2022 IRS Changes - selling old items with no receipt

[backhomeoutdoorz]

I sell mostly used clothes on ebay.  These are clothes that my family has worn and I sell at a loss.  The majority of these clothes I do not have receipts for.  How will this work moving forward when sales are reported?  Will the IRS accept my report that I made no money on these without proof?  I don't understand how this will work for the non-business people on here without getting screwed.  

[keynesguy]

You are incorrect. Hobby expenses are not deductible.

From Turbo Tax

Consequences of hobby classification

Generally, the IRS classifies your business as a hobby, it won't allow you to deduct any expenses or take any loss for it on your tax return.

If you have a hobby loss expense that you could otherwise claim as a personal expense, such as the home mortgage deduction, you can claim those expenses in full.

For tax years prior to 2018, other expenses, such as advertising, wages, insurance premiums, depreciation or amortization, may also be usable as an miscellaneous itemized deduction subject to 2 percent of your adjusted gross income. However, you must have earned more total income in your hobby than the amount of all of these deductions, including your personal deductions. In that scenario, it's likely the IRS would categorize your hobby as a business anyway.

Beginning in 2018, miscellaneous itemized deductions are no longer deductible and therefore no hobby expense is able to reduce hobby income.

[mam98031]

Slow down, take a breath.  You don't seem to be actually reading what I write.

We all have the right to reduce our Gross Receipts by the expenses we have regarding a 1099K.  As I've said before.  For those sellers that are ONLY selling their personal preowned items, they will NOT be able to claim any losses they may have against the income taxes they owe.  Again I have posted this before.

Why would a seller that only sells their personal preowned items have any kind of deduction for their mortgage?  

Yes I said the last administration took away many of our deductions.  It was a real loss to many of us.  

Because there is no longer a Schedule A does NOT mean what you are describing and I also said in previous posts.  

If a seller receives a 1099K for 2022, no matter what they sell, they will need to claim it on their income taxes.  There will be ways for sellers of their personal preowned to claim expenses, they just won't be able to claim any losses to reduce income liability.

However if they have profits, then they will need to file Capital Gains forms.  

And back at the beginning of this long thread I posted a several links that may help you.  I believe it was around post 44 or close to it.  I haven't said anything new in this post that I didn't in my other posts.  So I'm unsure how to further assist you.

[keynesguy]

Just to be clear, I agree with you completely on persons like myself, who sell personal goods at a loss. We will owe no taxes, but cannot deduct the loss against other income. I also agree that those who buy items for resale that they later sell at a higher cost must pay taxes on the gain.  If they can satisfy the IRS that this is a for profit business and  not a hobby business, that they can deduct all ordinary and necessary business expenses, and also deduct any losses from that business against other income. However, if the IRS decides that ones eBay business is in fact a hobby business, which is purely a question of fact, that seller will  be able to deduct only the cost of goods. However,  since shipping  charges and eBay fees are ordinary and necessarily business expenses, which are no longer deductible for hobby businesses post 2018 the seller will effectively be taxed on those proceeds, which you have confirmed are included in the 1099k. That is what at least some of the well informed posters are complaining about here. There is no “right” to any deduction as you seem to believe You can deduct only what the IRS says you can deduct. Unfortunately, the IRS has eliminated all deductions for hobby sellers, including those that had formerly been deductible to the extent of hobby gains. 
Over and out on this topic for me. 

[mam98031]

OK, I've done what I can.

[mike_jayroe]

Good morning. I am new to e-bay and am selling items from a railfan hobby I enjoyed from May 1978 to early 1994. I bought lots of books and such mostly through ads in Trains magazine or trade shows.

Add to that regaining interest in NASCAR Winston Cup racing between 1992 and 2003.

I am now selling everything basically just to clean  out the house.

I did not get receipts for about 75% of this material. Any other receipt the ink would have faded and been unreadable.

On 90% of this material I am taking huge looses. For example for one bound volume of Trains magazine I paid $90.00. I sold it for $30.00. I will not be able to prove it in any way. 

Other items I am selling for a much higher price than I paid as the values were high and I got them trough luck such as the 1988 Maxx race card of Dale Earnhardt. I made about a $400.00 profit off of it.

All I can hope for is when I get my taxes done, my financial planner will get me the best deal (?) I can get.

Hopefully everyone else will have good luck avoiding extra taxes. 

[keynesguy]

I would suggest that you make a list now of all items you plan to sell and what you paid according to your good faith, best recollection. Start now, before you are audited (unlikely). The IRS accords greater credibility to records kept in the ordinary course of business.  Are receipts the best records? Yes. Are they the only records the IRS will accept? I believe the IRS is well aware that original receipts are not routinely kept by most households for such items over long periods, and are therefore not required. Note that collectibles are taxed at a higher capital gains rate. You may be able to offset the the gains on some items with losses on the others on Schedule C, but that's a one you need to run by a tax professional, which I am not. You might also inquire of her whether you can offset gains on non-collectable assets (e.g., stocks) with losses on collectible assets. There's probably an IRS ruling or guidance on both situations somewhere, but I have not researched it, as it does not apply in my case.  

[keynesguy]

Actually you've been quite helpful. Thanks!

[mam98031]

---

@mike_jayroe wrote:

Good morning. I am new to e-bay and am selling items from a railfan hobby I enjoyed from May 1978 to early 1994. I bought lots of books and such mostly through ads in Trains magazine or trade shows.

Add to that regaining interest in NASCAR Winston Cup racing between 1992 and 2003.

I am now selling everything basically just to clean  out the house.

I did not get receipts for about 75% of this material. Any other receipt the ink would have faded and been unreadable.

On 90% of this material I am taking huge looses. For example for one bound volume of Trains magazine I paid $90.00. I sold it for $30.00. I will not be able to prove it in any way. 

Other items I am selling for a much higher price than I paid as the values were high and I got them trough luck such as the 1988 Maxx race card of Dale Earnhardt. I made about a $400.00 profit off of it.

All I can hope for is when I get my taxes done, my financial planner will get me the best deal (?) I can get.

Hopefully everyone else will have good luck avoiding extra taxes. 

---

@mike_jayroe 

The IRS is aware that producing receipts on some personal stuff purchased years ago isn't possible.  Just do the research, you have plenty of time, as to what IRS accepts.

Since you are going to use an accountant to file your taxes, make sure they are one fully versed on internet sales.  Not all are.  You want one with experience in this area.

[mike_jayroe]

That is where I am lucky. My guy goes to classes all through the year learning all the tax law changes. Had a partner that helped him when I got solar panels installed with the federal, state and county tax credits. Glad I found him. also is managing one of my retirement accounts.

[mam98031]

---

@mike_jayroe wrote:

That is where I am lucky. My guy goes to classes all through the year learning all the tax law changes. Had a partner that helped him when I got solar panels installed with the federal, state and county tax credits. Glad I found him. also is managing one of my retirement accounts.

---

Most tax accountants do, however it is still important to have one with experience with internet sales and the 1099K.  

[thestickperson]

I would love this to be true, but do you have some links to IRS references that explicitly point to the rules that would allow expense deductions against the specific hobby income?  I have only ever seen the rules like keynesguy posted, and it's tough to be sure and plan around being able to deduct expenses when there doesn't seem to be any explicit statement of rules that (1) say that such deductions are allowed and (2) indicate where to make such deductions.

[keynesguy]

https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a...

https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business

Links to IRS pubs are in the above. Since it is a question of fact, it is totally dependent on the specifics of your situation, meaning some uncertainty is all but unavoidable.

[keynesguy]

To amplify, if you are buying goods and selling them for a profit, you want to show IRS you are a "business," not a "hobby." I don't think that's as hard to show as some people here think. You will need to file a Schedule C. Not a big deal. Just keep business records. If you are just selling used personal goods at a loss, you don't need to file a schedule C, but you will have to report the 1099-K and net it out to no loss, no gain, on the 1040 schedules.

[dogofwar777]

Another reason I refuse to sell here anymore. I'm not dealing with this. 

[mam98031]

---

@thestickperson wrote:

I would love this to be true, but do you have some links to IRS references that explicitly point to the rules that would allow expense deductions against the specific hobby income?  I have only ever seen the rules like keynesguy posted, and it's tough to be sure and plan around being able to deduct expenses when there doesn't seem to be any explicit statement of rules that (1) say that such deductions are allowed and (2) indicate where to make such deductions.

---

@thestickperson 

Then if that is what you want to run with, that is your right.  I'm not going to try and defend the links I gave you, I have no need to do that.  You can do whatever you feel is best for you.  If you want to run with information that you have previously seen and not consider anything else, again that is your choice to make.

I hope everything turns out well for you.