mvlandsw If you do sell more than whatever the threshhold is, how do you know how much of the total is profit? I don't think that very many people have receipts for all the things that they have bought over the years. How can one determine what is owed or if there was any profit at all? How will the IRS determine what is owed?
If you do sell more than whatever the threshhold is, how do you know how much of the total is profit? I don't think that very many people have receipts for all the things that they have bought over the years.
How can one determine what is owed or if there was any profit at all?
How will the IRS determine what is owed?
I'm not a tax expert, but I have some auditing experience in the financial world and I can speak to general concepts of how I think things are looked at.
The IRS will assume that every penny that is reported on the 1099k is all taxable income. Unless you file the tax forms correctly telling them it is not.
"Telling them it is not" can be a simple number that demonstrates the total costs of the items sold.....(157 items totaling $6,189 received via paypal less $5,495 cost of items sold = $694 of Taxable Income...then you pay tax on only the $694), an itemized list that shows the cost of each item sold, or an itemized list complete with sales receipts for each item sold.
Its unknown what the IRS would expect to require as evidence of what the cost of the items was.
See the amount of minutia information the IRS would have to pour over if they ever enforced this $600 1099k threshold?
IMO, the agents want no part of this, and I suspect that is why the IRS has delayed this implementation for two years now. They know that 90% of the paperwork they will have to review contains a bunch of garage sale types of items that nobody has receipts for...and that the receipt-less cost estimation will lead to little income being claimed. A complete waste of their time.
And no, I do not think that the IRS would require people to have receipts for household items bought years ago when the rule was just implemented two years ago. The IRS may be strict, but they are not that unfair, IMO.
Simple answer, I think a listing of what you sold and the estimate of the cost of each item would suffice for the IRS.
If they think you are a small business established for profit, then they would probably expect you to have receipts (keep your books in a professional manner)
And yes, If you bought an Athearn blue box kit for $2.98 15 years ago and sold it for $12.98 this year, you would owe income tax on the $10 of income. If you want to provide an honest estimate of what it cost. And if total sales exceed whatever threshold the IRS ends up enforcing.
- Douglas
Keep in mind the rules/laws are just talking about when a business (Ebay) is required to send someone a 1099 form. It doesn't by itself determine how much (if any) of the amount is taxable, you would calculate that yourself using tax forms and schedules. Plus, not getting a 1099 doesn't necessarily mean there isn't taxable income.
However, I think the IRS is primarily looking at people selling things on Ebay as a business. A business is usually required to keep records of expenses and such. A business may be set up to buy things wholesale (not pay state or local sales tax) and have to then charge sales tax when they sell. Again, all this requires records be kept.
A person selling on Ebay once in a while, and for relatively small amounts, most likely isn't really affected by all this. Plus, generally selling something you bought retail for your personal use, and paid appropriate sales tax on, wouldn't be part of this.
Yes. That $600 rule was really dumb to begin with. Its not surprising its not getting off the ground. For one thing, the IRS does not want to review a bunch of small-potatoes garage sale types of transcations that amounts to nothing burger's, as plenty of folks would file all of the paperwork regardless of not owing anything.
The rule also makes using electronic payments a PITA, and encourages the use of cash, which tech and big brother do not want.
This threshold is not ever going to reach as low as $5,000 either, and they'll change it again in 2024. JMO.
Good news though for those who sell.
$5000 is a much more reasonable amount than $600, like who needs the extra paperwork and many people freak out over anything from the IRS.
That's from the IRS side. There's also legislation pending in Congress that would reset things to as before on a permanent basis. Of course, getting useful things done in Congress is difficult these days. For 2023 and 2024 does look better.
Mike Lehman
Urbana, IL
mobilman44, your understanding of the IRS rules for 2023 and 2024 is correct.
Here is the IRS statement of its position:
https://www.irs.gov/newsroom/irs-announces-2023-form-1099-k-reporting-threshold-delay-for-third-party-platform-payments-plans-for-a-5000-threshold-in-2024-to-phase-in-implementation#:~:text=Taxpayers%20should%20be%20aware%20that,income%20on%20your%20tax%20return.
This means that for 2023 and prior years, eBay is only required to send out Form 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS threshold will be $5,000.
Rich
Alton Junction
In order for the tax to mater at all is you have to have made a profit, otherwise it is just paperwork and aimed at resellers who make a profit. I get lots of 1099's, some for pure paperwork reasons. My e-bay sales have always been though a third party but even for him, no big deal as none of his sellers come to this mark, no even me during my purge years. Remember profit, anything you spent for aquiring, shipping or selling including taxes is taken off. When my freind used to do train shows, gas (you have to use the allowed mileage charts), room and many other expences were tax deductable and he could have even deducted some rent for his apt. if he wanted too for storage but that is a whole other set of rules.
Many of us have used Ebay and other online venues to sell stuff. Up until 2023, the threshold for a 1099k to be issued was $20,000.
Last year, the IRS announced that $600 would be the new threshold for 2023.
This morning I read (two sources) that the IRS would keep the 2023 threshold at $20,000. And, for 2024 the threshold would be lowered to $5,000.
This is certainly good news for some of us, but before I go back to listing stuff, I'd like your input to assure I understand correctly.
OK, I realize this isn't a financial forum, but my main reason of selling/buying on Ebay for 22 years was to change out model railroad equipment and supplies - and I suspect I'm not the Lone Ranger in that regard.
Thank you all - and a belated HAPPY THANKSGIVING !!!
ENJOY !
Mobilman44
Living in southeast Texas, formerly modeling the "postwar" Santa Fe and Illinois Central