Long term cap gains on JBL 100s. Who would have predicted that in 1972, when I bought mine?
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FYI I got scammed using PayPal Friends and Family
- Thread starter RonSSNova
- Start date
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I just ran into an issue on USAM with a seller. Great price, only to find out that despite his listing saying he took PayPal, he said he only took check or money order. I told him I was no longer interested as I only purchase items using PayPal.
His reply back to me was something about trust being given or earned or something. I have a secondary reason to use PayPal so trust wasn't completely the issue, and he did have excellent feedback.
But his main reason to avoid PayPal was, you guessed it, tax reporting. He'll probably sell to someone else soon enough. It just irks me that the tax situation is putting a damper on things like this.
agreed. the tax thing seems like overkill. and so many sellers are demanding F&F now, that paypal will have to do something - like discontinue it.
Interesting topic here. The IRS line between hobby and business income can be blurry for people with larger income dollar amounts on a 1099k.
Yes, there are additional taxes on a biz, but also large deductions for home office, vehicle use, meals, advertising, shipping, etc.
If you buy and sell with an expectation to make a profit, whether you do or not, it may be justified. Especially if you are retired. and it's your major source of non-passive income. Accountants can help you decide on this one
www.irs.gov
Yes, there are additional taxes on a biz, but also large deductions for home office, vehicle use, meals, advertising, shipping, etc.
If you buy and sell with an expectation to make a profit, whether you do or not, it may be justified. Especially if you are retired. and it's your major source of non-passive income. Accountants can help you decide on this one
Here’s how to tell the difference between a hobby and a business for tax purposes | Internal Revenue Service
Tax Tip 2022-57, April 13, 2022 — A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit.
Andyman
Junior Member
Interesting, but it really doesn't cover folks selling of unused items or downsizing. It might if you can position yourself as a collector and are simply downsizing your collection as collecting is a hobby.
I have no issue with this as I have been operating as a business and filing Schedule Cs for many years, but I can see where this can be daunting and more effort than one may want to get involved in.
The IRS has had quite a while to deal with this and there's no reason for them not to have issued publications clarifying that to do if you sell $1000 of your record collection online, aside from them either being ignorant, or simply not caring hoping that most folks will just roll over and pay taxes on the proceeds at their marginal rate w/o dealing with cost, packaging, and shipping adjustment.
I have no issue with this as I have been operating as a business and filing Schedule Cs for many years, but I can see where this can be daunting and more effort than one may want to get involved in.
The IRS has had quite a while to deal with this and there's no reason for them not to have issued publications clarifying that to do if you sell $1000 of your record collection online, aside from them either being ignorant, or simply not caring hoping that most folks will just roll over and pay taxes on the proceeds at their marginal rate w/o dealing with cost, packaging, and shipping adjustment.
I see on the 1040 Sched 1 where to enter "hobby" income, but I don't see how that directly ties into the 1099K.
Intuit does offer a little guidance:
Did You Get a Form 1099-K and Aren’t Self-Employed or a Small Business?
If you receive payments either by electronic transfer or credit card, you may receive Form 1099-K and possibly need to report some or all of the income that you receive.
turbotax.intuit.com
Don’t get taxed on non-taxable income
While Form 1099-K is supposed to be issued by third-party settlement organizations only for transactions for providing goods or services, there are several instances where using a third-party payment processing network could result in you receiving the form. But, you may not need to report this as taxable income. While the following is not an exhaustive list, it does cover several instances where you might unknowingly participate in a financial activity that triggers a 1099-K form being sent to you, but still doesn’t typically require you to recognize these payments as taxable income on your tax return.- If you’ve received payments from friends on Venmo for a restaurant bill
- Sold some items on eBay or Facebook Marketplace as a virtual yard sale for a loss
- Tickets sold on TicketMaster, StubHub or SeatGeek for a loss
- Getting paid by your roommate for their share of the rent so only one payment goes to the landlord
- Rented your home for fewer than 15 days during the year with a service such as Airbnb or Flipkey
Payment solutions like PayPal, Venmo, CashApp and others are very popular and are used by people who never had any intention of generating taxable income. If you or the buyer classifies the transactions as payments made for goods or services and they exceed the reporting threshold for the year, you generally should expect to receive a Form 1099-K from these peer-to-peer payment platforms. In fact, if you've sold more than the reporting threshold amount of goods or services and the buyer used the payment protection processing features offered by these platforms, whether you’re organized as a business or not, you will generally receive a 1099-K form. This income will also be reported to the IRS on Form 1099-K.
If, however, you receive payments for settling up the bill for a night out at a restaurant with friends, the payments will likely be handled as friends and family payments, and you shouldn’t expect to receive a Form 1099-K from the payment processing platform. This also includes parents using apps such as Venmo to send their college kids money for extra cafeteria meals or roommates needing to pool funds before paying the landlord each month. Splitting the check for dinner or sharing expenses would rarely if ever need to be reported on your tax return.
So, what do you do if you get a 1099-K form and you don't have taxable income from the platform? You typically don’t have to include it as taxable income on your tax return although you might want to document it using Schedule 1 as noted above. Time will tell if having so many 1099-K forms going out for these types of transactions will be problematic for the IRS or taxpayers, but – for now – just know that personal payments aren’t business payments, and you don’t have to report them as taxable income.
What bothers me the most is that we can sit here all day and sell off our possessions for a ginormous profit and not claim a cent of it if we are paid by cash or check, and the money goes into our bank account. Yet PayPal in a way acts as a bank account, so I don't get why these online processors are singled out to generate 1099Ks, and not bank accounts. To me they are both services offered to me for receiving and holding money.
Andyman
Junior Member
Probably because it is so much easier to track, and perhaps much more money. The Internet allows one to reach vast audiences of interested buyers and offers a far greater chance of making a sale than by a garge sale or even the old classified ads.
Many years ago I knew this was coming as there is just so much internet commerce. Ebay's gross income from fees was $9,940,000,000, which if they average 18% per transaction, indicates members sales and a cash flow of over $55 billion dollars, which in a 12% tax bracket means around $6.6 billion in uncollected taxes. That's worth fishing for. It's a soft figure as it doesn't account for those already filing, like me, or sales by non US members, but then that's just eBay and not Paypal for all those FB marketplace and AK Bartertown long distance sales. Last year we wound up not paying any income tax per se, but did have to pay $2,370 in self employment taxes, ie, Social Security and Medicare contributions, half of which was tax deductible the same year.
Honestly, I used to think that the IRS should find a way to access eBay sales for unreported income as they were leaving a lot on the table. I guess they finally woke up...
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Even eBay commercial vs. personal sales is a grey area. And I'll admit in the early days, eBay was a lot more fun before all the commercial sellers and swindlers (knockoffs, grey market, etc.) took it over. So even there, the IRS is off base in that they are seeing the entirety of eBay generating potential taxes rather than finding a way not to penalize the personal sellers.
The only "allowance" for not reporting taxes I think is the same limit it has always been--$600? And that was in place even a couple of decades ago.
The only "allowance" for not reporting taxes I think is the same limit it has always been--$600? And that was in place even a couple of decades ago.
I agree with Rudy....I only sell personal goods and usually not for profit...more for loss, like a garage sale. I am not and do not want to be a business. Hence I only use friends and family payments. The problem with 1099s for non-businesses is you cannot claim losses .... I sell a handful of items every year for much less total than would be considered a viable business.
if they discontinue f and f, I will discontinue using paypal....
I already have a "business" I can receive 1099s into, so it's not a big deal to roll that stuff into it.
I had not realized until reading the comments here what a complete mess this. Even more blurred lines emerge as the IRS
has defined 3 categories for EBay Sellers - business, hobbyist, and virtual yard sale.
Although not super defined, I read the difference between virtual yard sale and hobbyist as whether the average sale makes money, or not. If you make something for "fun"(knitted caps) and sell it online, every sale makes profit. If the knitted cap seller does not want to be, or can't qualify as a business, they are a hobbyist. More or less. I read the distinction as higher volume, not personal items, and can have gains and losses.
On the other hand, if occasionally you sell personal items online, for a loss, that is classified as a virtual yard sale and no tax is due.
The bugaboo is how to reconcile the 1099K income - you can't just ignore the form, even though no tax is due. Oddly enough, the IRS has a publication that neatly shows how, and even gives a simple example with form and line #s. Skip to Personal item sold at a loss
Understanding Your Form 1099-K | Internal Revenue Service
I'm glad they used a $700 value, as that would trigger a 1099K (it's over $600). So they show even relatively expensive items sold at a loss pay no tax - and even list stereo in the list of examples for what personal items qualifies for no tax.
I think this covers a lot of folks here who sell occasionally. And since EPay no longer sends your income to paypal, but direct to your bank, you don't need to worry about having the sale show up twice, also on a Paypal 1099-K.
Oddly enough, I googled this though 2 cups of java today, and no one explained it more clearly than the IRS pub linked above.
I wrote it down here, because guaranteed I'll forget all the details by the time I need it.
Bob
has defined 3 categories for EBay Sellers - business, hobbyist, and virtual yard sale.
Although not super defined, I read the difference between virtual yard sale and hobbyist as whether the average sale makes money, or not. If you make something for "fun"(knitted caps) and sell it online, every sale makes profit. If the knitted cap seller does not want to be, or can't qualify as a business, they are a hobbyist. More or less. I read the distinction as higher volume, not personal items, and can have gains and losses.
On the other hand, if occasionally you sell personal items online, for a loss, that is classified as a virtual yard sale and no tax is due.
The bugaboo is how to reconcile the 1099K income - you can't just ignore the form, even though no tax is due. Oddly enough, the IRS has a publication that neatly shows how, and even gives a simple example with form and line #s. Skip to Personal item sold at a loss
Understanding Your Form 1099-K | Internal Revenue Service
I'm glad they used a $700 value, as that would trigger a 1099K (it's over $600). So they show even relatively expensive items sold at a loss pay no tax - and even list stereo in the list of examples for what personal items qualifies for no tax.
I think this covers a lot of folks here who sell occasionally. And since EPay no longer sends your income to paypal, but direct to your bank, you don't need to worry about having the sale show up twice, also on a Paypal 1099-K.
Oddly enough, I googled this though 2 cups of java today, and no one explained it more clearly than the IRS pub linked above.
I wrote it down here, because guaranteed I'll forget all the details by the time I need it.
Bob
Here's the section from that link:
One thing to note--they say where to enter the items at, but this IRS document does not direct us to enclose original receipts or proof of what we paid for it. So in essence, we could write down everything we sell from our personal collections and not have to pay the tax. Thing is, if I buy something locally with cash, there is no receipt, so I guess the IRS relies on the honor system here if we can't provide proof of our original cost? 🤷♂️
Also, here is a minor consideration. What constitutes a "loss"? Those speakers I bought in 1982 for $300/pair? I could resell them for $700 today and technically lose money on them. I would have to sell them for more than $950 in 2023 dollars before I could say I made a profit on them. I've never seen anything in IRS publications about adjusting original costs for inflation, when reselling personal property.
$300 in 1982 → 2023 | Inflation Calculator
The 2.86% inflation rate means $300 in 1982 is equivalent to $954.48 today. This inflation calculator uses the official US consumer price index published by the Department of Labor.
www.in2013dollars.com
I thought about the "Original Price" thing too, for stuff bought long ago and the price was forgotten. Was also amused the IRS example was quite casual about not having some sort of worksheet to show the loss.
I would suggest simply using the original list price for records, unless you have old email confirmations of the transaction. You can get pricing from old Audio magazine equipment directories, available here
for instance, 1990 listings here -
I've done my own taxes for a good while, also have my own non-audio consulting biz, so this is typical.
The IRS expects you to keep these records to back up summary entries like this. The only time you need to show them is for an audit. Records do not have to be fancy - I use handwritten notes with lists of items for my tax records. If you forgot the price, use a reasonable number, but include your buy date (even if estimated), model year, and how paid.
Your chance of an audit today over something like this is, IMHO, close to zero - provided you acknowledge the 1099K on your return, and zero it out as above. If you ignore the 1099k, you will likely get a letter advising taxes are due. The IRS is underfunded and short of staff, so look to audit flagrant offenders who owe big $$$, not crucify sellers of used stuff via Paypal or Ebay. They acknowledge used things, in general, are worth less as they get older, so folks selling personal used stuff and simply using Paypal to collect $ are assumed to owe no tax on the transaction.
I would suggest simply using the original list price for records, unless you have old email confirmations of the transaction. You can get pricing from old Audio magazine equipment directories, available here
AUDIO - Consumer audio and music magazine from 1947 to 2000.
Audio Engineering magazine began publishing in May, 1947 with a new focus from its predecessor, "Radio". The title changed to "Audio" in February, 1954, with a graphic redesign. The first 7 years focused on technology and engineering, while the later issues highlighted consumer electronics and...
www.worldradiohistory.com
I've done my own taxes for a good while, also have my own non-audio consulting biz, so this is typical.
The IRS expects you to keep these records to back up summary entries like this. The only time you need to show them is for an audit. Records do not have to be fancy - I use handwritten notes with lists of items for my tax records. If you forgot the price, use a reasonable number, but include your buy date (even if estimated), model year, and how paid.
Your chance of an audit today over something like this is, IMHO, close to zero - provided you acknowledge the 1099K on your return, and zero it out as above. If you ignore the 1099k, you will likely get a letter advising taxes are due. The IRS is underfunded and short of staff, so look to audit flagrant offenders who owe big $$$, not crucify sellers of used stuff via Paypal or Ebay. They acknowledge used things, in general, are worth less as they get older, so folks selling personal used stuff and simply using Paypal to collect $ are assumed to owe no tax on the transaction.
Completely agree.
And perhaps someone needs to get this word out to the greater audio community, completely with the link and information you posted above. So many now have a PayPal phobia due to the tax issue that they have cut back selling, or insist on F&F payments. If I don't know the seller, sorry, it's going to be regular PayPal or no deal. In other words, if they sellers knew they could cancel out the 1099-K for personal sales, some of this phobia might die off.
well that makes sense then...it is those of us who are selling like a garage sale who prefer not to receive 1099s.
Completely agree. I shouldn't even have to worry about selling off my own property and needing to claim it on taxes.
Andyman
Junior Member
Yep. Has anyone ever had to pay taxes on selling a car, aside from perhaps some collectible???
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