eBay

*graydog · ‎03-20-2021

First off , am I correct in that the changes begin in 2022? Items sold in 2022?

Secondly, in reading the other posts regarding the IRS and reporting all income, what is the point of the IRS setting a threshold, be it $20,000 or $600 if they expect EVERY sale on ebay to be counted as income?

Or do they?

Why set a threshold? What is the purpose? Why set it at $600 when some of you here are saying EVERY dollar must be reported? For example if I sold one $700 pair of earrings, I expected to report that as income and go back 25 years to find proof that I sold at a loss? And if I'm unable to , then I have to pay taxes on $100? And what if that pair of earrings is stolen by a bad buyer? Should it be reported on income tax forms as a loss?

Thanks for reading.

nobody*s_perfect · ‎03-20-2021

The threshold was set, after much negotiation, at a level above which it would be worthwhile to go after scofflaws, and below which non-reporters were probably not making any net profit. Many states have already set lower thresholds (6 are at $600 already).

If you sell $700 worth of items, you report $700. Not $700 minus $600.

alcoforever · ‎03-20-2021

The purpose of a lower threshold is, I'm sure, to catch those who may be fudging just a little on their reported income.

As for your earrings example, even though you don't have a receipt, you can estimate your original cost to use as cost of goods sold. If those earrings are your only reported income aside from your day job, the chances of an IRS audit are virtually zero.

If you sell them to a bad buyer and get scammed out of them, you may or may not be able to report them as a loss. Check the details in the IRS form 1040 instructions to see for sure.

Disclaimer: I am not a tax professional. YMMV.

eburtonlab · ‎03-20-2021

The threshold to issue a 1099 is set by law -- either federal or state -- and it applies to the responsibility of the issuer of the 1099: eBay, in this case. If a seller meets the threshold for a state or the federal government, eBay will issue a 1099K or 1099 to comply with the law.

The seller is still responsible for declaring all qualified income, regardless of any thresholds or whether a 1099 has been issued or not, as I understand it.

coastaltechsolution · ‎03-20-2021

Earn and report

Keep records of everything for the year including loses such as "bad buyers"

If you have not been reporting earning so far and afraid of the IRS finding out, well that is on you

luckythewinner · ‎03-20-2021

what is the point of the IRS setting a threshold, be it $20,000 or $600 if they expect EVERY sale on ebay to be counted as income?

I suspect the original threshold was put in place to ease the reporting burden on the payment processors when the law was passed (in 2008, I think).

But now that payment processors have had a decade to put the reporting mechanisms in place, I suspect there was not meaningful pushback against lowering the threshold.

I suspect the new threshold was put in place to eliminate the need to send a 1099K for trivial amounts, for people who sold a single item, or who had the online equivalent of a yard sale.

For example if I sold one $700 pair of earrings, I expected to report that as income and go back 25 years to find proof that I sold at a loss?

Yes.

And if I'm unable to , then I have to pay taxes on $100?

No, you would pay it on the whole $700. The threshold is just a reporting threshold, it does not exempt $600 from your taxable income.

And what if that pair of earrings is stolen by a bad buyer?

Refunds and returns are deducted from the gross.

releasethekraken_1 · ‎03-20-2021

@luckythewinner wrote:

And if I'm unable to , then I have to pay taxes on $100?
No, you would pay it on the whole $700. The threshold is just a reporting threshold, it does not exempt $600 from your taxable income.

By that, you mean a "reporting threshold" for the entity that issues the 1099k, not the person receiving it. Just so there's no confusion that causes someone to think that they don't have to report income under $600.

farmalljr · ‎03-21-2021

The BEST advice anyone can give you, is to tell you to consult with the person who does your taxes. If that person is YOU, then you need to at least pay for a consultation with a CPA or accountant to learn what you have to do, what you can deduct and how you should be keeping records. Selling IS a business, and you are going to need to treat it as such.

I would NOT listen to someone telling you not to worry about being audited. IF/WHEN someone gets audited, the IRS can go back 10 years. They can pull the records from eBay (because eBay IS reporting your sales like they are required to) and they make you pay taxes on what they see. My advice would be, DO NOT mess around with taxes.

Though it will cost money, I would highly suggest anyone who has a business (and selling here IS a business) to at least consult with and hire and accountant/CPA to do your taxes. An audit can turn your life upside down. While I can understand the worry this now presents to sellers, if you do things properly, you don't have anything to worry about.