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

[jgreer1421]

I'll take it!  I'm in lol  What can I say....I use what works......most of the time 🤣

 

I was thinking with the handful of bst groups that are on there for golf clubs.

 

I haven't done much with facebook over the years so wasn't sure, but my wife seems to be putting something new on our front porch of all our old kids stuff daily lol. 

[cardia10]

I have no intent to collect payment through paypal or facebook. Just list the items there and meet in person for cash in my hand sales.

[endy]

So the reason people put “do not use Facebook pay” is because you have to link your bank account and they take a chunk of the sale, as well as charge the buyer taxes. It’s a giant pain in the butt. 

[jgreer1421]

2 minutes ago, endy said:

So the reason people put “do not use Facebook pay” is because you have to link your bank account and they take a chunk of the sale, as well as charge the buyer taxes. It’s a giant pain in the butt. 

Gotcha….sounds like the exact business model of eBay. 

 

Guess a little more research is needed. 

 

 

[endy]

3 minutes ago, jgreer1421 said:

Gotcha….sounds like the exact business model of eBay. 

 

Guess a little more research is needed. 

 

 

With Venmo now offering goods and services protection, people are using that more and more as well. Crappy thing is, I can see scammers using the new law as an excuse as to why they will only accept “gifted” payment, and unfortunately I think people will oblige it more often. Going to be interesting waters to navigate lol. 

[Dpavs]

Face book market place, cash sale and local pick up only is the way I have been selling my used clubs recently.

It's far less hassle, no fees paid to anyone and no shipping debacles.

[Krt22]

The new rules seem pretty clear, if you exceed $600 in electronic payments labeled as "goods and services", you will be issued a 1099k. I am assuming if you do not file anything, the IRS will simply view this as earned income.  Now for golfers who buy/sell lots of gear and accessories, they will quickly exceed this threshold and be subject to the new rules. I know the intent was to get profiteers and side hustle folks to "pay their fair share", but what about those who essentially are always buying/selling at a loss? 

 

If the IRS is going to view reselling goods as "income", does that mean I can actually report it as a loss, assuming I keep track of the original purchase price and sell it for less than I paid? And if simply buying/selling goods is essentially being treated as a small business, can I then start writing off all business related expenses? Ebay fees, paypal fees, shipping. What about the car I use to drive to buy the clubs? Or the computer if I buy everything online? How about my golf club membership, where I may entertain potential buyers of my used equipment? 

[mmoran]

You just need to be able to prove your "business" is not a hobby.

[Krt22]

23 minutes ago, mmoran said:

You just need to be able to prove your "business" is not a hobby.

What is that threshold? But does it not essentially become a business the minute you get a 1099k? If the IRS wants to view selling 2nd hand gods as income, don't they at the same time need to view the original purchase as an expense?

[mmoran]

google IRS business vs. hobby 

 

 

[Krt22]

17 minutes ago, mmoran said:

google IRS business vs. hobby 

 

 

I guess that clarifies it. I guess you need to keep track of all your expenses, just to show you did not make any actual income. What a PITA

[Petethreeput]

1 minute ago, Krt22 said:

I guess that clarifies it. I guess you need to keep track of all your expenses, just to show you did not make any actual income. What a PITA

I was just going to say, I suspect this is similar to any 1099 filing, just now they are going through 3rd party vendors like eBay.  I suspect if you keep the receipts/payments for the items you are selling that would help to offset the gross receipts portion.  Just like selling a security, the company only reports the sale price, not the purchase price.

[Soloman1]

Well, I guess I need to call off the garage sale.

[GooseHook]

I am not a CPA and I hope this doesn't get shut down for "politics" as it's a relevant topic for many active BSTers in the coming months. 

 

Provided you have decent traceability on your purchases and sales, it would be easy to demonstrate that your cash app payments are just resale of personal goods at a breakeven/loss and you're not running a side hustle. 

 

I personally despise TurboTax but if you want to read a thread on the specific topic it may clarify for you. 

[TwistedSister]

As long as there is not a profit ...NO taxes!  simple. 

[TwistedSister]

I guess you reap what you sow. If you haven't been paying your "fair" share  you asked for it.  IRS needs your money.  They have already spent it.

[Krt22]

16 minutes ago, dhacker56 said:

As long as there is not a profit ...NO taxes!  simple. 

I would argue it's not quite that simple, with the much lower threshold for a 1099 being issued, you need to be more diligent to prove that there is no profit (before the threshold was 20k and 200 transactions, so much less of an issue), otherwise you will either needlessly pay additional tax or potentially get hit with a CP2000. 

 

I will say it is a complete farce that a "hobby" can generate taxable income, but cannot generate tax deductible losses. 

[brew4eagle]

17 minutes ago, Krt22 said:

I would argue it's not quite that simple, with the much lower threshold for a 1099 being issued, you need to be more diligent to prove that there is no profit (before the threshold was 20k and 200 transactions, so much less of an issue), otherwise you will either needlessly pay additional tax or potentially get hit with a CP2000. 

 

I will say it is a complete farce that a "hobby" can generate taxable income, but cannot generate tax deductible losses. 

It's pretty simple via a spreadsheet to show no profit (assuming that's the situation), and 'no' you don't get to claim 'losses'.  You then fill out the applicable IRS schedule and you're done.  I had to do this last year since VA had implemented a greater than $800 rule.  My processed payments were well into the 5 figures, yikes.  It was good in that it significantly curtailed my ho'in.

[Krt22]

16 minutes ago, brew4eagle said:

It's pretty simple via a spreadsheet to show no profit (assuming that's the situation), and 'no' you don't get to claim 'losses'.  You then fill out the applicable IRS schedule and you're done.  I had to do this last year since VA had implemented a greater than $800 rule.  My processed payments were well into the 5 figures, yikes.  It was good in that it significantly curtailed my ho'in.

You see this is problematic for me, since I always told myself "Never add it all up!" 

[TwistedSister]

16 hours ago, Krt22 said:

I would argue it's not quite that simple, with the much lower threshold for a 1099 being issued, you need to be more diligent to prove that there is no profit (before the threshold was 20k and 200 transactions, so much less of an issue), otherwise you will either needlessly pay additional tax or potentially get hit with a CP2000. 

 

I will say it is a complete farce that a "hobby" can generate taxable income, but cannot generate tax deductible losses. 

When I was much younger I would buy two young steers and raise them to market weight.  I would then sell one and butcher the other for our use.  I did this for three years until we decided it was of no real benefit based on the cost and work involved.  My tax preparer told me that as long as we showed ANY profit in one year out of three we could write of the losses in the other two years.  Since if you make a profit in one year you are showing intent that it is not meant a s a hobby.  The same would apply here.  And it would sound like you are just trying to make money and avoid the taxes.  This is the exact reason the Congress did this.  After all we know that the Congress can't live within any budget they set out.

Edited January 14, 2022 by dhacker56

[Krt22]

2 hours ago, dhacker56 said:

When I was much younger I would buy two young steers and raise them to market weight.  I would then sell one and butcher the other for our use.  I did this for three years until we decided it was of no real benefit based on the cost and work involved.  My tax preparer told me that as long as we showed ANY profit in one year out of three we could write of the losses in the other two years.  Since if you make a profit in one year you are showing intent that it is not meant a s a hobby.  The same would apply here.  And it would sound like you are just trying to make money and avoid the taxes.  This is the exact reason the Congress did this.  After all we know that the Congress can't live within any budget they set out.

Not even remotely the case (not that there is anything wrong with trying to lower one's tax liability). Any club ho knows that it is 100% a losing venture, a losing venture that I now burdened with tabulating every single year (which in turn likely means a higher fee to my CPA). Do you not think it's a bit crazy that individuals need to keep track of cost basis of regular consumer goods that are bought and sold? I was simply pointing out the inconsistency in this tax policy. When it comes to small business, securities trading, gambling, etc...any income you earn you have to report, but in turn any loss you incur can then be written off. For this "hobby" income that isn't the case, it's a one way street to pound town.  With that being said, the new policy may just drive me to attempt to make money, such that I can use the tax code to offset my losses lol

[Hawkeye77]

LOL, thank goodness I just buy, buy, buy and never sell!

[dlow206]

Start a legitimate single member LLC (not a hobby business), sell golf equipment, and take deductions on business expenses. 

[ChaosTheory]

First of all, it doesn't matter at all unless you are audited. 

 

To file, if you get a 1099 for say $4000 of golf clubs you sold, make your best guess as to what they cost, and put that on the correct line and/or schedule for capital gains.   Which will net you out to a non-deductible loss.  At this point the IRS is gonna just process it.

 

If you get audited and they ask for documentation of the cost basis, you're gonna have to say it was your best guess, that you burn through a lot of trial and error of golf clubs because you enjoy it, there are worse vices one could have, you definitely lost money doing it, and here's why.   Show them a couple of examples. 

 

People have this image of IRS auditors demanding proof of every little thing.   Usually they are just looking for real issues, and not arguing about the value you put on the old dishes you took to Goodwill.   I guess they do have the very rare compliance audits where they verify every line, but even then, so what?  You lost money and you're not lying about that.   I predict this will be a big nothing burger in real life, other than the understandable bother that it is giving a lot of us.

 

 

 

 

[TwistedSister]

5 hours ago, Krt22 said:

Not even remotely the case (not that there is anything wrong with trying to lower one's tax liability). Any club ho knows that it is 100% a losing venture, a losing venture that I now burdened with tabulating every single year (which in turn likely means a higher fee to my CPA). Do you not think it's a bit crazy that individuals need to keep track of cost basis of regular consumer goods that are bought and sold? I was simply pointing out the inconsistency in this tax policy. When it comes to small business, securities trading, gambling, etc...any income you earn you have to report, but in turn any loss you incur can then be written off. For this "hobby" income that isn't the case, it's a one way street to pound town.  With that being said, the new policy may just drive me to attempt to make money, such that I can use the tax code to offset my losses lol

I have no problem with lowering one's tax liability....LEGALLY.  But to Club HO and make money and pay no taxes is not LEGALLY reducing one's tax liabilty. 

[Krt22]

46 minutes ago, dhacker56 said:

I have no problem with lowering one's tax liability....LEGALLY.  But to Club HO and make money and pay no taxes is not LEGALLY reducing one's tax liabilty. 

You are clearly not a real club ho lol. No real club ho ever makes any money, period. The best you can do is sell off the "losers" to mitigate your losses. We just now have to actually prove this on a yearly basis smdh

Edited January 14, 2022 by Krt22

[brew4eagle]

46 minutes ago, dhacker56 said:

I have no problem with lowering one's tax liability....LEGALLY.  But to Club HO and make money and pay no taxes is not LEGALLY reducing one's tax liabilty. 

"Club ho" and "make money" are oxymorons

[TwistedSister]

14 hours ago, brew4eagle said:

"Club ho" and "make money" are oxymorons

Tell that to those selling the SC trash!

[brew4eagle]

23 minutes ago, dhacker56 said:

Tell that to those selling the SC trash!

That's not "club ho'in" imo, that's "flipping".  Agree that flippers (those buying things to simply sell for a profit) should be subject to taxes on those profits.

[TwistedSister]

Just now, brew4eagle said:

That's not "club ho'in" imo, that's "flipping".  Agree that flippers (those buying things to simply sell for a profit) should be subject to taxes on those profits.

That sets my mind at ease.  Thanx