New Tax Law Hidden In COVID Relief Bill Will Crush eBay/Paypal Sellers (2 Viewers)

[dajebriza]

Apparently a new tax law was included in the COVID relief bill that was recently passed which lowers the reportable taxable amount of sales through any selling platform (eBay, Paypal, etc). Previously, there was a $20,000 sales threshold on these sales that if crossed, eBay/Payal etc are required by law to send a 1099 to the IRS informing them of your tax burden on these sales. You would then need to account for the sales on your tax return and pay income tax on any tax burden.

This has now been dropped to $600 total in sales annually.

Which means, it will hit anyone that sells a collectable or a few small items that cross this extremely low threshold and they will receive a 1099 for those small sales to pay taxes on. Most small sellers on eBay who use it more as a yard sale are not going to expect a 1099 and have to pay taxes, and surely they are not accounting for their taxable cost basis on the items they sell.

If you sell a $800 baseball card or rack of chips, the IRS is going to require you to pay tax on the full $800 unless you can account for the actual cost basis. All business sellers on eBay do this already because of their volume of sales, but this is going to hit the small sellers that are not businesses. Probably, many of them won't even know what a 1099 is and will ignore the email they get from eBay and then be surprised when the IRS bills them for taxes owed.

 

[Ethan]

Yuck.

 

[allforcharity]

Wow, insane

 

[dajebriza]

This also will include all the Facebook sales groups.

If you sell anything on these sites and it's a goods or services transaction, 1099 incoming!

 

[Ethan]

Any idea how cost basis can be proven outside of previous receipt of sale, @dajebriza (if at all)?

 

[Lemonzest]

Crypto. Its time.

 

[aggie]

1) Start a business buying and selling poker chips.
2) Buy more chips than you sell.
4) Track expenses related to your business including internet, office space, shipping, packing supplies.
5) Report a loss and save on your taxes.

 

[Ethan]

1) Start a business buying and selling poker chips.
2) Buy more chips than you sell.
4) Track expenses related to your business including internet, office space, shipping, packing supplies.
5) Report a loss and save on your taxes.

/thread

 

[Budha]

I fear this is but just the “tip”... been talking to my tax accountant and she is strongly encouraging starting some type of business in which we can incure “losses” - lol.

just sell for a “loss” on eBay vs current market value established by the highest price paid in the last year - lol.

 

[SiouxperStack]

That’s awful

 

[Ben8257]

Sounds like going back to hand written paper checks for payment!! That blows!!

 

[Jhoov2412]

I imagine this won’t be effecting friends and family transactions so on PCF we can continue on with business as usual. I haven’t paid for chips (except for eBay) any other way since the CT days.

 

[auto]

Does this mean if you sell chips using PayPal Goods & Services and your total is $600 or more for the year, then you will receive a 1099?

 

[cgpilot]

I imagine this won’t be effecting friends and family transactions so on PCF we can continue on with business as usual. I haven’t paid for chips (except for eBay) any other way since the CT days.

Yeah no tax expert here but a quick glance at the friends and family rules.

 

[dajebriza]

Any idea how cost basis can be proven outside of previous receipt of sale, @dajebriza (if at all)?

You can claim any basis you want on your tax return. The sticking point would come if the IRS ever wants you to show proof of it. But short of a previous eBay transaction, paypal transaction, store receipt etc. where you can account for the purchase price, most people won't really have any documented proof of original cost basis. But to have to keep receipt records of everything we buy that we might sell again in the future is ridiculous. Even if we sell it for a loss, the IRS is going to assume its all 100% profit and assess tax as such unless we claim otherwise.

 

[dajebriza]

Does this mean if you sell chips using PayPal Goods & Services and your total is $600 or more for the year, then you will receive a 1099?

Yes.

 

[Eloe2000]

Apparently this was originally aimed at gig workers...

https://fortune.com/2021/03/12/gig-workers-taxes-irs-covid-relief-bill/

https://www.politico.com/news/2021/03/05/gig-workers-coronavirus-relief-bill-losers-473902

 

[cpiaaq]

When does this go into effect?

 

[AllHoosier]

I agree this is not great news for sellers, but to be clear this is a measure to collect taxes owed already, not a measure to institute a new/higher tax. In other words, sellers have always owed taxes on these sales but now the platforms hosting these sellers have a more rigorous requirement to report.

 

[AllHoosier]

When does this go into effect?

2022

 

[joepro]

What a bunch of bs! The Beatles had it right 50 years ago, "and if you walk, they'll tax your feet!"

 

[FDLmold]

Learn how to start up an LLC. Then learn how to fill out a Schedule C. Every hobby that costs more than a few bucks a year is about to turn into a "part time business" for anybody being smart about it. My wife and I have two LLCs already for various ventures, and I'm about to start up at least one or two more. "FDL Consignments" or some such bullshit. It's completely legit as long as you show at least a $1 profit every three or five years I think. You also get new business expenses, like internet, cell phones, and mileage.

 

[AllHoosier]

Learn how to start up an LLC. Then learn how to fill out a Schedule C. Every hobby that costs more than a few bucks a year is about to turn into a "part time business" for anybody being smart about it.

This can be a great idea but anybody considering this ought to google “hobby loss rules” so you know what you’re getting into. These are the rules designed to kill this idea.

 

[dajebriza]

I agree this is not great news for sellers, but to be clear this is a measure to collect taxes owed already, not a measure to institute a new/higher tax. In other words, sellers have always owed taxes on these sales but now the platforms hosting these sellers have a more rigorous requirement to report.

Say I am a car hobbyist and I buy car parts second hand for my car on a Facebook car page. Some parts I buy don't fit or work on my car, so I resell them on the site to then buy the right ones. I now owe taxes on the full cost of the parts I re-sold unless I keep purchase records for a year and itemize the deduction on my taxes. How many small sellers are going to 1) know to do that? 2) be able to do that a year later? The IRS knows it will get to tax a huge amount of revenue that way. They are counting on people being ignorant and just paying whatever taxes owed letter they received from the IRS.

I am a board game enthusiast. I buy board games at retail, play them for a while, then when I am done with them, sell them used on board game facebook pages. I often sell them at a slight loss to what I paid. I probably sell 30 games a year or so, at several thousand dollars to fund my purchase of new games. I'm now going to either have to pay several hundred dollars of taxes on these sales, which I did not profit on, unless I now keep receipts of every game I buy and then itemize them on my taxes for their cost basis or the IRS will tax me on income that is not owed.

 

[AllHoosier]

@dajebriza, I completely agree with you on every point. If my post came across as a defense for the IRS that was not my intent. I’m certainly not an IRS apologist. This is going to catch a lot of people off guard.

 

[Tommy]

If you get a 1099-K from PayPal, make sure you deduct the refunds you send and received, PayPal fees, and shipping. PayPal reports incoming refunds as a payment received. So if you send a G&S payment for $500, and the person refunds it back to you, you get dinged for a transaction and $500. If you receive a $500 G&S payment and refund it, that will still show as $500 income. You don't have to create an LLC. You can be a sole proprietor (or sole member LLC) and do this on your personal taxes using Schedule C.

I'm not a tax pro by any means but just passing along info from my own experiences.

 

[philhut]

That is Gross taxation of money that has already been taxed on income and spending already....Absolute Thuggery by government getting you coming and going.

 

[wolfpack]

F this administration and those in control of congress.

 

[BiGGyT]

Sounds like all my sales are going to be via PM on this site

 

[FordPickup92]

Is venmo or zelle affected?