Do you like higher taxes? Too bad, they are coming like it or not...

[CorbLand]

It’s frustrating to say the least…

How working people can vote themselves into having less $ is astonishing. I can kind of see how deadbeat, natural resource consuming, gov tit sucking slugs vote themselves into an all encompassing tyrant society, simply by stupidity on so many levels.

The largest generation to exist is roughly 25-35 years old at this point. Most dont make enough money to really have tax increases really affect them so voting for increased taxes doesnt matter. I joke all the time that you shouldnt be allowed to vote until you make 45,000 a year because until you watch a mortgage payment leave your pay check every month, you dont really understand it.

 

[ozyclint]

Tax isn't really about the revenue for government. It's about manipulation of behavior. It's used as a tool to direct societal behaviors in certain directions. If they don't want you to do something they tax it heavily, if they do want you to do something they offer tax free or tax concessions. If tax is your way out of paying the USA national debt YOU WILL NEVER GET THERE.

 

[Titan]

Tax guy here - there is a lot of misinformation on here that I don’t want to cause any panic. On my phone so I’ll keep it short.

The main issue is the lumping together of different tax forms and situations. A 1099-K is not the same as a 1099-NEC or MISC. This is no big deal for the average person. They will not scrutinize a 1099-K like they do a 1099-NEC. The $600 threshold has been in effect for those forms for a while.

You will not pay tax on used gear you sell on the forum. Like others have said, 99.99% of the time it’s a loss.

if the sale is attributable to a business (guiding or even a reseller) then it would need to be treated in the correct manner. Whether that’s income or recapturing depreciation...it will depend on the situation.

there is also a major difference between a business and a hobby. You can’t create a business in order to start taking gear as an expense. There has to be income or the intent to create a net positive income figure within a couple years.

side not for those who are receiving a 1099-NEC since I have seen a couple posts about it. Yes, you will pay 15.3% “extra” on the net income on top of your federal tax bracket. I hear all the time that people regret making the extra money because it pushed them into a higher tax bracket. That is only on the income in that bracket. You never end up in the hole making extra money. You just need to plan for the taxes since there isn’t an employer withholding and matching 7.65%.
you also receive QBI which will help lower your federal taxable income on the net schedule c income.

someone also mentioned a tax rate of 50%+ somewhere. That would also be incorrect. Once you max out the social security income portion ($143k) you only pay the additional Medicare portion. That’s in the 22% federal tax bracket. At that point you would roughly owe an extra 3%.

This is way over simplified but feel free to shoot me a question if you have one.

 

[ryjack70ss]

Tax guy here - there is a lot of misinformation on here that I don’t want to cause any panic. On my phone so I’ll keep it short.

The main issue is the lumping together of different tax forms and situations. A 1099-K is not the same as a 1099-NEC or MISC. This is no big deal for the average person. They will not scrutinize a 1099-K like they do a 1099-NEC. The $600 threshold has been in effect for those forms for a while.

You will not pay tax on used gear you sell on the forum. Like others have said, 99.99% of the time it’s a loss.

if the sale is attributable to a business (guiding or even a reseller) then it would need to be treated in the correct manner. Whether that’s income or recapturing depreciation...it will depend on the situation.

there is also a major difference between a business and a hobby. You can’t create a business in order to start taking gear as an expense. There has to be income or the intent to create a net positive income figure within a couple years.

side not for those who are receiving a 1099-NEC since I have seen a couple posts about it. Yes, you will pay 15.3% “extra” on the net income on top of your federal tax bracket. I hear all the time that people regret making the extra money because it pushed them into a higher tax bracket. That is only on the income in that bracket. You never end up in the hole making extra money. You just need to plan for the taxes since there isn’t an employer withholding and matching 7.65%.
you also receive QBI which will help lower your federal taxable income on the net schedule c income.

someone also mentioned a tax rate of 50%+ somewhere. That would also be incorrect. Once you max out the social security income portion ($143k) you only pay the additional Medicare portion. That’s in the 22% federal tax bracket. At that point you would roughly owe an extra 3%.

This is way over simplified but feel free to shoot me a question if you have one.

Thanks for that. For simplicity sake,, say you make 500k. You make an additional 50 k self employed on top of that. How much federal do you now owe on that 50k?


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[Titan]

Thanks for that. For simplicity sake,, say you make 500k. You make an additional 50 k self employed on top of that. How much federal do you now owe on that 50k?


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At that level (assuming 500k taxable income not gross and married filing jointly), you will pay 35% federal tax,plus 2.9% Medicare, plus 0.9 additional Medicare (above $250k).
You would get a qbi deduction of 20% of the $50k.

Tax would be $19,400 minus $3,500. So essentially $15,900 on the $50k. All said and done about 32% effective tax rate on that extra.

 

[Wapiti7]

All of that sounds correct and was a great explanation, but my question (and I believe several others) is this: let’s say I decide this year to sell my $1500 binos, $1500 rifle, and $500 pack... all of which were purchased with personal money and not deducted, therefore should not be subject to any tax on the sale.. but then next January, I get a 1099 from PayPal reporting that $3500. Whats my accountant supposed to do with that? When I tell him all of that was personal, he just doesn’t report it on my income?

And if I end up getting audited, they’ll just see that those items were never deducted in the first place? And id probably have to prove what items that $3500 came from, correct?

All we are trying to do is avoid a matching notice from IRS (because there is no tax liability on the loss on sale of personal use assets). If this new reporting is in place for 2021 reporting, then I will likely have a shitpot of clients that will bring me 1099-K's. Historically, 1099-K's have been used by credit card companies. Most people that are receiving credit cards are businesses. That means the IRS genius is going to expect that to be reported on Schedule C for a trade or business, or at a minimum as other income. That's really not what's going on here...we are taking credit card or pay pal as part of our trade or business. In all reality, I would likely report it on Schedule D, as a capital asset with the basis equal to the 1099-K amount, showing zero gain/loss. I'm not sure if that will pass IRS' automated matching process. They're going to have to figure something out on the reporting because I can promise you they do not have the manpower to deal with millions of matching notice responses for casual ebay sellers.

And good hell, think of the divorces this is going to cause when your wife sees you received that $3,500 (on the 1099-K) that never hit her bank account. Please Baby Jesus, don't let them start doing this on the buy side or we're all toast.

 

[Titan]

I agree with Wapiti, the real issue here is the spouse finding out what our real losses are on gear we didn’t need. Haha.

and yes, I’m assuming if this is all correct and holds up, it will either just go on the Schedule D or have a box to mark it as non-income. I’ve had quite a few clients give me a 1099-S way after filing and never had the IRS flag it. I bet 99% will fly under $10k without reporting.

 

[ryjack70ss]

At that level (assuming 500k taxable income not gross and married filing jointly), you will pay 35% federal tax,plus 2.9% Medicare, plus 0.9 additional Medicare (above $250k).
You would get a qbi deduction of 20% of the $50k.

Tax would be $19,400 minus $3,500. So essentially $15,900 on the $50k. All said and done about 32% effective tax rate on that extra.

Thanks again. But I think I am missing something. 1. I read that QBI is phased out 326,600 and 2. Where is the 15.3% additional tax in your calculations?

Either way a lot of taxes are paid but I agree with your post that taxes are not a good reason to not earn more. Many misconceptions on that.


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[Titan]

There are qbi phase outs and they are very complicated. So It depends. I usually go worst case scenario and wouldn’t tell a client to plan on it.

the Social security portion of the 15.3% stops at $143k of income. That is 12.4% of the 15.3%. You still pay the 2.9% Medicare portion

 

[Silveroddo]

They're going to have to figure something out on the reporting because I can promise you they do not have the manpower to deal with millions of matching notice responses for casual ebay sellers.

That's the part that throws flags up in my mind. The amount of work they're creating when they can't keep the ball rolling as it is raises an eyebrow. I realize that in most cases its not going to be taxable, but who wants to deal with the reporting?

 

[Titan]

Again, you won't pay tax unless you are making a gain on the sale. Not many used weapons are going for more than what you paid (plus any mods, etc.).