IRS Delayed the 1099 600$ rule for one year. See article

[Billy Goat]

No. See Q7 at https://aboutbtax.com/6dg. Sorry (for your friend).

Good lord all that got confusing. Looks like it would be capital gains tho.



Need to read it again when I can actually follow it, draw some maps thru it or something.

 

[Neumie]

 

[fwafwow]

Good lord all that got confusing. Looks like it would be capital gains tho.



Need to read it again when I can actually follow it, draw some maps thru it or something.

Definitely. It is unusual in that there are plenty of other areas in which FAQs are needed but not provided. But it does warrant a diagram/flowchart, and I like how @Neumie demonstrated his expertise in volunteering to do so.

 

[fwafwow]

Good post. I should know better than to weigh in here - as taxes overlap politics to a great degree. But I've also got very poor judgment...

The government just passed a 1.7 trillion spending bill, the bill being over 4,000 pages long. The government and DoD specifically can only account for a shockingly low amount of assets and spending in a given year.

I think you hit the nail on the head right off of the bat. I believe spending is the primary problem, and if you spend, you have to print money and/or borrow, but ultimately the bill comes due and taxes are the source.

But somehow my potential $600 payment even if it’s all gain must absolutely be accounted for by the IRS. To accomplish making sure I pay my gains they’re giving the IRS $80 billion.

This is the part that sucks because, IMHO, it's just math. Unfortunately the only way to pay that bill via taxes is to tax everyone. Even if the tax rate is incredibly high, there isn't enough income among the "wealthy" (however defined) to produce enough revenue to cover annual spending.

If someone sells something for $1 million, $10k or $600 and it's all income, he's supposed to pay taxes on it. Same for if you work as a waiter and get a $10 tip. The results are not supposed to vary if the payment is in cash, or via Venmo. Is that fair? Probably a policy debate, but in any case not reporting and paying taxes is a personal moral decision - but technically wrong (and going way beyond taking advantage of a "loophole"). And yes, not reporting/paying is sticking it to the IRS, but really it's sticking it to everyone.

Then they claim the money given to the IRS is to go after the wealthy. Sure sounds great but the reality is the truly wealthy have lawyers and accountants that are top notch and “cheat” the system by utilizing the loopholes created by the system.

This is the primary reason I made the mistake of this post. In my opinion, I think this is a common misconception that there are special "loopholes" (which I don't even know what that means - deductions?) that are only available to the wealthy who hire lawyers and CPAs. Not true IMHO. But if there are some, I welcome learning about them.

Sure they might find an illegal scheme here or there and tangle up some athletes and Hollywood celebs but they won’t get at the true ultra wealthy.

The true ultra wealthy pay a lot in taxes. Sure, in some years the marginal rates are low, and there are exceptions. Like the often pointed to Elon Musk who was said to have not paid "enough" - until he sold a bunch of shares and incurred a huge income tax liability. Before that he didn't have income equal to what people perceive he did. And it's reported he used a "buy/borrow/die" approach to borrow against his stock (not income) with the hope that he could just hold off until death to avoid paying the capital gains. I hate that label, as it fails to consider interest carrying costs, and considerable risk (as the debts don't decline, but the stock certainly can - and did). Plus dying only avoids capital gains income taxes, not estate taxes.

Then they’ll look at how they can make up for the claimed expected tax profits, watch out medium to small family owned businesses. Wether republican or democrat I always see “x” official is giving “y” amount of money to Ukraine or to some foreign area that had a natural disaster. Well the government doesn’t give anything, the taxpayers do and they take credit for political score when applicable.

Totally agree. I think politicians view their jobs as acquiring, exercising and retaining power. Doing so means there are no real repercussions for behaving poorly or making bad decisions. My personal belief is that only term limits would help, but unfortunately they are unconstitutional for Congress.

 

[fwafwow]

 

[Brendan]

I can't believe people still haven't wrapped their head around this.

This does not and has not ever impacted the taxes you're required to pay. Sell any amount of goods at a loss (e.g. used hunting gear) in 2021, 2022, 2023 - you don't pay taxes.

Sell over $600 used goods at a profit in 2021 - you are required to pay taxes. Same for 2022, same for 2023, etc. The new reporting requirement has never changed this. (Don't quote me on if $600 is the actual threshold, it may be $0)

All this does is require PayPal to send the IRS a form telling them you had "Revenue" over $600. It does not determine whether or not you have to pay taxes on it. If I sell $5000 in used hunting gear at a loss - no taxes owed. But the IRS will get a form and I have to be prepared to defend those sales with receipts, and it does make me more likely to get audited. That's the change, and getting audited sucks. BTDT.

 

[Whitey Fisk 88]

IRS delays much-criticized new tax rule on side hustles over $600

Plans to force millions of Americans to report third-party payment app transactions over $600 have been delayed by the IRS after it admitted 'confusion' around the controversial policy.

www.dailymail.co.uk

At least we have another year to buy and sell gear. its a damn shame this is what our country has resorted too. Hoping a new Administration will throw this crap out.

Yea, well its kind of like being married to an abusive spouse, you get the treatment you deserve because you get the treatment you allow.

Like a bully, theyre not gonna wake up one day, and say "gee whiz, i guess we better stop mistreating the peasants today"...we could keep "voting red", etc etc doing the exact same thing we are now for 10 million years and itll not get a smidge better, only worse.

They dont care how much you bitch, or complain, in matter of fact they probably like it because it humiliates us even more..but just as long as we dont do anything, they dont care what we do because we're still complying and thats the all they need.

So stop

 

[ETtikka]

so any PayPal gs ,eBay, Venmo, etc transaction to a person will be reported to the IRS as income, it’s up to the individual to keep records and fill out forms that show the expenses vs income, and show the gain or loss, but you can’t count losses?

 

[fwafwow]

so any PayPal gs ,eBay, Venmo, etc transaction to a person will be reported to the IRS as income, it’s up to the individual to keep records and fill out forms that show the expenses vs income, and show the gain or loss, but you can’t count losses?

I think that’s close. Only slight variations - total has to be $600 in a year, and I think the forms don’t necessarily have to include the records (but they would be needed, or at least helpful, if you are audited). Sort of like donating property - you should have some backup for value, but the chances of being checked (at least for me) never materialized.

I’m confident TurboTax and similar programs will handle it.

 

[bojangles808]

if you are over 600$ and getting a 1099K (me) and it was personal items at loss this is what you do (I was planning on doing this at least until the most recent announcement)...

Understanding your Form 1099-K | Internal Revenue Service

Form 1099-K reports payments from payment apps or online marketplaces and from credit, debit or stored-value cards. Use it to help figure and report your correct income on your tax return.

www.irs.gov

 

[Brendan]

My understanding is this: (Not an accountant, so take it for what it's worth)

You won't report every item on your return, you'll get the 1099K if your total sales are above $600 and you will report the total amount, the total amount taxable, and total amount non-taxable. Doesn't matter if it's one item for $600, or twenty items that add up to $600.

And if total amount non-taxable is suspiciously large, the IRS audits you and you need to be prepared to prove it 3 years down the line when they get to it (up to 6 years if they start auditing you and find a bunch of issues). So it's your responsibility to keep records and be able to provide them to the IRS in the future.

You'll want to know and have records for: What you paid for it, what you sold it for, shipping/insurance/fees you paid as selling expenses. If you sell a gift, you should technically know what the giver paid for it, or at least document MSRP as what they paid for it is your basis.

 

[ewade07]

What if your payments from Venmo/PayPal were NOT through F&F (PayPal) or Goods and services (Venmo)?

 

[fwafwow]

What if your payments from Venmo/PayPal were NOT through F&F (PayPal) or Goods and services (Venmo)?

Sorry, I don’t understand the question. Is there another option?

 

[ewade07]

Sorry, I don’t understand the question. Is there another option?

Yes, yiu can pay through Friends and Family.

 

[fwafwow]

Yes, yiu can pay through Friends and Family.

Right, but your question says NOT thru F&F

 

[mtwarden]

I buys and sell a lot of goods throughout the year (gear junky has it's drawbacks ) on this site and others. Easily adds up to over $600.

I'm pretty sure I've never sold (or purchased) anything that would be a profit (as much as I'd like to the tell the wife that!).

Question- do you have to include such a 1099 when doing your taxes or simply have records handy if you're audited (they'd be pretty desperate to audit me)? The thoughts of having to account on my taxes each and every item I've sold over the year sounds like a real pain, I'd much prefer to ignore it and then prove it later in the highly unlikely event I was audited.

I wouldn't mind ditching PayPal altogether, but I wonder how much hesitation there would be from buyers having to send a money order (or using F&F)?

 

[fwafwow]

I buys and sell a lot of goods throughout the year (gear junky has it's drawbacks ) on this site and others. Easily adds up to over $600.

I'm pretty sure I've never sold (or purchased) anything that would be a profit (as much as I'd like to the tell the wife that!).

All that matters are your sales.

Question- do you have to include such a 1099 when doing your taxes or simply have records handy if you're audited (they'd be pretty desperate to audit me)?

As I read the rule, the 1099-K is a form that PP (etc.) has to prepare and send you.

The thoughts of having to account on my taxes each and every item I've sold over the year sounds like a real pain, I'd much prefer to ignore it and then prove it later in the highly unlikely event I was audited.

I was pretty much in the ignore camp. That was before I saw the detail of how the IRS expects things to be reported if a 1099-K is issued. I’m still not worried, as I’ve used TurboTax for 25+ years and I’m sure it will be easier to handle than we think.

I wouldn't mind ditching PayPal altogether, but I wonder how much hesitation there would be from buyers having to send a money order (or using F&F)?

There are plenty of threads on RS in which I’ve seen two schools of thought. On one side (trying to avoid IRS reporting - whether income is realized has nothing to do with the form of payment) people say to use F&F, money orders, etc. On the other side are concerns about being scammed and some of the posts saying even asking for F&F is a red flag for a scam.

I personally worry more as a seller about being scammed and often ask for F&F as my default, but offer G&S if I can determine the buyer is legit.

 

[mtwarden]

^ thanks!

I think in 23 I'll ask for F&F or a money order to avoid the hassle; fortunately I have made enough sales here (and elsewhere) over a long period, that it should be pretty easy to see it's not a scam

 

[Brendan]

@mtwarden @fwafwow - in addition to PayPal sending you the 1099K, they send the IRS your 1099K. You definitely need to account for it on your tax return even if it's 100% losses (Starting in 2024/FY2023 now). In the past, I've just ignored it too as I'm in the same camp - you don't make money selling used gear.

If you ignore it on your return and the IRS has it on their end, I'd imagine that's probably a flag that would increase your chances of getting audited.

Using F&F, Venmo F&F, Zelle, Money Orders avoids all of this, but you lose the buyer/seller protection that comes with PayPal. Not an issue if it's a site like this though where people have been around for years, and have a history here you can check, but harder when you want to sell stuff between "unknown" buyers/sellers.

 

[fwafwow]

^ thanks!

I think in 23 I'll ask for F&F or a money order to avoid the hassle; fortunately I have made enough sales here (and elsewhere) over a long period, that it should be pretty easy to see it's not a scam

You are definitely good to go as a buyer! Insisting on F&F as a seller to avoid being scammed is perhaps paranoia on my part.