what is the impact of selling with new tax law?

[jb_abides]

I sold a guitar a few weeks ago for $2000 on Reverb. They notified me that they are sending me a 10-99 form showing $2000 as income.

Also note when you purchase on Reverb, the transaction is saved and you are given the option to save it to your 'Reverb Collection' (and also upload everything you own tied to their item listing which tracks market value).

You can view this as a useful tool, or... something else entirely.

 

[jwalker]

Sales tax is charged by Reverb because you are selling on their market place and as such the volume of sales they do for each state requires they charge state sales tax. The 2017 Supreme Court Ruling of South Dakota vs. Wayfair Inc. requires sales tax charged if there is delivery of more that $100,000 in goods or services or 200 or more transactions conducted in a specific state. Below those limits and you don't need to charge sales tax. But Reverb and Ebay do well above those numbers so they have to charge sales tax on all sales through their marketplace.

 

[Pat Boyack]

Per above comments about IRS 'not going after little guys, so don't be troubled'... Respectfully, please be very careful giving advice to willfully violate tax law using your real name and place of business. Trust meme

I've spent plenty of time sending out my own 1099s to band members and I employed a CPA for a number of years. I'm also not very hard to find. Shit, I even use my real name in this forum.

 

[J.D.]

First off, nobody should be taking tax advice from an internet forum.

Read the IRS publication for yourself. A 1099K is an income report. It will need to be acknowledged "somehow" in your tax filing, as, by law, the payment houses are reporting it to the IRS.

Best to follow the advice of your accountant.

 

[sikoniko]

Was this law lobbied by accountants? It would seem we are all going to need one now… I heard one shop owner saying this is going to pull a lot of individual sellers out of the marketplace and limit transactions to just businesses now, due to the complications now added. I can see that. Next year a lot of people are going to be surprised when they have to deal with this crap. I can see the trend lean that way… I’m clearly have second thoughts about selling…

I really think if they wanted to, they could make this easy…

 

[J.D.]

This is all Biden admin. I seriously doubt the accountants preparing tax filings like this one bit.

 

[Uncle Jesse]

My state had this law in effect for tax year 2021 and I didn't know it until tax time a few months back. I was able to use turbotax for small business to fill out the forms for cost of goods etc. It allowed me to write off expenses such as mileage to UPS, insurance policy, StewMac membership, books, strings, polishing cloths, etc. So even if you do make some sort of profit selling stuff it's fairly easy to offset it if you go through your past year's expenses.

 

[DestineyHale]

Hey. Selling items for less than you paid for them typically doesn't require reporting income, but if you're selling for a profit, it's important to be aware of capital gains. As for taxes, they usually come out of the money you receive from the sale, not on top of your asking price. If you're worried about keeping track of all this, you might want to check out this paystub maker https://www.thepaystubs.com/. It can help you keep track of your income and expenses for tax purposes. Hope that helps.

 

[Wound_Up]

This is all Biden admin. I seriously doubt the accountants preparing tax filings like this one bit.

They couldn't care less. They're accountants. This is what they're paid to do. If they don't like doing accountant things, they probably shouldn't be accountants lol

Let's not forget it was put off for 2022 and you don't have to report anything when you file taxes this year. The 200/$20000 requirement is still in effect until Dec 31, 2023

You guys need to read this entire page and understand it. If you don't understand it, have someone explain it to you that does understand.

NTA Blog: Heard Loud and Clear: IRS Postpones Implementation of $600 Form 1099-K Reporting by a Year

As a result of taxpayer confusion, lack of clear guidance, concerns about the existing backlog, and impact on the upcoming filing season industry and stakeholders urged the IRS to postpone the implementation of the new reporting requirements of the Forms 1099-K.

www.taxpayeradvocate.irs.gov

Part of what's on this page:

A Form 1099-K is an information form typically provided to freelancers or small business owners who receive payments of income from a client via a third-party payment system (e.g., Venmo, PayPal, or Cash App) and it is often considered self-employment income. However, with the convenience of Venmo, PayPal, or Cash App, many individuals pay personal expenses as well as payments associated with goods and services with these apps.

For example, think about a group of friends who regularly has lunch or dinner together and one person pays the bill. After the meal, the friends send reimbursement through Venmo. Unless the account or payment is designated as personal, it will trigger a reporting requirement if the annual amount exceeds $600. The person receiving the funds could receive a Form 1099-K, and the IRS will expect to see that income reported on his or her tax return. Payments incorrectly classified as business (goods or services) will trigger a Form 1099-K. If a taxpayer believes it is not taxable and does not include the amount on his or her tax return, it will create a mismatch with IRS systems potentially triggering an IRS notice of adjustments and penalties. If not taxable, taxpayers will be required to provide support as to why the payments should not be included in income. Lowering the threshold from $20,000 to $600 substantially increases the number of Forms 1099-K that will be issued. The postponement should provide taxpayers additional time to familiarize themselves with the rules and, more importantly, to properly identify personal versus business payments to prevent misidentified payments being reported on a Form 1099-K at year-end.

 

[jimmi]

Why is this being taxed as income? Shouldn’t this be capital gains? You sell a private property for a profit it is taxed at the lower capital gains rate. Sell a collectible car, it is the same. Why would this be different ?

 

[ADP]

Taxation is theft. God bless the USA.

 

[bursty]

I have been selling for longer than I can remember; since I was a teenager and I'm 62 now.
By the time I was 20 I had sold several guitars and a few amps.
Where did all that time go?

Anyhow, I received an email from Reverb back on January 12 this year that states, "We’re happy to share that the IRS announced a one-year delay of the federal $600 tax reporting threshold."
So, this means that all of my 2022 sales are not gonna be subject to the tax man screwing my *** over a few guitars that I sold as a casual aka hobby seller.

YMMV and **** the IRS ..............

 

[jimmi]

Again, why is it income and not capital gains? I could buy and sell these (or any other property) under a self directed IRA for example and the profit is listed as capital gains and deferred (and the gains then taxed as income when you draw it out which is the knock against the practice,but I digress).

You aren’t making the guitar, you aren’t distributing it as a dealer, you are buying and selling property.

 

[J.D.]

If you did not receive a 1099-K, your transactions did not get reported to the IRS. If you did, they were. The 1099-K doesn't provide any transaction details, only amounts. Again, you and your accountant will need to determine how to deal with it on your tax filing.

 

[jtees4]

Hmmm...I have a nice Strat I am thinking about selling. I'd guess it's worth about $1500 if I were to sell online. Might just have to part the guitar out and avoid the tax issues. Luckily, being a Strat it would be easy to part out!

 

[J.D.]

My research suggests your accountant will deal with your 1099-K in one of three ways:

1. Online garage sales. Zero net income. Explanation provided in filing.
2. Collectables sales. Net income must be explained against a cost basis.
3. Online business. Must process as business income.

What you can't seem to do is simply not acknowledge this form, as it has been reported to the IRS by the payment house.

 

[Siarra]

The new law you are referring to is likely related to the taxation of online sales, which was implemented in many countries in recent years. Generally, if you sell items online and make a profit, you will need to report that income on your tax return. The exact rules and regulations will depend on the country or state where you live.
In terms of taxes, you will likely need to pay income tax on any profits you make from selling items online. This means that you will need to keep track of all your sales and expenses related to those sales. The amount of tax you owe will depend on your overall income, so it's important to consult a tax professional or use tax software to accurately calculate your tax liability. In order not to have a sales drop implement marketing strategies like CRM data enrichment.
Regarding sales tax, in some countries or states, you may be required to collect and remit sales tax on the items you sell. This means that you would need to charge an additional amount to the buyer to cover the sales tax. Again, the rules and regulations regarding sales tax will depend on where you live.
If you sell an item for more than you paid for it, you may be subject to capital gains tax. This tax is generally based on the difference between the purchase price and the sale price, and may be subject to certain exemptions or deductions.
In summary, if you sell items online and make a profit, you will likely need to report that income on your tax return and pay any applicable taxes. The exact rules and regulations will depend on where you live, so it's important to consult a tax professional or use tax software to ensure compliance with the law.

 

[YahayaLuqman]

It's totally understandable to feel a little overwhelmed and confused about the new tax law and how it might impact your sales. But there are plenty of resources out there to help guide you through the process.

 

[TomJohnson]

The taxes you'll owe on the income from sales will depend on your total income and tax bracket. You won't be charged taxes on the full amount you sell the guitar for, only on the profit you make from selling it. As an individual seller, you don't need to charge sales tax on top of your asking price, but you'll need to keep track of all your sales and related expenses to help you calculate your profit accurately. When it comes to reporting your income from sales, you'll need to include it on your tax return and provide supporting documentation such as receipts or a checkstub. And yes, you do need to be conscious of capital gains if you sell the guitar for more than you bought it for, especially if you bought it in the last two years.

 

[jimmi]

All that is going to happen is that a lot of the sales will go underground. Sellers will list items and then negotiate sales outside of the websites or use Facebook etc to set them up. Really large sales will be the only thing captured. Really if it tax on the profit it will be hard to calculate or enforce. How will anyone know the real price on a lot of these unless purchased recently? I have guitars I bought 20 or more yrs ago from individuals where there is no receipt and I really don’t remember what I paid honestly.