mam98031 • Volunteer Community Member • Buyer/Seller since 1999
@seperk wrote:" The last administration (2018) made a change to the tax rules that disallowed hobby sellers from deducting ANY expenses related to their hobby."
But NOTHING was taxed until you reached $20,000. All us small sellers are getting screwed! Most won't even be aware until they get that 1099-K next year. Lots of low income/middle income people are going to get a big surprise!
You are confusing the threshold for a FORM with the IRS threshold for for when you have to report income. The two are simply NOT the same.
Consider this. Not everyone in the US is subject to a 1099K that earns money not reported on a W2. So how can the 1099K determine what all those citizens were to pay?
In actuality IRS has NO minimum threshold on when you have to report your income. We are all suppose to claim ALL income on our Federal tax returns. So if you have not been doing that, then when it comes time to file your 2022 taxes you will showing IRS that you potentially had income in previous years you did not claim properly.
@seperk wrote:"but that DOES NOT mean you will have to pay income taxes on that money. You will however have to take the time to learn the rules guiding this"
That is exactly his point! The "rules" are you have to prove to the IRS you didn't make a single penny on the item sold (once you reach $601). How is one prove this without a receipt or other proof?? From something you may have purchased several years ago. Yes, you can write-off the money but you need proof you took a loss!!
The form is issued when you sell $600 or more. Again the threshold to report your income is NOT $600, you are required to report ALL income.
As I suggested, you need to do a bit of studying and learning. There are provisions if you are selling stuff from around your home and for not having a receipt. You just need to do some research.
"So, you only need to report earnings you made that total 600 or more."
This is NOT correct. IRS has NO minimum amount on when you are suppose to claim your income. They did many years ago, but that is no longer true.
" They were going to make it harder but they decided IF the money that goes into your bank account already had federal and state taxes taken out then they do not care. "
For purposes of reporting your income, it makes NO difference if it goes into a bank account or you get paid in cash. If you earned the money, it is to be reported on your Federal Tax Reports. And who is "they"?
"...having to report ANY income that is not from an employer will flag you for an audit, possibly." Why are you trying to scare people? This is NOT true. I've been an online sellers for over a couple of decades. I've claimed every penny of my income on my tax returns since I began. I have never been subject to an audit nor has many other sellers. I'm unsure as to why you would state something like this.
"So, if audited, show your ebay sales. You obviously are not selling your toaster as new. Or a pair of LV shoes as new." The distinction of if a product being sold on Ebay is new or used has NOTHING to do if you need to claim the income and pay the appropriate taxes. Not every seller of used items are simply selling stuff from around their own home. Many sellers seek out these used items and buy them to resell on Ebay. Many sellers selling used items have taxable income. ONLY sellers selling ONLY items from their own home are likely not going to experience an increase in income taxes.
@victoriasecreteposhseller wrote:Don't get caught up in jargon. Taxes scared people to death.
Breathe...and just file the proper forms and be honest. If you sold a bow from 2005 and you took a loss, just make sure what is going into your bank account from sales reflects your report.
In essence, just do not lie. And don't get into depreciation or anything. If you bought it for 500 and sold it for 200 you took a 300 loss. Say so and all is well. If you don't know what you paid..guess. I am an avid high end shoe buyer. I can guess about whay I paid for a shoe or bag 20 years ago. I won't be right on the dot but thr IRS knows that. They are just asking us to try our best to be honest. That is all this is about.
Again, whether or not the money you earn goes into your bank account does NOT determine if the money is to be reported on your Federal Tax Return.
@victoriasecreteposhseller wrote:The IRS had a limit in past years. It was that you could sell up to 20 grand and or so many transactions. I mean, if someone did that, they were paying taxes on it, it was likely a business. If not, that's not really going to be an issue with the new law. At any point those people could and would be audited. Home business income puts a target on you.
NOT in recent years. Yes a long time ago they did, but they since did away with that. We are to report ALL income whether it was for $100 or $1000.
The threshold for the form called 1099K is just that, a threshold for when the form is to be created. It has NOTHING to do with the threshold for reporting your income. A threshold for a FORM does NOT create a threshold for what everyone uses as to when they need to report the income on their federal tax return or not. How could that possibly be??? A 1099K is ONLY for online sales. What about those that don't earn their money from online sales? Is it a free for all for them?? Of course not.
I also don't know why it seems to be so important to you to scare people in thinking this will cause them to get audited. It simply isn't true and you are potentially harming others by continuing to pass around this around.
@keynesguy wrote:This is incorrect. Since the sales were at a loss, there is no net income, and thus no tax. If you get a 1099K, just note that sales were at a loss. Maintain records on the original cost, even if the records of the original cost are your best recollection.
Not exactly. For this to be correct, you MUST be a seller that is ONLY selling stuff from around your home. If you sell $600+ this year of stuff from around your home, you WILL need to claim your income on your Federal Tax Report, however you likely will not owe any additional income taxes from those sales and you can't take the loss from those sales as a deduction on your other income.
@keynesguy wrote:Here it is:
"In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable" the IRS says.
https://www.cleveland.com/business/2016/06/when_you_have_a_garage_sale_do.html
This article is outdated and does not consider what a 1099K is for in the first place. If you are issued a 1099K for 2022, you DO have to report the income on your Federal tax report. However if you ONLY sold stuff from around your home then it is likely you will not owe any additional income taxes, but you do have to report the income.
@keynesguy wrote:Interesting. So let’s say you sell over $600 and therefore get a 1099K. Let’s also say that your original cost was $1000. Where do you report the $1000 cost in order to avoid paying taxes on the gross receipts indicated on the 1099K? Schedule C? I would not think most people selling household goods would be expected to file a schedule C for household sales at a loss?
This is a good article you may want to read.
https://www.1040.com/blog/2019/7/12/selling-stuff-online-taxes-for-etsy-ebay-letgo-and-more/
It is likely you account for it on Schedule D, but I'm not positive.
https://www.irs.gov/pub/irs-pdf/f1040sd.pdf
