New 1099: What if I don't have receipts?

[chiachadly]

I am in a financial bind and have been selling stuff I own -- coins, comic books, video games, band merch, toys. It is all stuff I have owned personally, bought for my own personal use, in some cases 25+ years ago. 

I have never received anywhere near the 20K threshold in total sales. However, the new $600 threshold fills me with anxiety. I have no idea how to prove how much I bought my 20 year old Sega Genesis and all my games for! Do I owe the full tax burden when I get a 1099?  If not, what do I do?

This is crazy. I can't find a single article or news story that details how this will actually work for people like me. It's all "We closed the loophole and stopped the rich!" and  people say things like "Just keep good records! Derp Derp!". 

Ok, but I was alive before the Internet and digital payments were a thing. We used to buy things in cash from stores -- stores that gave out thermal paper receipts with no digital record -- and we didn't think there would come a time when the IRS would hunt us down for having to sell our Ninja Turtles toys.

[diss-here]

Sorry to say if you do not have sales slips(yes even from 25 years ago) The IRS will consider this full profit.

Also I read if you do not itemize with your taxes then you will end up paying taxes on everything.

Itemizing shows the following:

(  deduct shipping(Ebay will count that as part of your total I hear), sales tax paid, Your  business costs, internet use, the amount of space you use in your house for your business is to be deducted (if you pay a mortgage and house insurance), the ink and paper you use for printing labels.  There is so much more.

But the 600 threshold on little sellers- those cleaning out there house is not kind.

I have read several article son the Net about this New issue.

If you sell very little (I am lucky to sell 80 dollars in 90 days) . Well it is not even worth paying an Accountant as I do not make enough to even pay them.  I would be considered a Hobby by the IRS and Not allowed to deduct any of my expenses and have to pay an unfair full tax without being allowed to deduct the amount the item cost.

I have to agree with the person who said just put a stop on selling when you near $600.  That way you can see what will come out of this issue.

You can always go to other selling sites an list if they use different paying apps.  You will again just limit yourself to the 600 on each of those sites.

[chiachadly]

Yep, everything I am reading says you are right. I even spoke to a CPA. At the end of the day, it would be a lot of work to show the IRS I am not making profit. And if I can't do that in an acceptable way, they tax the full amount. And I can't make deductions for expenses in the same way a business can. It's crazy. It hurts me financially because I really needed the money and no longer want my stuff.

[mod-designs4u]

I'm not an accountant rendering tax advice but here's how I understand the cost basis for personal items sold at a garage sale, flea market and an online internet sales platform: the cost basis will be the price you paid for the item or the fair market value (the sales price), whichever is less. Thus, many or most personal items sold at these venues will not be a taxable event (the seller paid more for the item(s) than the sales price(s). Local jurisdictions typically allow 2 garage sales or flea market sales per year to not be considered a business (ie; selling your personal property on an inconsistent basis). IMO, the new federal $600 threshold is inconsistent with the 2 personal sales per year rule within your local jurisdiction (federal overreach). Selling a $1,000 worth of unwanted stuff that you paid $3,000 for at 2 garage sales during the year is not subject to government reporting and not a taxable event. Now, selling any number of personal items over $600 will be reported to the IRS which may or may not be a taxable event. If you are selling some "personal items" which have appreciated in value such as the stuff you have been selling (coins, comic books, video games, band merch and toys commonly appreciate in value due to collector demand) you would include the profit as a capital gain on Schedule D and Form 1040.

If you have been "buying and selling" these items for a certain amount of time (not incidental sales) you are a business and would file a Schedule C and Form 1040. Also, since you have been collecting items which typically increase in value the IRS may indicate that your activity has a "profit motive" and deem you a business subject to business reporting requirements. This is probably why form 1099-k has the total amount of yearly transactions with the sales dollar amount indicated for each month of the year. IMO, if you have a high number of yearly sales transactions and a high dollar amount for each month you are considered a business. Personal incidental sales over the new national $600 threshold amount will show a low yearly transaction number with a few or some of the 12 months showing sales.

Before President Biden's Democrat Party Rescue Plan Act within the Build Back Better program there was already 9 or 10 states which had already implemented the low $600 threshold amount. Perhaps an occasional eBay seller peddling some of their unwanted household goods at a financial loss over the $600 threshold in one of these states could contribute to the conversation. IMO, the low $600 threshold amount lowered from the $20,000/200 item threshold amount wouldn't have raised much income tax revenue for these 9 or 10 states. Incidentally, the lowered $600 threshold amount in these 9 or 10 states were created by legislative action of each state which has nothing to do with the federal Trump Administration. Hope my comment helps and good luck!      

[chiachadly]

Right, I think you are correct on how this should work. And I agree, the limit seems at odds with the existing law.

Bottom line is, for regular people who can't afford an accountant to work out these details, there is no way to realistically address receiving a 1099. The risk of owing taxes on a $3000 burden for me is huge. And even if I am not legally obligated to pay it, proving that requires potentially a lot of time and resources to meet an arbitrary burden that the IRS may challenge anyway.  That is why the $600 limit is so stupid. And for state taxes, where you are not dealing with the feds, this may be a simpler thing to address... But I have never run into it.

[holmaneva-2]

An article I read stated that this new law could also require that a small seller would have to pay a capital gains tax as well if they were lucky enough to have something that was  $10 when purchased back in the 60's like a Barbie/Barbie Friend that managed to make it through the decades in mint condition & is sold for $1000 or more. Seems like any profit now made in 2022 by a small seller, a good portion of it is now recommended to be spent on a financial advisor.

[thewickedwardrobe1970-7]

Well now that the current  administration is hiring 80,000 plus new IRS agents I guess our government will have plenty of worker bees to nickel and dime those of us who resell our items for a little extra cash or just for hobbie…but according to the current administration the new IRS agents were specifically going after the billionaires.🤔🙄

[gosimus]

@mjjb_56 

< Ebay is working with Government to have this sneaky Law ... changed to 10 thousand threshold >    

It remains to be seen how effective eBay's lobbyists will be.  One thing for sure, eBay does not favor this new requirement.  I think a cost of $1 each, to mail out those 1099's, is a reasonable conservative estimate.  eBay has about 7,000,000 sellers in the US.  So to send out 7 million 1099's would cost 7 million dollars.  There's no doubt that eBay would rather find a different use for that money.  Of course, the 12 million sellers in foreign countries won't be receiving 1099's, although they might have their own types of government impositions. 

[dreamsofmykitty]

Thanks for posting. I panicked and canceled a sale on a guy when the message flashed on my screen that I had to give more info or have payments frozen (totally embarrassed about that), as well as deleted all my listings...too late though because I'm still over the $600 by about $200. A paperwork hassle for sure, prior to this a person could just report the "hobby" income on Schedule 1 (1040). Now, because it's 1099K, it has to go on Schedule C and the person has to have been using an IRS accepted method of inventory. Like the OP, I don't have receipts for stuff bought decades ago. However one commenter had an interesting point about fair market value, I will need to look into that - all of my stuff sold for well below fair market value and I had several sell for less than I paid (again no receipts to prove it). 

[aabalat_fine_and_rare_wines]

And with the IRS getting a new infusion of agents, the gig economy and people who sell on sites like ebay are going to be low hanging fruit for audits.  

[mam98031]

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@thewickedwardrobe1970-7 wrote:

Well now that the current  administration is hiring 80,000 plus new IRS agents I guess our government will have plenty of worker bees to nickel and dime those of us who resell our items for a little extra cash or just for hobbie…but according to the current administration the new IRS agents were specifically going after the billionaires.🤔🙄

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@thewickedwardrobe1970-7 

It is important to remember that is over a TEN year period and it is NOT just for new auditors.  It is funds to hire people in their IT department, clerks of all kinds, replace equipment, etc. and yes likely some auditors, but the money will be spent on so much more than just hiring auditors.  People want to make it seem that way to scare others.

[mam98031]

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@dreamsofmykitty wrote:

Thanks for posting. I panicked and canceled a sale on a guy when the message flashed on my screen that I had to give more info or have payments frozen (totally embarrassed about that), as well as deleted all my listings...too late though because I'm still over the $600 by about $200. A paperwork hassle for sure, prior to this a person could just report the "hobby" income on Schedule 1 (1040). Now, because it's 1099K, it has to go on Schedule C and the person has to have been using an IRS accepted method of inventory. Like the OP, I don't have receipts for stuff bought decades ago. However one commenter had an interesting point about fair market value, I will need to look into that - all of my stuff sold for well below fair market value and I had several sell for less than I paid (again no receipts to prove it). 

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Yes, but you don't want to go the Hobby Income route anymore.  That changed with the last administration.  Those claiming Hobby Income can't take deductions from their gross money received for their hobby income.

Here is some information that will likely help you learn how to best handle your situation and plan for the future.

https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-10...

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

[stevekent]

The law is a **bleep** law. We all have loads of stuff around the house that we don't want to send to  the landfill, and figure someone might be able to use it. Now we will end up with having to report someone paid us over $600 on items that we have had lying around since childhood. Lord knows what it cost to fix it in the 1960's when we broke it, or restore it in the 1990's. Think of someone with a Lionel train set. Does anyone have receipts for all the nick knacks that are in those boxes we sell when we get ready to downsize. I consider this law such an intrusion but with all the other things going on it is only par for the course.  My neighbor makes quilts. Can you see her trying to show that 1500' of red thread cost her $22?  "And do you have a receipt per foot, and can you tell us what you did with the other 1200'?  How many squares of that cloth did you say you used, and do you have proof the guy charged you $32 last year to sharpen your scissors?"  The law is overly intrusive. Wait until the folks who voted these people in pay their taxes next year. Me, I am sending about $3000 worth of rare repair parts I have collected to the landfill. It will be easier to do that than sell them. I can deduct them from the sale of collectible car since I have receipts. It is a heck of a lot easier than trying to itemize each part from 20 years of receipts. It is an accounting nightmare. Only people who are a Narcissist could feel any other way. People have lots of things they inherit to that gets sold. The family all gets together and says, "hey dad had a box of screwdrivers, anyone want them? Susie says, can I have his old records, maybe someone will want them. I can list them on ebay. Not any more. Off to the landfill. 

[mam98031]

@stevekent 

This has been gone over MANY times on this thread and 100's of other just like it.  The IRS laws regarding reporting income has NOT changed.  They changed a FORM.  The two are not the same.  These links will likely help you to better understand what is going on if you are willing to take the time to read them.

https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-10...

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

" My neighbor makes quilts. Can you see her trying to show that 1500' of red thread cost her $22?  "And do you have a receipt per foot, and can you tell us what you did with the other 1200'?"  Now this statement rather baffles me.  Gather costs for making and selling quilts is really easy.  Keep ALL receipts for material, thread, yarn, batting, etc.  Those all go into creating the quilts.  It is that simple.

IRS does not expect you to report your income by each individual sale.  Which is what you seem to want to do with your quilt example.  It simply isn't necessary.

Throwing out your stuff isn't the answer.  Educating yourself on how to report your income is the answer.  If you decide you want to throw the stuff out, that of course is your decision, but that is like throwing out real money.  Still your choice of course.

" Only people who are a Narcissist could feel any other way. "  It is really unfair to call people that don't see things as you do names.  It isn't necessary at all.  You just are running with only part of the info you need and assuming the rest.

Things that are inherited, should be valued on the day they are inherited.  That is the cost of those item.

[holmaneva-2]

"Think of someone with a Lionel train set." 

Funny you should use that example. I just had a cousin inherit her father's old train set that he started way back in the 60's -- a real enthusiast, would have his conductor hat on every time he ran it.  The thing was huge with towns, buildings, the works! When he would run it for us kids, he would admonish us not to touch it, even if we were just looking at it too hard or standing close enough to breath on it. If she just sold off a few choice collector pieces at a time, applying the sum of the parts is worth more than the whole adage, she really could be into the thousands of dollar range on items that were purchased for $5-$10 back in the 60's in no time.

[mam98031]

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@holmaneva-2 wrote:

"Think of someone with a Lionel train set." 

Funny you should use that example. I just had a cousin inherit her father's old train set that he started way back in the 60's -- a real enthusiast, would have his conductor hat on every time he ran it.  The thing was huge with towns, buildings, the works! When he would run it for us kids, he would admonish us not to touch it, even if we were just looking at it too hard or standing close enough to breath on it. If she just sold off a few choice collector pieces at a time, applying the sum of the parts is worth more than the whole adage, she really could be into the thousands of dollar range on items that were purchased for $5-$10 back in the 60's in no time.

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@holmaneva-2 

As I mentioned before, when you inherit something, you value it the day you inherit it, you don't go back to when it was purchased.  What matters is what it is worth when you inherit it.