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.

[chiachadly]

*New 1099 Reporting. Sorry for the headline typo, it won't let me fix it.

[mjjb_56 · Accepted solution]

Right now I plan to put my listing on Vacation once I near the 600 threshold. 

Ebay is working with Government to have this sneaky Law that was hidden by Biden in his Build back Better bill.  They want to have it changed to 10 thousand threshold.

I suggest everyone stop selling anything and put your listings on hold.  Ebay has a button for that now for everyone. It's not just stores.

If everyone puts their listings on Hold (vacation) or take all listings down until Ebay gets Government to Change the rules for us little guys.

[dq3141]

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@mjjb_56 wrote:

Right now I plan to put my listing on Vacation once I near the 600 threshold. 

Ebay is working with Government to have this sneaky Law that was hidden by Biden in his Build back Better bill.  They want to have it changed to 10 thousand threshold.

I suggest everyone stop selling anything and put your listings on hold.  Ebay has a button for that now for everyone. It's not just stores.

If everyone puts their listings on Hold (vacation) or take all listings down until Ebay gets Government to Change the rules for us little guys.

---

You’ve got two things mixed up. And eBay isn’t getting anything changed. So please stop posting bad info that will only confuse the OP.

[mjjb_56]

DQ,

Ebay is working with Congress concerning this.

Link:

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

And what other issue do you state is wrong in my Post????????

[katzrul15]

@chiachadly 

It is my understanding the IRS will allow you to claim FMV (fair market value) for the items you sold.  The FMV is typically what the item was "worth" when you listed it for sale.

You really should speak with an accountant or CPA or tax preparer to help you with this if you have not tackled this before.

The law was always clear - we were to report our gross online e-tailer revenue/sales and apply any deductions that were applicable.  Tax then may or may not have been due based on same.

The CHANGE is the threshold at which e-Bay and other e-tailers (Amazon, Etsy, Mercari, etc) are required to issue a 1099-k.  This will apply to your potential sales in 2022, with tax due "potentially" in 2023.  You most likely, if applicable, will see the 1099k in Jan 2023, etc.

Good luck - just search on these boards - has to be well over 100 threads on this by now.

[buyselljack2016]

Ebay is working with Congress concerning this.

-----------------------------------------------------------------------

?????

[mjjb_56]

https://www.verifythis.com/article/news/verify/money-verify/users-of-cash-apps-will-get-a-1099-form-...

From Verify.

 I stated it was the Build Back Better Bill but was wrong. It was the American Rescue Act.

Verify lists that .

And ask Ebay how and  Accountant will help you when your selling things from Home with no proof of what they cost 20 years ago?  

[lacemaker3]

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@mjjb_56 wrote:

DQ,

Ebay is working with Congress concerning this.

Link:

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

And what other issue do you state is wrong in my Post????????

---

@mjjb_56, eBay is not "working with congress", that's just their self-serving lobby posting information to make themselves look good. They also tried to stop the States passing laws to require marketplaces to collect sales tax, and weren't successful at that either.

And, nobody is working to change the threshold for 1099-K reporting from $600 to $10,000. That's a completely separate bill (about banks reporting bank transactions), which has nothing to do with 1099-K forms.

The $600 threshold for 1099-K forms is a done deal, it was passed last year and is already effective. The $600 threshold for 1099-K forms is not going to go away, it's already here.

Another issue, that is implied but not stated, is that you appear to believe that you don't have to pay tax on income unless it is reported on a 1099-K, which is not and has never been correct.

If you have enough income that you are required to file a tax return, then you are required to report all income that you received, whether it was reported on a 1099 or not. You can subtract the cost of goods sold from the income, to determine how much net income is taxable. That's why eBay says "some transactions are not taxable". That's very  misleading, because that is only true if you are selling the items at a loss, and you are supposed to report the income and the expenses to justify the net income you report. You were never supposed to just ignore the income.

If you qualify to file as a business, then you can also deduct other business expenses, in addition to the cost of goods sold. Most eBay sellers would be better off if they did this.

[lacemaker3]

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@chiachadly wrote:

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.

---

@chiachadly 

You don't have to have receipts for items that you inherited or owned personally. If you can't use receipts to establish the cost basis then you use the fair market value when they were acquired or inherited, which means the date the estate was settled. This can also be used in other situations where receipts are not available (e.g. bartered, exchanged, or no records). You need to determine the fair market value consistently, and follow standard accounting procedures. See IRS Publication 551:

https://www.irs.gov/forms-pubs/about-publication-551

The cost basis is part of the cost of goods sold, you can also add on the cost of any repairs or improvements that were made, and the cost of selling (e.g. eBay fees) and delivering them to the buyer (shipping labels, packaging supplies).

The net income is the gross amount received, minus the cost of goods sold. If the net income is zero or negative (the item(s) sold for less than the cost of goods sold), then you don't have any tax liability for that income.

If you qualify to file as a business, then you can use your business expenses to offset income from other sources (employment, investments, etc.) to reduce your overall tax liability. If you are selling activity is not for profit, then you can only use the expenses to reduce the net income to zero, but not to a negative amount.

[chiachadly]

This is my plan as well. I have no choice.

[chiachadly]

???

[chiachadly]

Ok, I am pretty sure the fair market value only applies to when you acquire it and if asked, you have to have some evidence of when and how much you purchased an item for or the cost basis is zero. There was a 2010 court case essentially about this exact situation, except the seller was selling a lot more than a few items. Nevertheless, the lack of receipts meant they owed the full tax burden.

[chiachadly]

Who has records of any kind, including dates, for every comic book or Magic card in their collection over a 30 year period?

[orionandrachel]

First off, eBay has set up this page: https://www.ebaymainstreet.com/issues/1099-k-federal-tax-reporting if you'd be interested in telling them a version of "I sold childhood items bc money was tight, and now I can't afford a CPA to do this next year, because if I could afford a CPA, I wouldn't need to sell these things." And you definitely will need a CPA because you sold coins and comics, and because eBay knows that there are a lot of sellers in that position, and that they'll have to deal with a huge mess around tax time next year if this change isn't reversed.  

Anyways, as far as needing a CPA because you sold coins, it's because coins for sure are classified as "collectibles" by statue (being written into law/regulation, and the IRS puts numbers and definitions for everything in statutory law) and "rare comics" and other items like political rally memorabilia have been held to be "collectibles" by precedent (interpretation of the written law, usually by judges or lawyers who  feel that "I know it when I see it" is a perfectly sound legal theory) which makes the interpretation so broad that, *in theory,* anything could be a collectible - even a used vehicle that's appreciated above purchase price instead of depreciating, like most used vehicles did these past couple years because of the chip shortage.

In reality, the IRS doesn't have near enough staff to try to push an issue like that which they know they'd be on very shaky ground about - in fact, I'd be surprised if they even have enough staff to deal with the new crypto rules, and all the people who dipped their toes into stock trading, and the continuing confusion from unemployment benefits and stimulus checks, THIS tax season. For that matter, going into the entire question of who's creating and filing and processing tax documents, every e-commerce site, every gig economy app, every tax prep company, and even the IRS themselves will know that they'll have a huge amount of additional work if this isn't reversed. 

So, anyways, as far as the options in the worst-case scenario, I'm not going to go into detail bc I'm not a CPA - but one thing to remember is not to forget that the costs of shipping and packing materials can be also put down somewhere somehow. Where and how will depend on what option the tax preparer uses for the rest of the income, but definitely keep all the financial records of paying to list, sell, and send the items just in case.