How to keep myself from getting in trouble with the 1099-K stuff?

[catwings42]

If anyone can help me figure out what I need to do to stay on the up and up, it would be greatly appreciated.

So, I started selling off some of my collectibles that I no longer want/have space for.  I am fortunate in that they have often increased in value since I got them (anywhere from a year to 10 years ago) and have already hit the cap for needing a 1099k.  I've been doing my best to keep track of the eBay financial summaries and a general tally of how much I bought the items for back in the day, but honestly I didn't keep receipts from a decade ago for dolls or action figures.  I vaguely remember how much they all cost me, so I should be fairly close and not be dinged too badly if I get audited.

What information should I be recording moving forward?  And is it worth it to try to see if I should be counted as a business if it's just from selling my personal collection? Would I still get to deduct shipping costs and eBay fees even if I count as a hobby vs a business?

Asking the community before trying to sit down with a family member who is an accountant so I can gather as much paperwork beforehand as possible.  

[kensgiftshop]

@catwings42 

How have you reported your income and done your taxes before?

The only thing that has changed is when Ebay is required to report your income.

[catwings42]

Yes, I have. It's just that this year is the first time I have sold anything above the threshold for reporting and not selling things at a loss to get them out of the house.  

Sorry if it's a stupid question! I'm trying to learn as I go how to keep my books as clean as possible.

[johnrj1226]

Those items you bought 10 years ago  I assuming are used and are not new.  You need to determine what the current fair market value is of those items are.  You  can search eBay to see  what the same or similar item is sell for today in the same or similar condition or go to Goodwill and  see if they  have the same or similar item..

[kensgiftshop]

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@catwings42 wrote:

Yes, I have. It's just that this year is the first time I have sold anything above the threshold for reporting and not selling things at a loss to get them out of the house.  

Sorry if it's a stupid question! I'm trying to learn as I go how to keep my books as clean as possible.

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The threshold for reporting is only for payment processors.

There is no threshold for us to report our income.

Keep track of all your expenses and deduct them.

[wrong66]

Obviously has been selling for years and not reporting income. Nice.

[maxine*j · Accepted solution]

You could owe capital gains tax on those collectibles, and be unable to deduct any of your expenses in selling them.  Or, you could file a Schedule C, and perhaps owe less, little, or no tax on the net income from their sale.  Or...  Or...

Since no two people are in exactly the same situation vis-à-vis income tax, I strongly recommend that you consult with a tax professional.  Random advice, no matter how well-meaning or even accurate so far as it goes, is not what you need, given your current level of understanding.

One good, thoughtful consultation may be all you need, and after that you can do your own record-keeping and tax preparation / filing with that proper guidance.

If you see the sense in using a properly-trained auto mechanic, plumber, electrician, roofer, et al, you shouldn't balk at using a tax professional.

,

[stephenmorgan]

You should start recording what you purchase, when it was purchase and how much was paid to acquire items.  Print out the Order Details for each sale you make, keep track of you eBay Fees and Shipping Costs.

How much income do you estimate you will make? 

When you talk to you family member who is an accountant, ask them if you can file you collectable income as a Capital Gain using IRS Form 8949.

[maxine*j]

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@stephenmorgan wrote:

...  When you talk to you family member who is an accountant, ask them if you can file you collectable income as a Capital Gain using IRS Form 8949.

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Aren't they still taxing capital gains on collectibles at 28%?

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[gemarakop_trading]

Step one hire an accountant.

step two hire an accountant 

step three….

[catwings42]

It's possible I missed some in the past, but if I did it was an honest mistake.

In the past I'd only really sold garage sale level items and the like to get a few bucks for old clothes. Last year or two I sold off some figures but entered it manually into TurboTax, maybe like 10 in a year. I'm trying my best to not miss anything this year.

[catwings42]

Thank you, I was trying to do as much work ahead of time as possible but it seems I'll have to ask them about what best fits my situation.

[stephenmorgan]

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@maxine*j wrote:

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@stephenmorgan wrote:

...  When you talk to you family member who is an accountant, ask them if you can file you collectable income as a Capital Gain using IRS Form 8949.

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Aren't they still taxing capital gains on collectibles at 28%?

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Collectibles are taxed up to 28% but not necessarily 28%.  Basically you would never be Taxed more than 28% for the collectables.  It depends on you entire taxable liability.  Last year my effective rate on collectables sold was 22% and this was way less than if I filed as a business because in addition to the 22% I would of had to pay Self Employment Tax of 15.3%

There are many, many variables with Income Taxes. 

The OP has a family member that is an Accountant so I am sure they will guide them in the right direction of what is best.