New 1099k rules...and how it impacts gear junkies/golfers. Is this actually a good thing? CPAs feel free to chime in (merged)

[dciman1]

(Topic may need to be moved to another location)

 

If I'm not mistaken, starting Jan 1st a new law goes into effect regarding all transactions with online payment options such as PayPal, Zelle, Venmo, Cashapp and others.

It doesn't matter if it's only one transaction  or multiple but once your account eclipses $599 you will be issued a 1099k and have to pay income taxes. If you're audited, there's also a chance that the IRS determines that you have a small business, you will need to pay the self employment tax on top of it. Keep that in mind when you're selling your equipment. You'll be paying PayPal fee's, and if you sell on eBay there will be eBay fee's, and now taxes on top of it. I'm sure I don't have everything covered but you get the idea. 

[Abh159]

12 minutes ago, dciman1 said:

(Topic may need to be moved to another location)

 

If I'm not mistaken, starting Jan 1st a new law goes into effect regarding all transactions with online payment options such as PayPal, Zelle, Venmo, Cashapp and others.

It doesn't matter if it's only one transaction  or multiple but once your account eclipses $599 you will be issued a 1099k and have to pay income taxes. If you're audited, there's also a chance that the IRS determines that you have a small business, you will need to pay the self employment tax on top of it. Keep that in mind when you're selling your equipment. You'll be paying PayPal fee's, and if you sell on eBay there will be eBay fee's, and now taxes on top of it. I'm sure I don't have everything covered but you get the idea. 

 

I'm not a tax attorney or expert, but unless you're one of the people constantly trying to flip limited release items then it won't have much of an impact on you. It's primarily designed for those small businesses who have been using these forms of payment previously in an attempt to avoid having to report taxable income.

 

According to an article I recently read in Forbes... If you receive money from selling a personal item at a loss, you are not required to report the amount on your tax return. For example in golf terms, if you purchased a driver for $600 and sold it for $450, the amount is not taxable.

[bking556]

Great topic idea. I'm sure the best final answers will come from your tax person, but a discussion to gain information is a good iea. 

 

Abh159, thank you for the information you posted.

[bking556]

Quote

Q: Will the updated 1099-K Threshold Change apply if I sell personal property, like a couch or an item at a garage sale, for $600 or more if it was sold for less than its original value? Will I be issued a Form 1099-K?

Form 1099-K is an IRS informational tax form that is used to report goods and services payments received by a business or individual in the calendar year. While banks and payment service providers, like PayPal and Venmo are required by the IRS to send customers a Form-1099K if they meet the $600 threshold amount, there are certain amounts that may be included on the form that are generally excluded from gross income and therefore are not subject to income tax. This includes:

• Amounts from selling personal items at a loss
• Amounts sent as reimbursement
• Amounts sent as a gift

So, for example, if you purchased a couch for $1200 and sold it for $800, this amount would not be subject to income tax.

We encourage customers to speak with a tax professional when reviewing their 1099-Ks to determine whether specific amounts are classified as taxable income.

 

Source: https://newsroom.paypal-corp.com/2021-11-04-New-US-Tax-Reporting-Requirements-Your-Questions-Answered

[brew4eagle]

This happened to me last year.  I just created a spreadsheet that showed my net gain/loss (it was a loss btw) and then was able to enter a "0" on the appropriate tax form.

[dlow206]

for individuals, we rarely buy something for $X amount and then sell it for $X+. Therefore we aren't making any taxable income. you will still receive the 1099 but that doesn't mean you owe taxes. 

Edited December 17, 2021 by dlow206

[brew4eagle]

1 minute ago, dlow206 said:

for individuals, we rarely buy something for $X amount and then sell it for $X+. Therefore we aren't making any taxable income. you will still receive the 1099 but that doesn't mean you owe taxes. 

Correct, but I interpreted it to mean I had to do some justification, which was a PITA.  It definitely influenced my ho'ing in 2021, but I still broke the $600 threshold and will have to fill out some forms. 

[dlow206]

35 minutes ago, brew4eagle said:

Correct, but I interpreted it to mean I had to do some justification, which was a PITA.  It definitely influenced my ho'ing in 2021, but I still broke the $600 threshold and will have to fill out some forms. 

 

Yeah, it does cause extra paperwork which is a PITA

[Mustu]

I'm a CPA/tax accountant.  There are two issues here.  Whether the sales of your items are taxable and what to do about the new reporting requirements.  If you buy a driver for $600 and sell it for $450 it's clearly not taxable and the $150 loss is not deductible.  Technically this would be a non-deductible capital loss.  However, the IRS has automated matching programs that will generate a notice if something gets reported to the IRS and it's not included on a tax return.  For example, if a bank sends you a 1099-int for $1,000 in interest that you don't report on your tax return then you'll get a letter from them asking for additional tax on that $1,000.  We don't really know what the IRS is going to do with these 1099k and matching.  They will probably have some threshold amount before they contact someone about the difference between the tax return and the 1099k.  They may not advertise what that threshold is, but they're not going to want to send out millions of letters to people who are just selling their old stuff.  No one likes getting a letter from the IRS so what I plan on doing with clients in this situation is reporting the amount from the 1099k and subtracting it out on another line.  This will help make sure my clients don't get notices.  You may get different answers from different accountants until we have an idea of how the IRS is going to handle these.

 

The above is not for the flippers who are selling stuff at a profit.

[Krt22]

On 12/18/2021 at 10:19 AM, Mustu said:

I'm a CPA/tax accountant.  There are two issues here.  Whether the sales of your items are taxable and what to do about the new reporting requirements.  If you buy a driver for $600 and sell it for $450 it's clearly not taxable and the $150 loss is not deductible.  Technically this would be a non-deductible capital loss.  However, the IRS has automated matching programs that will generate a notice if something gets reported to the IRS and it's not included on a tax return.  For example, if a bank sends you a 1099-int for $1,000 in interest that you don't report on your tax return then you'll get a letter from them asking for additional tax on that $1,000.  We don't really know what the IRS is going to do with these 1099k and matching.  They will probably have some threshold amount before they contact someone about the difference between the tax return and the 1099k.  They may not advertise what that threshold is, but they're not going to want to send out millions of letters to people who are just selling their old stuff.  No one likes getting a letter from the IRS so what I plan on doing with clients in this situation is reporting the amount from the 1099k and subtracting it out on another line.  This will help make sure my clients don't get notices.  You may get different answers from different accountants until we have an idea of how the IRS is going to handle these.

 

The above is not for the flippers who are selling stuff at a profit.

Sheesh I hate the IRS, we are basically going to have to balance sheet for buying and selling used goods to prove we aren't making a profit?

 

This also sounds like the "issue" I have had twice now with selling RSUs. Income tax is paid when they vest first of each year, this tax get's lumped into my W2. When I sell them I report the gain, the tax form clearly states the cost basis and total gain, but twice now the IRS audits me and says I owe tax on the full amount, not just the gain. Basically I should start preemptively showing the tax was paid since my employer doesn't itemize it? I will ask my CPA to do this vs paying him to write a response smdh

[brew4eagle]

25 minutes ago, Krt22 said:

Sheesh I hate the IRS, we are basically going to have to balance sheet for buying and selling used goods to prove we aren't making a profit?

 

This also sounds like the "issue" I have had twice now with selling RSUs. Income tax is paid when they vest first of each year, this tax get's lumped into my W2. When I sell them I report the gain, the tax form clearly states the cost basis and total gain, but twice now the IRS audits me and says I owe tax on the full amount, not just the gain. Basically I should start preemptively showing the tax was paid since my employer doesn't itemize it? I will ask my CPA to do this vs paying him to write a response smdh

I don't blame the IRS.  If people were honest and handled their income received via payment apps appropriately then it wouldn't be a problem.

[Mustu]

3 hours ago, Krt22 said:

Sheesh I hate the IRS, we are basically going to have to balance sheet for buying and selling used goods to prove we aren't making a profit?

 

This also sounds like the "issue" I have had twice now with selling RSUs. Income tax is paid when they vest first of each year, this tax get's lumped into my W2. When I sell them I report the gain, the tax form clearly states the cost basis and total gain, but twice now the IRS audits me and says I owe tax on the full amount, not just the gain. Basically I should start preemptively showing the tax was paid since my employer doesn't itemize it? I will ask my CPA to do this vs paying him to write a response smdh

I don't want to get off topic, but I deal with RSUs all the time.  Send me a pm if you want me to explain how they work or how they should be reported on the tax return.   

[Gxhwh]

I might miss this information, but will this change only apply to the payment as Goods and Service, or to all the money you received. For example, if I send my son 1K by PayPal gifted, would this be counted as well? 

[larryd3]

6 hours ago, Gxhwh said:

I might miss this information, but will this change only apply to the payment as Goods and Service, or to all the money you received. For example, if I send my son 1K by PayPal gifted, would this be counted as well? 

Believe it's only goods and services from everything I've read, gifts are not reported.  

[Mustu]

9 hours ago, Gxhwh said:

I might miss this information, but will this change only apply to the payment as Goods and Service, or to all the money you received. For example, if I send my son 1K by PayPal gifted, would this be counted as well? 

Just goods and services.

[Gxhwh]

Thanks guys. Very helpful! 

[bmurph]

1 hour ago, Mustu said:

Just goods and services.

You sure about that? Last I heard venmo/zelle/cashapp are also included in this and they don't have options for goods and services.

[Krt22]

 

21 hours ago, brew4eagle said:

I don't blame the IRS.  If people were honest and handled their income received via payment apps appropriately then it wouldn't be a problem.

lol ok. 

[endy]

1 hour ago, bmurph said:

You sure about that? Last I heard venmo/zelle/cashapp are also included in this and they don't have options for goods and services.

Yeah it’s G and S only. Venmo now has a g and s option, not sure about the other two. 

[CasualLie]

All of the sudden that SWAG flipping doesn't look like fun... Good!

[cardia10]

3 hours ago, CasualLie said:

All of the sudden that SWAG flipping doesn't look like fun... Good!

Lol! All those Jordans that are size 8, 11 and 14 that “don’t fit” will push that limit fast! 

[rainkingjr]

Kind of a blessing in disguise as it will surely cure my golf club ho'ing. Just don't feel like dealing with it right now and certainy won't be providing Ebay my ss number or tax ID. Won't really apply as I almost always sell at a loss, but I'm not bothering with keeping track. 

[awtryau89]

If Titleist releases another batch of Left Dots those folks are going to get hit hard.

[endy]

14 hours ago, rainkingjr said:

Kind of a blessing in disguise as it will surely cure my golf club ho'ing. Just don't feel like dealing with it right now and certainy won't be providing Ebay my ss number or tax ID. Won't really apply as I almost always sell at a loss, but I'm not bothering with keeping track. 

This is exactly my attitude right now lol 

[gibbiesmalls]

I'm buying stock in local sales websites like offerup (letgo), craigslist, facebook marketplace etc..

 

If I could buy stock in "Friends and Family" paypal transactions going up, I would. HA!

 

Endy, don't worry bud, I got you... what I buy from you, I'm gifting you and vice versa! lol

[endy]

Haha sounds like a plan! 

[bking556]

Going to start accepting Bitcoin for my sales. 

[cardia10]

I’m going to put my 50 ebay items on a seller vacation for as long as possible. Sadly, I guess I’ll just use my wife’s Facebook Marketplace and do in person sales only. 

[jgreer1421]

On 12/27/2021 at 9:01 PM, gibbiesmalls said:

I'm buying stock in local sales websites like offerup (letgo), craigslist, facebook marketplace etc..

 

If I could buy stock in "Friends and Family" paypal transactions going up, I would. HA!

 

Endy, don't worry bud, I got you... what I buy from you, I'm gifting you and vice versa! lol

Can i join in this relationship? 🤣  We need to start a group of bst that only use F&F lol.

 

In terms of Facebook Marketplace.....will we not be issued a tax form if people start paying through Facebook marketplace pay vs paypal?  

 

As you look through many facebook listings in these groups, many many say "don't pay through facebook, only paypal"......is this the way around it and to just start using that service?

 

I bought and sold a lot of things over the last year.....

[gibbiesmalls]

23 minutes ago, jgreer1421 said:

Can i join in this relationship? 🤣  We need to start a group of bst that only use F&F lol.

 

In terms of Facebook Marketplace.....will we not be issued a tax form if people start paying through Facebook marketplace pay vs paypal?  

 

As you look through many facebook listings in these groups, many many say "don't pay through facebook, only paypal"......is this the way around it and to just start using that service?

 

I bought and sold a lot of things over the last year.....

Sorry bud!  40+ Feedback ratings only! lol  But we'll make an exception for you because we like your use of two different iron manufactures to make up your iron set!

 

I'm sure Facebook will actually also result in a tax form if the purchase is completed through their platform.  I guess I just figured most of the purchases on facebook happen in person (that's been my experience) because it's typically local sales.