Better hurry, this forum is not long for this world!
Hi,
In recent months I wanted to post an update a number of times but got side tracked or just couldn't log in to the forum. I really didn't expect to be able to log in today, but obviously I did.
I've got a number of "update items" to mention, but I just wasn't prepared to do it right now. So I will be back......
ENJOY !
Mobilman44
Living in southeast Texas, formerly modeling the "postwar" Santa Fe and Illinois Central
I misspoke above when saying the IRS would be hiring 87,000 agents. Yes, that is a lot of agents....way too many. Government agencies are dealing with the same kinds of personnel issues that private companies are....the baby boomers are retiring and the pool of replacement employees is simply too small. 87,000 is probably the total number of employees wanting to be hired for various reasons.
I agree with Rich. Simply preparing a tax return that accounts for your items as "losses selling hobby items" would suffice 99.5% of us casual sellers.
Even if some things are reported as a gain, you pay tax at the lower capital gains tax rate on a gain of probably, what, $5 to $50 if you were lucky enough.
Remember, sales tax is paid on the total sales price. The tax we are talking about is paid on the difference between slaes price and your cost. In most cases, if its not a loss its only a small gain. Its not that big of a deal to me to pay the tax, so this change in tax enforcement isn't going to change how I plan things.
- Douglas
ATLANTIC CENTRAL I have never paid a penny to file my tax returns and I have done it electronicly for many years now.
I have never paid a penny to file my tax returns and I have done it electronicly for many years now.
In my case, I had worked for five years as the Chief Tax Consultant in the Trust Department of a large bank and then later in my career provided Income Tax Planning as part of my financial planning practice to high income corporate executives.
To the extent that someone is conversant with the federal income tax law and regulations, the revision in reporting requirements by the IRS for third party providers such as eBay should come as no surprise. Over the years, eBay has evolved from a forum for the "little guys" selling used items to a platform for "power sellers" to operate a "for profit" business.
The change in the IRS regulation being discussed here is aimed at these power sellers, not the little guys like most of us. But that does not exclude the little guys from keeping records and receipts. Aside from any potential income tax liabilities, it always amazes me that model railroaders do not keep track of their purchases. For all of the MR-related items that I have purchased over the past 19 years, I have kept all of my receipts stuffed into an 8 1/2" x 11" brown envelope.
Rich
Alton Junction
jpg You know, it's another argument for not selling anything and letting your heirs dispose of it all. When it comes to investments in stocks, I think its the case that if you have an unrealized profit (paper capital gain) in a stock and you die, the current value of that stock is used for estate tax purposes, but if there aren't any of those, your heirs inherit the stock and their basis is the current value, the value on the day you died, not what you paid for it. So I think the same will be true of collectibles, but I'm on thinner ground there. The current value of your models will be listed in the estate, your heirs can sell the models for that and pay no tax, and need no receipts (at most an appraisal of the current value). If your heirs choose to sell on ebay, they can get appraisals done first (a good idea anyway) and use that as their basis, and so they likely won't have any gains to be taxed. But if you've got tens of thousands of bucks worth of stuff, consult an accountant please.
You know, it's another argument for not selling anything and letting your heirs dispose of it all. When it comes to investments in stocks, I think its the case that if you have an unrealized profit (paper capital gain) in a stock and you die, the current value of that stock is used for estate tax purposes, but if there aren't any of those, your heirs inherit the stock and their basis is the current value, the value on the day you died, not what you paid for it.
So I think the same will be true of collectibles, but I'm on thinner ground there. The current value of your models will be listed in the estate, your heirs can sell the models for that and pay no tax, and need no receipts (at most an appraisal of the current value). If your heirs choose to sell on ebay, they can get appraisals done first (a good idea anyway) and use that as their basis, and so they likely won't have any gains to be taxed.
But if you've got tens of thousands of bucks worth of stuff, consult an accountant please.
Generally speaking, most of us relatively poor slobs will not face federal estate tax problems because of the magnitude of available exemptions. But, the federal income tax must be considered as a separate issue and tax basis becomes the paramount issue.
SeeYou190 My understanding was that most of the new IRS employees that are not replacing outgoing employees would be either tele-assistants, or IT people tasked with making the IRS able to do for free what other companies are charging for right now. It sounded like they are serious about making free online filings of simple returns a real thing... finally. I hope it happens. It irritates me no end to give an outside company 100-150 dollars to do what should be a simple online process for a typical taxpayer. -Kevin
My understanding was that most of the new IRS employees that are not replacing outgoing employees would be either tele-assistants, or IT people tasked with making the IRS able to do for free what other companies are charging for right now.
It sounded like they are serious about making free online filings of simple returns a real thing... finally.
I hope it happens.
It irritates me no end to give an outside company 100-150 dollars to do what should be a simple online process for a typical taxpayer.
-Kevin
https://www.irs.gov/e-file-providers/free-file-fillable-forms
Sheldon
Living the dream.
fwrightThat's why the IRS is getting 87,000 additional agents - so tax "cheats" like you and me can get nailed for not having receipts and documentation from 30 years ago.
My understanding is that the IRS is "adding" 87,000 employees over the next ten years. Not ALL of them will be tasked with trying to hunt down tax cheats as you imply. Many of them will be computer or IT techs, accountants, telephone or "help desk" employees or any number of hundreds of other positions at the IRS.
In that same ten year period about half the present employees are expected to be retirement age or leave for other reasons so these aren't all going to be added employees.
Regards, Ed
I have been self employed most of my life. Until recently, I was also a landlord for 26 years. For a time we also had money in the market.
Only once did I ever require the services of a tax/accounting professional, I have always done my own bookkeeping and taxes. I have never been audited.
I do have serious concerns about the direction in which this country is headed, including the IRS, but that is a topic for another forum.
I am simply going to repeat my view as it applies to me.
All my model trains were bought with "restaurant money", or "bubble gum" money, or "vacation" money.
Think about every meal you ever ate in a restaurant, every vacation you ever took, every green fee you ever paid at the golf course, every admission you ever paid to a movie, amusement park, every airline ticket you ever bought or all the gas you put in the car to travel, etc.
Any plans to recoupe that money before for you die? I'm willing to make a small wager, that as a percentage of my income, I have spend a lot less on those kinds of things in my life time then most people.
I spent it on trains, or tinkering with the garden tractor, or the hot rod cars years ago.
And when I get done kit bashing, modifying, weathering, custom painting and lettering them, I suspect their "resale value" will be pretty low.
And honestly, I refuse to spend my time selling stuff on EBAY. I did a little of that years ago, no more.
I'm sure that all of you who have kept you models "stock" for the highest resale value are happy with your choice, but the hobby would not be fun for me in that form.
And the hobby would not be fun if I elected to worry about what happens when I leave this life.
I am now off to the layout room to work on the new ATLANTIC CENTRAL and get away from all the negativity on the internet.
And I just got an order from Walthers, passenger trucks for some more kit bashing work on the passenger fleet. For those interested Walthers is giving away some of their passenger trucks at 75% off.
MidlandMike How would the IRS know that you are selling your old items at a loss vs. selling a bunch of items picked up at an estate sale for a profit?
How would the IRS know that you are selling your old items at a loss vs. selling a bunch of items picked up at an estate sale for a profit?
1. The IRS can accept your tax return without objection.
2. The IRS can send you a letter asking for more detail.
3. The IRS can audit your return by mail.
4. The IRS can audit your return in person.
In the usual instance, the IRS will take you at your word. That is likely to happen except in instances where the gross sales proceeds and number of transactions are high enough to suggest a profit motive.
Using my circumtances as an example, I sold 11 used MR items on eBay for a total amount of just under $1,100. So, eBay will send me a Form 1099-K. I have records and receipts to prove that each and every item was sold for less than I paid for it. When I file my 2022 tax return next April, I will report these transactions as hobby losses, and I will never hear back from the IRS. Too few transactions and too few dollars in gross sales proceeds.
York1 If I sell some things that I bought many years ago, how can I prove a loss? Would I need the original receipt?
If I sell some things that I bought many years ago, how can I prove a loss? Would I need the original receipt?
That's why the IRS is getting 87,000 additional agents - so tax "cheats" like you and me can get nailed for not having receipts and documentation from 30 years ago.
My assumption would be that you had a loss on the transaction, just because even collectible HO models don't gain value. But I'm not from the IRS. OTOH, when I liquidated my father's trains in 2006 I was getting $10-$12 for 3 NOS Athearn freight car kits - and I'm not sure he paid $3.33-$4 each when he bought them in the 1970s.
Of course, a tax lawyer would help you account for storage costs and maybe some other costs (moving?) to lower the basis of your "investment". Still, our government is in reality taxing us on inflation-created capital gains.
Fred W
I know a little but about the tax law but not enough to be any sort of reliable source of information...
I think the technical answer is, yes, receipts are needed if you HAVE to prove that you did not sell something at a gain.
But practically, the IRS is interested in cost/benefit, and them spending a lot of time going over a bunch of small potatuhzz reciepts from people who sell stuff at garage sales likely at a loss probably won't net them much revenue.
The tax is only about 20% of the net gain. So something that cost $8 20 years ago that you now sells for $28 produces income of $20, and revenue (tax) to the IRS of $4. I wouldn't worry too much about being audited.
But hey, supposedly they are going to hire 87,000 new agents so you never know.
mobilman44 I can't imagine trying to put together the costs of the hundreds of items I sold in the past......
I can't imagine trying to put together the costs of the hundreds of items I sold in the past......
Speaking for myself, being somewhat anal, I do keep all of my purchase receipts and also records of these purchases on a separate spreadsheet. I would agree with you that your 2021 sales were timely in keeping one step ahead of the Grim Reaper (IRS).
York1 John
The purpose of my post was just to express my happiness for having sold most all my stuff before the limitation was lowered. As I haven't sold anything for a year, I never paid attention to all the talk about it on this forum.
Also, whatever I have to sell later this year will gross less than $600 for sure.
richhotrain mobilman44 Its been months since I posted on this thread, but realized something this week that prompted me to add..... Man, I seriously lucked out - having sold most all my MR stuff on Ebay last year. As I just found out (haven't listed anything for a year), the IRS 1099 base dropped from $20,000 income to $600 this year. I've got some unused items to sell this fall, and will make sure the return stays under the tax reporting limit. Still enjoying the forum, MR, CT, and gazing fondly at the display case of favorite locos and tank cars........ Hope all are well! This change in IRS rules for reporting income from sales beginning in 2022 has been widely discussed in two recent threads on this forum. It is not a change in the tax law. Rather, it is a change in the reporting requirements for 3rd parties such as eBay. Even before the change in reporting requirements, taxpayers were obligated to report income from all sources regardless of amount. To the extent that such went unreported in the past, namely because no Form 1099s were issued, the IRS decided to plug this loophole. That said, model railroaders selling used equipment on eBay were not likely to be taxed on such sales since, most likely, those sales resulted in losses, and hobby losses are not tax deductible. Sales at a profit are a whole different matter. Rich
mobilman44 Its been months since I posted on this thread, but realized something this week that prompted me to add..... Man, I seriously lucked out - having sold most all my MR stuff on Ebay last year. As I just found out (haven't listed anything for a year), the IRS 1099 base dropped from $20,000 income to $600 this year. I've got some unused items to sell this fall, and will make sure the return stays under the tax reporting limit. Still enjoying the forum, MR, CT, and gazing fondly at the display case of favorite locos and tank cars........ Hope all are well!
Its been months since I posted on this thread, but realized something this week that prompted me to add.....
Man, I seriously lucked out - having sold most all my MR stuff on Ebay last year. As I just found out (haven't listed anything for a year), the IRS 1099 base dropped from $20,000 income to $600 this year.
I've got some unused items to sell this fall, and will make sure the return stays under the tax reporting limit.
Still enjoying the forum, MR, CT, and gazing fondly at the display case of favorite locos and tank cars........
Hope all are well!
This change in IRS rules for reporting income from sales beginning in 2022 has been widely discussed in two recent threads on this forum. It is not a change in the tax law. Rather, it is a change in the reporting requirements for 3rd parties such as eBay.
Even before the change in reporting requirements, taxpayers were obligated to report income from all sources regardless of amount. To the extent that such went unreported in the past, namely because no Form 1099s were issued, the IRS decided to plug this loophole.
That said, model railroaders selling used equipment on eBay were not likely to be taxed on such sales since, most likely, those sales resulted in losses, and hobby losses are not tax deductible. Sales at a profit are a whole different matter.
Not to derail the thread, but if OP wants to sell items on ebay using a personal account, ebay requires an individual to supply their full social security number once sales (payouts actually...which I think includes shipping), go over the $600. Understandable, they need to be sure they are sending the 1099 to the correct person.
To avoid this you can apply to the IRS to have a separate sales business. Use your ebay account as the name of the business. The IRS assigns that proprietorship an Employer Identification Number (EIN). Ebay allows you to easily change your ebay account from a personal account to a business account so that you then have to only supply the EIN, which prevents you from having to supply your personal Soc if you are concerned about ebay privacy and security systems.
At that point, I think you would need to prepare Schedule C (Proprietor's business) with your tax return. I would show simply the net loss incurred for the year with few details. Supply the IRS with a detailed list once (if) they asked for it. (It might be capital gains form and not Sch C....I don't know tax prep forms well enough)
But if you reported a small net income, you could/would pay tax on that income (or capital gains tax). (There may be a way to adjust the cost of your items based upon inflation, but consult your tax advisor for that)
Deleted by poster.
In addition to the locos and a few cars in the display cabinet, I have 4 "harder" rolling stock kits, a test track, several 19-24 inch sections of code 100, and a Digitrax Zephyr - and several MR dedicated tools.
And then there is the postwar Lionel.... 10 operating locos, about 60 cars, several accessories, a plethora of track and turnouts, and a KW and LW transformer.
mobilman44Thanks Kevin! Taking the layout down and selling off most all the stuff was difficult, but it was all about "acceptance". Once the layout was "done", I realized I wasn't running trains like I thought I would. I am much more a builder than an operator, and it was getting to be more and more of a painful effort to access the center of the layout. Anyway, after a couple of years of that I found that the ol ticker was a bit faulty (major surprise). And among other things, that meant that I needed to stop doing yardwork - a major beloved chore. So I suddenly found myself accepting the situation for what it was, and not what I wanted it to be. And the solution was pretty plain to me - remove the layout and turn the room into an "exercise" area. It's been a year, and I've got a plethora of layout pics and a display cabinet of great locos/cars, and a terrific treadmill/tv room. It's odd.....I've "played with trains" since I was 7 or so, and they were a big part of my life for decades. Now the layout is gone, but I have the memories/pics and I'm ok with that. I certainly have other interests to keep me occupied, and that obviously is a big help. All said, every once in awhile an MR issue will have a transition era layout spread and I find myself glued to those pages.......... Take care all, Mobilman44 Bill
Taking the layout down and selling off most all the stuff was difficult, but it was all about "acceptance".
Once the layout was "done", I realized I wasn't running trains like I thought I would. I am much more a builder than an operator, and it was getting to be more and more of a painful effort to access the center of the layout.
Anyway, after a couple of years of that I found that the ol ticker was a bit faulty (major surprise). And among other things, that meant that I needed to stop doing yardwork - a major beloved chore.
So I suddenly found myself accepting the situation for what it was, and not what I wanted it to be. And the solution was pretty plain to me - remove the layout and turn the room into an "exercise" area.
It's been a year, and I've got a plethora of layout pics and a display cabinet of great locos/cars, and a terrific treadmill/tv room.
It's odd.....I've "played with trains" since I was 7 or so, and they were a big part of my life for decades. Now the layout is gone, but I have the memories/pics and I'm ok with that. I certainly have other interests to keep me occupied, and that obviously is a big help.
All said, every once in awhile an MR issue will have a transition era layout spread and I find myself glued to those pages..........
Take care all,
Bill
Did you at least hang onto an oval of track, a transformer, a loco, and some rolling stock for when the mood hits you?
73 is still young!
But, I know how health related issues can be troublesome. I am 59 and have some of the same issues you do.
However, when it comes to life expectency I always adhered to having as much fun during ones life.
If I am going to get sick or die, my mindset is to die with my boots on, i.e. I dont give up without a fight and even though my back is killing me (duck under), from so many things, I push and keep pushing.
I respect your decision, but hope you somehow continue model railroading to some degree.
All the best.
Thanks Kevin!
Today I was looking at old editions of Show Me Something.
In 2019 Mobilman44 posted a lot of pictures of his layout in the Show Me Something thread. It made me kind of sad to realize the layout is gone.
mobilman44 ... Well, I thought I was "invincible" until about a year ago. My stamina went rapidly downhill, and when I got my annual physical a heart problem was found. And of course, the bum knees kicked in again about the same time. So for a year I've had a yard crew, and with some exceptions, have Ford deal with the vehicles. I like to say that 2020-21 was the year "I got old". Believe me, it was unexpected! It took me awhile, but I've come to accepting the limitations and I've learned to enjoy what I still can do - which IMO is a lot compared to some others. Still, the key to all this is (for me) is a like minded spouse and a lot of interests. I've stretched my boundaries on music and old movies and literature with great results. ...
...
Well, I thought I was "invincible" until about a year ago. My stamina went rapidly downhill, and when I got my annual physical a heart problem was found. And of course, the bum knees kicked in again about the same time. So for a year I've had a yard crew, and with some exceptions, have Ford deal with the vehicles. I like to say that 2020-21 was the year "I got old". Believe me, it was unexpected!
It took me awhile, but I've come to accepting the limitations and I've learned to enjoy what I still can do - which IMO is a lot compared to some others.
Still, the key to all this is (for me) is a like minded spouse and a lot of interests. I've stretched my boundaries on music and old movies and literature with great results. ...
This sounds like a healthy, and realistic, assessment of your circumstances, and now we both understand that they are in flux...as we would now both accept must necessarily be the case over the next 10-20 years...Deo volente. I think it's a wise man who can accept the deteriorations that age foists off on us, but still find contentment in what he/she CAN DO, and that the person struggles to continue to do that regularly to help stave off the decay and diminution that age will continue to press on us.
There's that old saying, "Life's tough. Then, you die." Our bodies thrive on a little hormesis. Hormesis elicits a little adaptation by the body and the mind. It's a stress response, but it is necessary for keeping our vigor and potency against 'the end'.
Oh I hear you, last decade I could keep up with the 20 year olds, trying hard not to take the next step of 40 year olds, the pandemic put a big dent in my exersise program. Last year I could only put in a 4 hr day in construction, in my defense it was super hot then, but I was working inside. Used to be able to work, on a limited basis, a 20 hour day in my 20's and a 12 hour day in heavy construction in my 50's. Damn, now I feel like I am getting old.