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Tax law change for Jan 1 2011

Started by BrianR,

41 posts in this topic

BrianR

BrianR

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Without getting into the area of whether it’s right or wrong. How do you think the new law requiring 1099 for items sold equaling $600 over the course of the year will effect sales on eBay, consignment sites etc.

 

From my understanding if you consign through C-link etc. If you sell 1 comic book for over $600 or 10 over the course of the year equaling at least $600 the consignment business will need to fill out a 1099 and send it to you so you can claim it on taxes.

 

Do you think it will limit or deter the part time “dealers” now that there will be a record of their sale and they will need to claim it?

 

 

 

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CKB

CKB

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The burden of producing these 1099s will fall heavily on small businesses like Comiclink, and even pretty heavily on big businesses like eBay. This will increase their costs, which will be passed on to the people using their services. So we can all expect increases in fees from cosignment services.

 

On the other hand, there will be no end of games played by sellers to avoid hitting the limits that trigger the 1099.

 

So, I think it's impact will be driven by how hard or easy it is to get around. If you can play stupid games to get around it, it won't have much impact at all.

 

 

 

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PokerKid

PokerKid

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Are you sure it is $600?

 

I did see this in the Washington Post :

"For their 2011 tax returns, "taxpayers who annually sell more than $20,000 worth of goods and have more than 200 electronic transactions" will receive a new IRS form, known as 1099-K, reporting the proceeds, said a spokesman for H&R Block, the nation's largest tax preparation company."

 

These types of numbers make a lot more sense. (Not that I expect my government tax codes to make sense.)

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BrianR

BrianR

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Can you see this limting the supply of books hitting the market through these venues? The consigners will be passing the costs along to the sellers, and while the sellers in turn will try and sell the books for more, I just don't see buyers willing to pay more for typical non-key books in the current market.

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BrianR

BrianR

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I don't think the $600 rule applies to the individual? I think this will apply business to business? It will be interesting if it does apply to individuals. I can only imagine in general the paper work impact.

 

 

http://www.cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/

 

That's what I thought as well. But today I heard it also applied to individuals using consignment businesses as well. Those businesses are bringing in revenue from the sale of individuals so in a sense they are independent vendors/ contractors working with the small business.

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dupont2005

dupont2005

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I think of my internet sales as an online yard sale. It's for used items I paid retail for and am now selling at a loss. If I can do it at a yard sale without paying income tax on it, why can't I do it on eBay the same way?

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CKB

CKB

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I think of my internet sales as an online yard sale. It's for used items I paid retail for and am now selling at a loss. If I can do it at a yard sale without paying income tax on it, why can't I do it on eBay the same way?

 

You can, until you overcome the limits. Then, you will get a 1099 and need to claim that your basis in what you have sold is more than the sale price. As usual, you won't have to prove that claim until you are audited. You would also, by the rules, have to prove the same thing about your yard sale items if audited and asked to explain why you didn't claim that as income. The 1099 just formalizes the income and lets the government know about it from the channel the money came through.

 

My take on it is that anyone who overcomes the limits is thought of as a business (Sole Proprietor) no matter how they think of themselves. This is why there is the application of the tax to "individuals".

 

 

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EastEnd

EastEnd

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My understanding is that both Democratic and legislators largely support repeal of this 1099 reporting provision for small businesses (apparently, the provision was rushed into the health care law to help show that the health care law was paid for). I believe that repeal is expected to be included in the jobs bill they're trying to put together... so there's a good chance this won't take effect.

 

However, I believe there is a separate 1099 reporting requirement enacted a few years ago taking effect in 2011 or 2012 (I forget which) that will require credit card issuers or outfits like Paypal to issue 1099s to any vendor with more than 200 transactions and more than $20,000 in value sold in a given year. Interestingly, in the case of Comiclink, they would be the ones receiving the 1099s since they are the ones putting through the charges on sold books -- whether or how they would pass that on to consignors is anyone's guess.

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EastEnd

EastEnd

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Here's a little blurb I found on this...

 

 

WASHINGTON (MarketWatch) -- Bipartisan support is building for a repeal of a little-known tax rule in President Barack Obama's signature health-care law that has drawn the ire of small businesses around the country.

 

The movement to dump the tax rule reflects growing resistance to portions of the controversial health law passed earlier this year. A federal appeals court on Monday let proceed Virginia's legal challenge to a federal requirement that all citizens buy health insurance or pay a penalty. And in a symbolic act Tuesday, 71% of Missouri residents who voted in a low-turnout election rejected the mandate in a nonbinding referendum. See more on Missouri vote in MarketWatch's election blog.

 

The part of the law riling up small-business owners is tied to a new IRS rule. Starting in 2012, businesses will be required to file a 1099 tax form each time they spend more than $600 a year to buy goods or services from another company.

 

Small businesses say their costs to comply would soar with all the added paperwork.

 

Amid a rising chorus of complaints, eager to show off their pro-growth credentials in a weak economy sought to dump the new 1099 requirements in a vote last Friday. Yet the measure failed to win a two-thirds majority required under a special House rule owing to a lack of support.

 

favor repeal, but they objected to corporate tax increases included in the bill. "The answer isn't to hurt other job providers," said Rep. Dave Camp, R-Mich. "We're in a recession. Unemployment isn't getting better."

 

Geithner: Financial reforms will be toughTreasury Secretary Timothy F. Geithner spoke about financial reforms in New York City.

The possibility of repeal, however, is still much alive. The House bill was backed by Sander Levin, chairman of the powerful House and Ways Committee, as well as politically vulnerable such as Rep. Scott Murphy in New York. Dozens of other are also supportive.

 

"As I travel around my district in upstate New York, I hear consistently, all the time from my small business owners that they need regulatory relief," Murphy said. "They need support if they're going to invest and expand our economic recovery that we have going on."

 

Despite growing support, partisan politics and the political calendar make it less likely that repeal will happen this year. As the crucial fall elections approach, most are loath to admit any major flaws in the controversial health-care law passed earlier this year. would like nothing better than to claim their first scalp as part of a public vow to repeal large portions of the law.

 

What's more, the House is off for a month-long summer recess and the Senate hasn't scheduled a debate on the matter. With many pressing tax issues still unresolved, such as whether to extend the Bush tax cuts for the middle class, lawmakers are spread thin.

 

"The situation at this point is very hazy," said Peter Kravitz, director of congressional affairs at American Institute of Certified Public Accountants. "But there are enough folks who think it's a problem for small business that it may get some legs under it next year."

 

Unintended consequences

The 1099 rule is not entirely new. Under long-standing law, businesses have to file tax forms when they buy services from individual-owned businesses or partnerships. The new law extends the requirement to cover the purchase of any goods from any type of supplier.

 

Buy one airline ticket at $600, for example, and a business would have to file a form with the IRS and send one to the airline itself. Ditto if a small company buys $600 worth of sandwiches from Subway, spends $600 a year for Starbucks coffee or purchases $600 of gas at the nearly Shell station.

 

More than 37 million small businesses, historically a major engine of U.S. job growth, would be affected nationwide. Many have taken to the Internet to complain.

 

Although the 1099 rule is not directly related to health care, the measure was inserted by as a means to help pay for expanded government medical coverage. The rule is projected to generate $19 billion in revenue over 10 years by uncovering income that would have gone unreported under the old law.

 

 

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