if I don't have to pay taxes I made no money. Everything I have sold on Ebay has been at a loss. I am classified "a hobbiest", whatever that means, and can not deduct packaging, shipping supplies, listing fees, or anything else (as far as I am understanding). I know its shocking, but I do not have the receipt for a magazines I bought 20 years ago,  the pryex I bought 10 or 15 years ago,( hell I don't remember when I bought it, but I know I paid more than $7.00) , or the McDonald playset purchased at a store that even exist anymore. I go then to a eBay chat and I feel like everyone is calling names , writing that I avoid paying taxes, because I question the legality of being taxed twice. 

[dnasilver]

A 1099 does not mean you owe or pay tax. As far as hobby deductions, the last administration made those changes. There is no new tax law since the giveaway a few years ago to the ultra rich. FYI every magazine as the value right on it. So you are not being taxed illegally, since everything is at a loss - zero tax due for you!

[glasser]

I think a lot of sellers like you are stuck between a rock and hard place.  One of the great services eBay provides is allowing people to sell things they no longer need and maybe recoup some of the money. 

I think the guidance about valuing things you bought in the past is a bit vague. If you can find some way to document a reasonable cost that might work (check with your tax expert).  BTW. if the magazine has a cover price that's probably what you paid.

eBay should do a better job helping people understand how this all works.

[donsdetour]

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@mylissa wrote:

Hello, just started selling on eBay this February 2022, heard about the n ew tax and stopped. I am very frustrated by others on this site accusing people on not claiming income. I have no problem paying taxes on the thought if I don't have to pay taxes I made no money. Everything I have sold on Ebay has been at a loss. I am classified "a hobbiest", whatever that means, and can not deduct packaging, shipping supplies, listing fees, or anything else (as far as I am understanding). I know its shocking, but I do not have the receipt for a magazines I bought 20 years ago,  the pryex I bought 10 or 15 years ago,( hell I don't remember when I bought it, but I know I paid more than $7.00) , or the McDonald playset purchased at a store that even exist anymore. I go then to a eBay chat and I feel like everyone is calling names , writing that I avoid paying taxes, because I question the legality of being taxed twice. 

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All it means is more work for you due to you now have to admit receiving the amounts of money from ebay sales: Note eBay keeps records for a long time.

Your choice if you desire to stay hobby and lose right offs that easily can be applied..

Get a business license and continue selling. Keep books.

[farmalljr]

Well, like it or not, that's the tax laws we have. You can sell a few things a year and fly under the radar. Sell more and the tax man WILL be involved. 

When you buy something for personal use, and later want to sell it, the IRS looks at it like this:

You bought the item for personal use. All money paid for it was spent for the "thing". When you decide later to sell it, it's ALL profit since you paid for the use of the item. Now you are making a "profit" because there is life or value left in the used thing you are selling. Most people that buy a blender, throw it away when they are done with it or it breaks. 

[monica-sells]

"...You bought the item for personal use. All money paid for it was spent for the "thing". When you decide later to sell it, it's ALL profit since you paid for the use of the item...."

Respectfully asking, is this your opinion, or in fact a statement from your tax advisor.....I only ask because (if I am reading this right) my tax person has informed me differently.....

If I decide to sell the "thing" I bought 5 years ago for 100.00, and I have a receipt showing my purchase ("a.k.a. "bill of sale") and sell said "thing" for 25.00, it is not "profit", it's a zero-sum number depending on my filing status. She took the detailing of 'why' a lot further than just that analogy, but it is not profit in most cases like is being described...

I suspect (hope) in the next few months, the IRS will help define this obvious gray area of determining acquisition costs......

[klhmdg]

You are not being taxed twice.

When you 1st bought the item it was a "sales tax"

Now that you sell it it is an "income tax"

Depending on your state you may or may not need a business license. 

You can choose to be a hobbiest or a business. IF you choose to be a business you can write off a lot of expenses.

It is best to look at the IRS classifications of a business seller or a hobbiest.

There is nothing illegal about being charged when you buy an item and when you sell it. 2 different taxes.

[dentalsales4u]

When they purchased it, they paid for it with "income" they earned and have already been taxed on.

No one's saying anything about the sales tax paid on a purchase.

Now they sell it to get some of their money back and get taxed again for "income" on the same product. 

[farmalljr]

"Hobby sellers" don't get deductions. Only businesses get them now. Like the OP said, she can't deduct shipping and supplies. What makes you think they are going to let you deduct the 29.99 you paid for the blender 10 years ago? When you aren't a business, it's all "profit" in the eyes of the IRS. It's considered "other income". 

You got a fair use from the thing you are selling. Hence, you got your value for what you paid. Now if you sell it, you are profiting. 

[glasser]

@farmalljr I don't believe this is correct. Your profit or loss is based on the purchase price in dollars at the time you acquired.  That's why people who sell things they have owned for a while have frustrations since they may not have paperwork or remember what they paid. 

[farmalljr]

SMH....

If you buy a hamburger, eat it, and use your toilet, and then sell the contents of your septic tank for fertilizer, you don't get to deduct the costs of the hamburger.  You got your fair use of the hamburger. Now the fertilizer is all profit in the eyes of the IRS. 

Same thing with things you buy from the store for personal use. This isn't a hard concept to grasp. 

[dnasilver]

Our CPA and Tax Attorney would agree with your tax person. 

[dnasilver]

You do not have to be a business. you can be an investor and claim as unearned income versus a business as earned income. The latter requires FICA taxes being paid whereas investment income does not.

[klhmdg]

@dentalsales4u  - I think you are misunderstanding.  The OP states they were charged tax twice.

Since the OP says they paid for the item years ago. Then that would be the 1st tax.

They do not think that they should have to pay tax on items they sell which is income. 

BUT either way apples and oranges. 

AND the OP can choose to be a business and have deductions on this income.

[b86fiero]

Just wondering:  Who classified you as a Hobby Seller?  Are you going by the IRS definition?  Not trying to be mean, just wondering about the designation.

I don't believe people are trying to be mean to you.  Most advice offered is to try and help a seller avoid the pitfalls of an IRS audit and charges of operating a business without a license in their state, city or county.  Some do require a license and expect to receive their share of sales tax collected and income tax due on sales.  (I pay federal, state and city income tax here).

Not so long ago a seller on here stated that her hobby for years was hitting all the clearance aisles at multiple Walmart, Target, Macy, Hobby Lobby and Joann stores in her area and selling whatever she decided not to keep.  She got extremely upset when members told her to check with a tax professional.  She claimed she was a hobbyist seller too.