I don't want to violate forum rules about selling trains or advocating politics, but I received a message in my Ebay account about potential changes to the tax consequences of selling our trains individually through Ebay or other means.
Apparently, there is a proposal to raise the threshold from the current $600 burden.
As background:
Companies like eBay are required to report sales to the IRS using a tax form called a 1099-K. Until recently, you would only get a 1099-K if you sold over $20,000, or more than 200 items. Starting with 2022, new legislation has lowered that threshold to just $600, even if that was from a single sale all year. Where it gets complicated is you’ll get this form even if you don’t owe anything, because not all sales are taxable–for example, if you sell something for less than you paid for it.
Imagine selling an old bike for $800 that cost you $1,500 a few years ago. Since you didn’t make a profit, the IRS doesn’t consider that taxable income. But under this new law, you’re still going to get a 1099-K. And now you’ll have to prove to the IRS that you don’t actually owe any taxes on that sale, which makes for complicated accounting work.
Recently, new legislation was introduced in Congress to raise the threshold and limit the number of sellers getting these unnecessary forms.
The message goes on to provide links for gathering support and expressing a voice for supporting the new proposal. I did not share the links since I do not want to be accused of advocating a political agenda. So if you're interested, you may want to Google to see what suits you.
I'm interested in at least following this possible development, since I believe that modelers being able to sell trains makes this hobby more enjoyable and expands interest. In the past, I have sold off older stuff to be able to buy some of the new products manufacturers are introducing. This year, I have been less interested in purchasing new items or even browsing retail and producers websites since the funds would have to come from general household funds and not train sales proceeds. I didn't expect that not having an easy way to sell trains would have such a material impact on how I look at buying, but it does.
- Douglas
DoughlessI believe that modelers being able to sell trains makes this hobby more enjoyable and expands interest.
More importantly, modelers need to be able to buy trains to enjoy the hobby.
If like me, the trains they want are out-of-production, or hard to locate, eBay is a necessary device. If this change results in fewer sellers, that lowers the liklihood I will find anything to buy.
-Kevin
Living the dream.
I hope we all can obey the rules of the forum so this topic can be discussed without being locked or deleted.
Have respect for our hosts.
SeeYou190If this change results in fewer sellers, that lowers the liklihood I will find anything to buy.
It is only a reporting threshold for a 1099K to be generated. It mainly stems from "third party settlement" transactions i.e. PayPal, Venmo, Cashapp, etc.
It has no bearing on any "profit" from the sale of used trains.
https://www.irs.gov/payments/general-faqs-on-new-payment-card-reporting-requirements
Tempest in a teapot.
Cheers, Ed
gmpullmanTempest in a teapot.
I hope so.
I read through the FAQ page you linked to, and realized that I know nothing about any of these payment apps or third party settlements.
The number of model trains auctions on eBay seems to have been steadily declining since shipping costs skyrocketed. I hope it does not drop more, but I certainly buy a lot less than I used to.
Tempest in a teapot for sure. Let the IRS require all of the 1099-Ks that it wants sent out. It will regret it with all that additional paper showing up on its doorstep. I have sold a lot of used MR stuff and never close to a profit on anything. Everything that I sell, and the quality is good, is still sold at a loss.
In this instance, it is eBay whining because it is more work for them. I could care less if I get a 1099-K from eBay. I very seriously doubt that the IRS is going to call me in for an audit when I fail to do anything about the 1099-K on my annual tax return.
As for eBay, this is directed at their power sellers and retailers, not Joe Blow. I think that it is time for eBay to divide itself into two entities, one for selling new items and one for selling used items.
What really irks me about eBay is a very recent development where they now report Views on listings on a rolling 30-day basis. I have an item up for sale where my Views suddenly dropped in half and the listing is less than 18 days old. If this change accomplishes anything, it will further discourage sellers who are now led to believe that no one is looking at their listings. Idiots!
Rich
Alton Junction
richhotrain ... I could care less if I get a 1099-K from eBay. I very seriously doubt that the IRS is going to call me in for an audit when I fail to do anything about the 1099-K on my annual tax return.... Rich
This reminds me of issues of venmo under this new policy where if you checked a category and used your account for selling a few items and also used it for a whole lot of dinners and splitting costs with friends personally, you now have to clarify with the IRS what is actually a business transaction. You may have sold $100 in train stuff but was given hundreds maybe thousands in Venmo cash cause you were nice to put dinner on your credit card, your friends paid you back, and now you need to clarify to the IRS that 10% of that was only business income.
It doesn't surprise me at all. For years the state department of revenue would send agents to train shows on the weekends looking for people not collecting taxes on sales. $600 is not much. One brass locomotive and your over. Maybe items will be less expensive to try to stay below.
Pete.
For me, the issue is not the tax return prep, its that if you go over the $600 for the year (I hit that threshold in 2 months), Ebay requires your social security number on the account because they have to send out the 1099. If you stay below $600, you can operate the account disclosing only the last 4 digits, which is enough info to do the managed payments thing with a bank account.
They cut you off from selling once you hit the 600 and dont supply the full soc. They really have no choice given the current threshold.
The low threshold matters to me, because I don't want to disclose my personal soc number....and if I recall correctly, a person who already has a soc number cannot also have a tax ID number, only a business.
Here is a pretty good commentary on this latest tax folly.
https://www.journalofaccountancy.com/news/2022/mar/new-lower-form-1099-k-threshold-cautions-criticisms.html
My mom was an antique dealer on the side, had to have a dealer tax ID number (renewable annually, for a fee), had to charge sales tax when she did a show and send the amount to the government at the end of the year. What a pain in the derriere. She had to keep a record of each and every sale she made, no matter how small.
When I was a grad student, I proctored some undergrad tests as a favor to friends and got a small amount (something like $10) as beer money. After I had graduated, I got a letter from the town demanding the taxes I owed them. It amounted to, I am not making this up, seventeen cents. I shudder to think of how much taxpayer money was spent (even postage must have more) to collect that munificent sum.
BEAUSABRE When I was a grad student, I proctored some undergrad tests as a favor to friends and got a small amount (something like $10) as beer money. After I had graduated, I got a letter from the town demanding the taxes I owed them. It amounted to, I am not making this up, seventeen cents. I shudder to think of how much taxpayer money was spent (even postage must have more) to collect that munificent sum.
Your story reminds me of when I graduated college and started real work and had to do my taxes the following year. So due to some changes in the law where I went to college, I now had to pay state taxes on the income I made working the dining hall as part of my financial aid package. So my tax peparer tells me that I owe Indiana $5. OK, I thought it would be worse. Then he tells me, I owe him an extra $100 because he had to prepare a separate form for the Indiana state taxes.
Douglas--
Your original post is absolutely correct. Beginning last summer, I stopped selling anything on Ebay, and narrowly missed last year's limit of $1200 in sales for some states to generate the 1099 (didn't know if that would apply to me or not at the time.)
It has most certainly affected my buying and my selling. Who keeps all receipts to be able to prove the cost basis? Certainly not me.
Now my local store is selling the lightly used but basically mint trains on consignment to walk-in store customers. We cannot ask as much money for them, but they take care of everything. All I have to do is drop the models off. The downside is I'm getting less money than in the past, and it mostly goes to store credit toward my pre-ordered models. Also, there are more than 16 unsold locos there right now tying up some nice cash.
I have had to take a very hard look at my roster, what I want to keep, and what I might want to buy in the future. I'm only keeping those items that I just absolutely fall in love with, as everything these days is expensive, it seems.
One could reasonably argue that in the past I was a bit irresponsible with my money. Now I just cannot be. It is much more difficult to sell anything I don't need. That means I will only buy it if I absolutely positively have to have it, and the only items that fit that category right now are a handful of ATSF Kodachrome paint scheme units that are really nice models. Everything else I already have or already have on pre-order.
I'm down to 3 diesels that will most likely stay, and two of those are in the mail to me and not here yet.
John
The new reporying threshold has been done and changed many times in the past, to most people it means nothing. You are required to keep receipts for a buisness or if you are writing off things like state taxes. The IRS are going to be drowning in extra paper work, not just with the forms but with people misunderstanding the new rules. It really dosn't affect most people.
I disagree. There are many who horse trade more than $600 of their model trains or whatever other hobby on ebay in a given year who likely didnt figure on having to prove cost basis.
It has been over two years since I have sold anything on eBay, primarily because of the changes and fee increases. I do not want to futz with the paperwork on my tax return that would result if I got a 1099 from eBay. Not worth the hassle. I will sell stuff at local train shows or on other online forums.
Tin Can II It has been over two years since I have sold anything on eBay, primarily because of the changes and fee increases. I do not want to futz with the paperwork on my tax return that would result if I got a 1099 from eBay. Not worth the hassle. I will sell stuff at local train shows or on other online forums.
Kinda hard to do the paperwork, if one can even follow the instructions, if/when one does not have all the receipts to prove one's original costs, isn't it?
I know a piano teacher who teaches at least 40 lessons a week, for many years, all for cash payment, and that family does not report that income. The hobby people are small potatoes by comparison.
I also heard recently that in a normal year only about 59% of American households pay any income taxes, but last year it was only 43%. So less than 50% are supporting a whole lot of...
Also, technically if I am selling my used items for less money than I have in them, they are already previously taxed and I'm not making ANY profit whatsoever. I would report a net loss.
PRR8259Also, technically if I am selling my used items for less money than I have in them, they are already previously taxed and I'm not making ANY profit whatsoever. I would report a net loss.
A personal loss so not deductible even if you had the documentation to support it.
Tempest in a teapot topic for sure. These types of doofus ideas get put out every year and they always get repealed as soon as someone with enough sense to understand how unworkable it is.
MJ4562 PRR8259 Also, technically if I am selling my used items for less money than I have in them, they are already previously taxed and I'm not making ANY profit whatsoever. I would report a net loss. A personal loss so not deductible even if you had the documentation to support it.
PRR8259 Also, technically if I am selling my used items for less money than I have in them, they are already previously taxed and I'm not making ANY profit whatsoever. I would report a net loss.
As far as model railroaders are concerned, think about it. When was the last time you sold a used piece of equipment at a profit? To answer that question for myself, never. The used items that I sell on eBay are always in very good condition, but I usually sell this stuff for 50% to 70% of what I paid for it. Those losses are simply not deductible. But, if I were to manage to sell an item at a profit, it would be subject to tax, subject to de minimus rules imposed by the tax law.
The federal income tax law regarding sales at a profit are primarily aimed at the "big guys" who sell new stuff, almost always at a profit. But the IRS casts a big net to snare all of the profit makers and, as in this case, the little guys get caught in the same net.
In the case of the legislation that provoked this thread, the little guys most affected are those folks who buy and sell "collectibles" and those folks who make and sell stuff like pottery, jewelry, art work, etc.
Let me add one final thought. If you don't keep receipts for your purchases, at least keep a spreadsheet of purchases and costs. I do both although I doubt that I will ever be required to produce this stuff for some IRS agent to review.
Just on a quick once-over of the info at the IRS website, it sounds to me they're trying to find people who are using ebay or other online sellers to basically run a business selling things, as opposed to people who just sell their personal stuff once in a while.
We ran into something like that here in my state regarding collecting sales tax. If you sold your personal property at an "occasional" (4 or less a year) garage sale or flea market, you didn't charge sales tax. Some folks were having a weekly "garage sale" where they were selling things like new TV sets and microwaves. You also had hobby shops (sometimes from out of state) coming to model railroad flea markets and selling products they normally sold in their store, but not charging sales tax. Eventually the state cracked down and required people selling things as a business to charge sales tax at flea markets etc., but still allowing regular folks to do occassional sales of their own property without worrying about it.
wjstixonline sellers to basically run a business selling things
That's why I have sympathy for the guy that sold a pair of locomotives for $650, but none for the guy doing $10k at a show. There's a point where it is a business, regardless of the number.
No sale, no profit.
I do keep a spreadsheet of my sales, listing cost, shipping, and ebay fees. I very rarely made a profit on any one sale. Any sale that went over retail price, I rebated shipping charges back and put extra stuff in the box.
Bottom line as I see it is if you bought a brass engine 10 years ago and sell it now, the IRS doesn't really care. You bought it, probably paid sales tax on it. If you sell it now for more or less, not a problem. I suspect it's people who buy and sell things as a business but who are trying to disguise it as just an individual selling their own items that is the concern.
It's a little like the problem Walthers ran into a while back where guys would register as 'vendors' so they could buy things for their own use (or their friends) but only pay wholesale instead of retail. Eventually Walthers set up requirements that you had to have some sort of actual business (a brick-and-mortar store, or verifiable on-line dealer) to be allowed to buy wholesale.
A lot of people use their dealer licenses from other businesses, like auto sales, to buy model trains at wholesale--without a storefront--and they get away with it for awhile perhaps many years. If you bought enough stuff, some importers did not care that you had no storefront, and this included but was not by any means limited to Overland Models. Sometimes you don't really know who your model railroad "friends" really are when you only see them in the train store (I waited on them) and in the train room or at train shows. One of mine, now deceased, was caught turning back odometers on used cars--80 counts--and he went to jail. He also had been a big buyer of HO brass, with an extensive inventory of all the small screws, springs, whatever from Overland Models. He could and did completely remotor and regear brass diesel engines with all new Overland tower gear mechanism parts.
I have heard other dealers openly bragging at a train show that the tax they collect is extra profit because they never report it.
So yes, I kinda think I understand the intent of the law. I'm just done selling on ebay. Some of the customers became too much of a hassle to deal with. The used stuff my local store is liquidating on my behalf--well I'll never have that much stuff again.
I notice the IRS website's info page on the 1099-K seems to emphasize "business"....
It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K. You must report on your income tax return all income you receive from your business. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments. Business income is generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return.
https://www.irs.gov/businesses/understanding-your-form-1099-k
It seems to me the IRS is concerned with businesses receiving third-party payments (like thru PayPal) and not reporting them.
wjstix I notice the IRS website's info page on the 1099-K seems to emphasize "business".... What should I do with this information? It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K. You must report on your income tax return all income you receive from your business. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments. Business income is generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return. https://www.irs.gov/businesses/understanding-your-form-1099-k It seems to me the IRS is concerned with businesses receiving third-party payments (like thru PayPal) and not reporting them.
This is why it needs to get better sorted out.
The 1099-K will be sent (by ebay) regardless if you are a business or personal. In fact, when you sign up for managed payments, it asks you to designate if your account is personal or business. If a business, it expects you to supply the Tax ID number. If personal, it expects you to supply your full social security number. That's how they interface with the IRS, by the full numbers. If you do not pass the $600 threshold, you can sign up using only the last 4 digits, because that's only part of the number the bank interface needs, and you can sell until you hit the $600, then they want the soc.
So either ebay is being overzealous in sending the 1099-k to everybody...when they even go through the trouble of separating business from personal....or the law also requires individuals to support their sales proceeds.
What you posted is not exactly the rule, or an interpretation of the full rule, so its still foggy. I think the rule applies to all payment system facilitators, so I'm thinking individuals still have to mess with the $600 1099-k.
Either way, I think not having to supply a full soc number and not having to mess with the paperwork would be something that would benefit everyone, even though most people wouldn't owe taxes anyway.
Yes, I don't want to deal with the 1099.
Just dealing as the Executor of my parents' estate has been a big enough trial. I'm not adding to it by dealing with an Ebay 1099 form.
Per the IRS website, if you receive a 1099-K and you operate a business buying and selling things using PayPal, Ebay, or other third-party electronic paying systems, you will use that information when completing the return for your business income.
Note that the 1099-K has a section (box 2) for the "Merchant category code", where it lists the code for the type of business you are operating.
The "understanding your form 1099-K" also explains that if you receive a 1099-K "in your name as an individual (showing your social security number)" that you should contact the issuer of the 1099-K to correct it to show your business ID number.
In fact, everything the IRS has that I can see re the 1099-K is talking about business income issues.
https://www.irs.gov/pub/irs-pdf/f1099k.pdf