New IRS reporting for 2021? 8 8

[Shrevvy]

15 hours ago, inapicklecomics said:

Let's say I buy a comic for $25k, log it in quickbooks, then sell it on ebay for 26k.  Ebay sends me a 1099 for 25k, but my profit is only 1k.  Am I able to just input 1k on my taxes, or will I face some other steps needed since the discrepancy will be 24k?  I was wondering if my taxes will be flagged/audited if they see that 24k difference. 

You would reflect the $26k on the 1099 and deduct the cost of product and selling expense. It would look something like:

Revenue $26,000
Cost of Goods ($25,000)
eBay Fees (2,600)
Net Loss (1,600)

The trick is that if you made income, you have to pay taxes on the income. If you have a loss, you may or may not get a tax benefit from that loss. 

[fantastic_four]

12 hours ago, OuterboroGuy said:

Collectibles are taxed at a capital gains rate of 28%, unless you are a dealer, in which case it is ordinary income (i.e., net sales).   Also, if you flip a book within a year, its taxed at your full rate (not capped at preferential longer-term capital gains 28%).

Argh. 

Researching this it apparently went into effect in 2011, and I haven't looked into this topic since then so I wasn't aware.  Here's IRS form 8949 that explains it and that you use to record the sale and taxes owed on it:

https://www.irs.gov/pub/irs-pdf/f8949.pdf

Here's TurboTax's explanation of the form and taxes on collectibles:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/guide-to-schedule-d-capital-gains-and-losses/L1bKWgPea

One thing I'm wondering about this is how to deduct maintenance costs.  Stocks don't tend to carry overhead costs aside from broker's fees, but physical items like cars, comics, or whatever do carry ongoing costs of storage, bags and boards, safety deposit box fees, HVAC or dehumidifier electricity fees, insurance costs, etc.  Is all of that deductible?  It certainly should be.

I always resented the idea that stocks were only taxed at 15% to 20% but the rate on collectibles was higher at whatever your income tax rate is, so obviously knowing now they've raised it even more to 28% absolutely infuriates me.    Is there any logic behind this?  Why is it DOUBLE the rate on stock profits?

[fantastic_four]

3 hours ago, Shrevvy said:

The trick is that if you made income, you have to pay taxes on the income. If you have a loss, you may or may not get a tax benefit from that loss. 

I'm going to play around with form 8949 in HR Block when I do my taxes over the next few weeks.  I don't have sales to report, but I'm going to enter a few fake sales to see what the software thinks I owe.  I'm particularly interested in if I lose $1000 on one comic but gain $1000 on the other--do they cancel each other out?  What if I lose $1500 and gain $1000, is the $500 loss deductible?  I bet it isn't.  And what if I gain $1500 and lose $1000--I presume I'm taxed on $500.

If gains and losses cancel each other out then it would be advantageous to sell books you're losing on in the same years you're selling books you've gained on.

Edited March 22, 2021 by fantastic_four

[OuterboroGuy]

15 minutes ago, fantastic_four said:

I always resented the idea that stocks were only taxed at 15% to 20% but the rate on collectibles was higher at whatever your income tax rate is, so obviously knowing now they've raised it even more to 28% absolutely infuriates me.    Is there any logic behind this?  Why is it DOUBLE the rate on stock profits?

Because investing in collectibles does not add to the productivity of the economy.  By contrast, encouraging a liquid trading market where companies can issue securities and use the cash proceeds to invest in employees, factories, etc., increases productivity -- by turning raw assets (land, material, human capital) into productive economic assets. 

[MyNameIsLegion]

15 minutes ago, OuterboroGuy said:

Because investing in collectibles does not add to the productivity of the economy.  By contrast, encouraging a liquid trading market where companies can issue securities and use the cash proceeds to invest in employees, factories, etc., increases productivity -- by turning raw assets (land, material, human capital) into productive economic assets. 

HA and and state sales tax revenues would beg to differ.  15% to HA from seller, 21% to HA from Buyer, 8-10% in sales tax. Not to mention S&H, I think selling a few grand of collectibles generates plenty of velocity for money in the REAL economy.  I'd argue the opposite on many capital gains bound electronic transactions. It's just paper wealth sitting on servers.

[fantastic_four]

28 minutes ago, OuterboroGuy said:

46 minutes ago, fantastic_four said:

I always resented the idea that stocks were only taxed at 15% to 20% but the rate on collectibles was higher at whatever your income tax rate is, so obviously knowing now they've raised it even more to 28% absolutely infuriates me.    Is there any logic behind this?  Why is it DOUBLE the rate on stock profits?

Because investing in collectibles does not add to the productivity of the economy.  By contrast, encouraging a liquid trading market where companies can issue securities and use the cash proceeds to invest in employees, factories, etc., increases productivity -- by turning raw assets (land, material, human capital) into productive economic assets. 

Yea I was thinking something similar when I posted, but you clarified it greatly, so thanks!  I think I agree, although I need to mull it over a LOT more.

[MyNameIsLegion]

18 minutes ago, fantastic_four said:

Yea I was thinking something similar when I posted, but you clarified it greatly, so thanks!  I think I agree, although I need to mull it over a LOT more.

the very reason this thread exists is because a capital gains rule that was stated to tax the most wealth (let me sell my Monet for Money) has now filtered down to the the average Joe with real world consequences and paperwork headaches for inconsequential tax revenue.  Wall Streets rules foisted upon Main Street people.  Most people don't participate in the 15% Capital gains side of the economy. They don't have individual stocks, they buy, make and sell stuff to other people that use that cash to buy make and sell stuff. Most people live in the Main Street economy and their economic activity contributes to the tangible velocity of money.  You sell 5k of CGC comics, you put a downpayment on a a car or hire a contractor to redo the kitchen. Salesmen, Loan Officers, contractors, suppliers of raw materials make money whereas I get on my Schwab app and sell 50 shares of BofA stock, that doesn't do squat for the world.

Edited March 22, 2021 by MyNameIsLegion

[WolverineX]

https://www.commondreams.org/news/2021/03/22/tax-evasion-richest-1-us-households-dont-report-21-their-income-analysis-finds

 

This Is Tax Evasion': Richest 1% of US Households Don't Report 21% of Their Income, Analysis Finds.

 

Good thing they are cracking down on the 99%

[MustEatBrains]

1 hour ago, Wolverinex said:

https://www.commondreams.org/news/2021/03/22/tax-evasion-richest-1-us-households-dont-report-21-their-income-analysis-finds

 

This Is Tax Evasion': Richest 1% of US Households Don't Report 21% of Their Income, Analysis Finds.

 

Good thing they are cracking down on the 99%

So if the IRS spent the time tracking down that 21% belonging to the top 1% they wouldn't have to nickle and dime the rest of us.  No doubt what they would collect outstanding from the richest 1% would FAR exceed anything they hope to gain from this ridiculous new reporting rule, plus the resources they'd have to throw at the 1% should be much less than coming after us serfs.  Our government hard at work. 

[MyNameIsLegion]

16 hours ago, awakeintheashes said:

How so? Legislative fixes will most certainly be introduced to provide relief to the sellers @Buzzetta mentioned in his post. Given that the change to the De Minimis threshold will affect the constituents of many lawmakers on both sides of the aisle, leads me to believe certain fixes will be passed to change this provision of newly passed law ($600 De Minimis threshold for 2022 tax year).

[Westy Steve]

On 3/21/2021 at 10:16 PM, awakeintheashes said:

How so? Legislative fixes will most certainly be introduced to provide relief to the sellers @Buzzetta mentioned in his post. Given that the change to the De Minimis threshold will affect the constituents of many lawmakers on both sides of the aisle, leads me to believe certain fixes will be passed to change this provision of newly passed law ($600 De Minimis threshold for 2022 tax year).

Hi,

I'm trying to read through this thread to figure out if this bill did pass.  So based on this comment it did?  And changes take effect in the 2022 tax year?   Or will I get a tax hit for the stuff I sold/am selling this year (2021)?

Thanks,

Steve 

 

[Westy Steve]

On 3/8/2021 at 1:50 PM, nochips said:

According to this link   https://www.jct.gov/publications/2021/technical-explanation-of-section-9674-of-hr-1319/

They want to drop the $20,000 reporting threshold for IRS 1099 reporting to $600.00 a year. That means every ebay seller with total yearly aggregate sales over $600.00 is getting a 1099. That is nuts. This will kill ebay and force people to buy and sell with checks and money orders on non affiliated sites, Facebook, the CGC boards, etc.. This is the government thinking they can raise taxes by going after the guy selling stuff in their basement. Ebay was built on that seller. If this bill passes ebay sales will plummet. I know I will not be selling on there ever again. This will ruin some online portals, just ruin them.

Would you consider updating your original post to provide a simple summary?  Was the law passed?

[bc]

2 minutes ago, Westy Steve said:

Would you consider updating your original post to provide a simple summary?  Was the law passed?

Yes it was passed as part of the recent $1.9T stimulus package.

Believe it goes into effect for the tax year 2022 (not this year).

-bc

Edited March 23, 2021 by bc

[awakeintheashes]

8 minutes ago, Westy Steve said:

Hi,

I'm trying to read through this thread to figure out if this bill did pass.  So based on this comment it did?  And changes take effect in the 2022 tax year?   Or will I get a tax hit for the stuff I sold/am selling this year (2021)?

Thanks,

Steve 

 

Hey! Yeah, the bill passed and was signed into law two weeks ago (i think it was 2 weeks...covid has my timeline messed up). The changes will take effect for the 2022 tax year. There is the possibility for some type of legislative fix or even a regulatory delay before tax season in 2023. So, plan to get a 1099, but watch this space. 

Edited March 23, 2021 by awakeintheashes

[Westy Steve]

1 minute ago, awakeintheashes said:

Hey! Yeah, the bill passed and was signed into law two weeks ago (i think it was 2 weeks...covid has my timeline messed up). The changes will take effect for the 2022 tax year. There is the possibility for some time of legislative fix or even a regulatory delay before tax season in 2023. So, plan to get a 1099, but watch this space. 

Thanks.  I'll be saving my receipts!

[shadroch]

On 3/22/2021 at 4:15 AM, Shrevvy said:

You would reflect the $26k on the 1099 and deduct the cost of product and selling expense. It would look something like:

Revenue $26,000
Cost of Goods ($25,000)
eBay Fees (2,600)
Net Loss (1,600)

The trick is that if you made income, you have to pay taxes on the income. If you have a loss, you may or may not get a tax benefit from that loss. 

You'd also include paypal fees, cost of insurance, cost of internet, cost of storage, cost of insuring the book, cost of driving to the post office, ect, ect.

[fantastic_four]

On 3/22/2021 at 10:23 AM, fantastic_four said:

I'm going to play around with form 8949 in HR Block when I do my taxes over the next few weeks.  I don't have sales to report, but I'm going to enter a few fake sales to see what the software thinks I owe.  I'm particularly interested in if I lose $1000 on one comic but gain $1000 on the other--do they cancel each other out?  What if I lose $1500 and gain $1000, is the $500 loss deductible?  I bet it isn't.  And what if I gain $1500 and lose $1000--I presume I'm taxed on $500.

If gains and losses cancel each other out then it would be advantageous to sell books you're losing on in the same years you're selling books you've gained on.

OK, just played around with this in HR Block.  First I entered a $1500 net income sale, and yep, it taxed me on the $1500, no surprise.

Then I entered a $1500 net loss sale, and it did cancel out the gain for a tax owed of $0.  No real surprise.

I then edited the loss sale to be a $1000 loss instead of a $1500 loss and it did just subtract less of a loss leaving me owing taxes on $500.  Again no surprise.

I then deleted the $1500 gain sale, and VERY surprisingly the net loss for the year was actually deductible, or so HR Block's software thinks.  That floored me...I didn't think they'd let me deduct net losses on collectibles sales from the rest of my income, but apparently that does work.  It makes general sense, but I still didn't think the IRS would allow it--but luckily they do.

One last thing--there was a separate section for deducting costs related to investments.  There was one box where it looked to me as if I could deduct maintenance expenses on collectibles, although I'm not entirely sure if that was just supposed to be expenses for 2020 or expenses between the time I first bought something years ago and today.  So if I made $1500 on a comic and spend a few hundred on safety deposit fees, insurance fees, storage fees, etc I think I could deduct those costs on the items sold as one big chunk.  But I'm not sure of it and will need to research more when I inevitably start selling some of my better stuff.

[WolverineX]

21 minutes ago, fantastic_four said:

OK, just played around with this in HR Block.  First I entered a $1500 net income sale, and yep, it taxed me on the $1500, no surprise.

Then I entered a $1500 net loss sale, and it did cancel out the gain for a tax owed of $0.  No real surprise.

I then edited the loss sale to be a $1000 loss instead of a $1500 loss and it did just subtract less of a loss leaving me owing taxes on $500.  Again no surprise.

I then deleted the $1500 gain sale, and VERY surprisingly the net loss for the year was actually deductible, or so HR Block's software thinks.  That floored me...I didn't think they'd let me deduct net losses on collectibles sales from the rest of my income, but apparently that does work.  It makes general sense, but I still didn't think the IRS would allow it--but luckily they do.

One last thing--there was a separate section for deducting costs related to investments.  There was one box where it looked to me as if I could deduct maintenance expenses on collectibles, although I'm not entirely sure if that was just supposed to be expenses for 2020 or expenses between the time I first bought something years ago and today.  So if I made $1500 on a comic and spend a few hundred on safety deposit fees, insurance fees, storage fees, etc I think I could deduct those costs on the items sold as one big chunk.  But I'm not sure of it and will need to research more when I inevitably start selling some of my better stuff.

That would be amazing if so... I have a few books that have lost value and that would be great to deduct that from my income if it works and I have a receipt.

[WolverineX]

Good thing Zoom pays nothing in taxes....

https://www.cbsnews.com/news/zoom-no-federal-taxes-2020/

[grebal]

On 3/9/2021 at 1:55 PM, grebal said:

For those who might be more current on the tax regs, what's the story - can we deduct $3,000 in losses from Comic Book Trading against Ordinary Income every year?

I ask . . .

10 hours ago, fantastic_four said:

...

I then deleted the $1500 gain sale, and VERY surprisingly the net loss for the year was actually deductible, or so HR Block's software thinks.  That floored me...I didn't think they'd let me deduct net losses on collectibles sales from the rest of my income, but apparently that does work.  It makes general sense, but I still didn't think the IRS would allow it--but luckily they do.

...

and f_f answers.

Thanks, bud, I thought that might still be the case.  If it's the same rule I was thinking about, the max loss amount that can be used to offset ord. inc. is $3k.