Last week to avoid higher taxes 6 6

[Guest Race]

The new tax law governing payment apps goes into effect Jan. 1, after which $600 becomes the new annual threshold for reporting income obtained via a payment app such as Paypal, Venmo and the like. Again, this is the aggregate amount over a year -- once you cross it, ALL income over it will be reported. This is a marked change from the current law, which allows up to $20,000 or 200 transactions using payment apps before triggering tax reporting requirements.

Please note the payment apps will be doing direct reporting to the IRS -- meaning it will be impossible for you not to include this income on your tax return.

In other words, if you are a seller and want to move art over $600 (and are not near the $20,000/200 cap for 2021) you have two more days to accept payment via payment apps without being taxed. Good luck!

Edited December 29, 2021 by Guest

[vodou]

It should be added, of course, that all income, all sources is always reportable - now and then, it's only the "threshold" for mandated third-party reporting that's being lowered. Nobody's personal income reporting and potential tax liability is changing...just the amount of rope they're letting you use to hang yourself 

[Ryan.]

$600 has been the threshold here in Massachusetts for years.

[vodou]

On 12/29/2021 at 10:12 AM, Ryan. said:

$600 has been the threshold here in Massachusetts for years.

No doubt  

[cstojano]

On 12/29/2021 at 7:15 AM, Race said:

The new tax law governing payment apps goes into effect Jan. 1, after which $600 becomes the new annual threshold for reporting income obtained via a payment app such as Paypal, Venmo and the like. Again, this is the aggregate amount over a year -- once you cross it, ALL income over it will be reported. This is a marked change from the current law, which allows up to $20,000 or 200 transactions using payment apps before triggering tax reporting requirements.

Please note the payment apps will be doing direct reporting to the IRS -- meaning it will be impossible for you not to include this income on your tax return.

In other words, if you are a seller and want to move art over $600 (and are not near the $20,000/200 cap for 2021) you have two more days to accept payment via payment apps without being taxed. Good luck!

I thought it was 20k AND 200 transactions not OR

[Hockeyflow33]

On 12/29/2021 at 10:12 AM, Ryan. said:

$600 has been the threshold here in Massachusetts for years.

That was a fun time when we received 1099s out of nowhere from PayPal. 

[Ryan.]

On 12/29/2021 at 10:42 AM, Hockeyflow33 said:

That was a fun time when we received 1099s out of nowhere from PayPal. 

Yes...fun...

[Guest Race]

Correct, it was 20K or 200 transactions which did not exceed 20K. Also vodou is right, you are supposed to report all income... but the loophole (not forcing third party payment apps to report) was there to benefit the poor/lower middle class/individuals on a fixed income. This "shadow" income was a big deal for a lot of folks -- esp. those on a fixed income, who have received nothing for their money in the form of interest over the past few years. 

[vodou]

On 12/29/2021 at 10:42 AM, Hockeyflow33 said:

That was a fun time when we received 1099s out of nowhere from PayPal. 

...PayPal did make me aware when the law changed, thus well in advance, not you?

I wasn't particularly effected though because, like all of you I'm certain  , I was already fully compliant in my annual IRS reporting.

[vodou]

On 12/29/2021 at 10:57 AM, Race said:

Correct, it was 20K or 200 transactions which did not exceed 20K.

Sorry, the above statement is still a little confusing (for others) so I'm going to clarify.

To start, this entire conversation is about the IRS 1099-K form. You can read the official IRS language on that here - https://www.irs.gov/businesses/understanding-your-form-1099-k

What's changing is what "triggers" the third-party issuance of that form (trust me - all the data leading up to that point, whether issuance is required or not, is collected and easily available if a subpoena or maybe even just a request is made by the IRS. So...be careful out there!) The "trigger" used to be $20,000 gross and 200 transactions. Thus, selling one car for $25,000 did not trigger issuance (in isolation), neither did $19,500 or 199 transactions, but selling 10,000 beanie babies for $50,000 shipped (which sounds about right to me  ) did.

Now the ceiling ($20,000 and 200 transactions) is coming down, way down, but nothing else has changed.

[cstojano]

On 12/29/2021 at 9:22 AM, vodou said:

Sorry, the above statement is still a little confusing (for others) so I'm going to clarify.

To start, this entire conversation is about the IRS 1099-K form. You can read the official IRS language on that here - https://www.irs.gov/businesses/understanding-your-form-1099-k

What's changing is what "triggers" the third-party issuance of that form (trust me - all the data leading up to that point, whether issuance is required or not, is collected and easily available if a subpoena or maybe even just a request is made by the IRS. So...be careful out there!) The "trigger" used to be $20,000 gross and 200 transactions. Thus, selling one car for $25,000 did not trigger issuance (in isolation), neither did $19,500 or 199 transactions, but selling 10,000 beanie babies for $50,000 shipped (which sounds about right to me  ) did.

Now the ceiling ($20,000 and 200 transactions) is coming down, way down, but nothing else has changed.

thank you for clarifying, this was my understanding. 

[Guest Race]

What bothers me is this is a hobby for almost all of us, not a business. In the old days we would meet at cons or in person, sell pieces and keep the profits. One thing I always liked was putting money directly into the hands of artists (I remember George Tuska and Gene Colan, both of whom were living on a fixed income and needed every dollar from a sale at a con). The exchange of e-payments for greater access to taxable income is not a fair one, I fear, for any of us.

 

[vodou]

On 12/29/2021 at 11:41 AM, Race said:

What bothers me is this is a hobby for almost all of us, not a business. In the old days we would meet at cons or in person, sell pieces and keep the profits. One thing I always liked was putting money directly into the hands of artists (I remember George Tuska and Gene Colan, both of whom were living on a fixed income and needed every dollar from a sale at a con). The exchange of e-payments for greater access to taxable income is not a fair one, I fear, for any of us.

 

Like everything in life when something changes there are trade-offs and unintended consequences.

Everyone should be careful with this conversation though, it can quickly and easily turn political and then the Mods can/will make it disappear and hand out warnings and perhaps unexpected Board "vacations". That would be a shame because the information being presented, the conversation ex-politics here is all good and useful for all collectors.

And back to it...the "cash only at cons" situation that existed for three decades (1970s-1990s) was great except prices were flat and moribund. For decades. That was pretty good for buyers but not sellers - including artists. Then with widespread internet use we all got virtual eBay and Yahoo! auctions, among others, that did not have all the speed bumps that traditional physical auction houses such as Sotheby's, Christie's, et al put up around qualifying bidders and limiting lots on offer. That was part of it, part of why prices starting moving up faster than before: greater access to a greater number of people than the old "cash only at cons" model offered, even SDCC! So: increasing demand against fixed or much more slowly increasing supply = increasing prices. Now, this is becoming better for sellers than buyers...except that this dynamic also brought MORE art to market too, so variety increased along with general supply. In a sense, everyone was winnnig...as long as prices didn't rise too much faster than before, and certainly not faster than incomes.

Then...X.com, PayPal.com, etc etc...now you could buy with a credit card, essentially spending money you didn't actually have "yet" (or could send faster than a check/mo/cash through the mails) and the risk (over time, not initially) of sending money blindly through the mails to someone somewhere that you didn't previously know (and likely well outside your own state's Small Claims Court jurisdiction) was greatly mitigated too. Now that previous new dynamic was running on nitrous. And roughly fifteen/twenty years later...here we are. Not just for art, for all collectibles and lots of garage/estate crapola too, everything is on nitrous and the income, according to "them", is not being reported properly or even at all, gains are not being calculated and taxes due are not being paid.

So...everyone's collection is worth A LOT MORE, but we all have A LOT MORE income reporting and potentially taxes due. Anyone really want to go back to the 1990s -before eBay, et al, back to CBG and "cash only at cons" or start sending check/mo/cash through the mail again and cross your fingers that anything ever comes back to you? Not me! and anyway, you can't put the toothpaste back in the tube.

[BLUECHIPCOLLECTIBLES]

On 12/29/2021 at 8:22 AM, vodou said:

nothing else has changed.

Not everybody on ebay is selling things that have gone up in value.  Some people are selling old video games and the like for less than they paid, just to get back some of the money they spent.  They will be able to get refunds on the taxes that will be taken (on the presumption it's all profit) but only if they can prove it's not profit.  How many people are going to have receipts for every DVD or video game they bought years ago and are selling now for pennies on the dollar?   

Edited December 29, 2021 by BLUECHIPCOLLECTIBLES

[cstojano]

On 12/29/2021 at 12:02 PM, BLUECHIPCOLLECTIBLES said:

Not everybody on ebay is selling things that have gone up in value.  Some people are selling old video games and the like for less than they paid, just to get back some of the money they spent.  They will be able to get refunds on the taxes that will be taken (on the presumption it's all profit) but only if they can prove it's not profit.  How many people are going to have receipts for every DVD or video game they bought years ago and are selling now for pennies on the dollar?   

Don't worry, even if you saved the receipts they are made from that heat sensitive paper/ink that fades over time anyway...

[mattn792]

On 12/29/2021 at 10:41 AM, Race said:

What bothers me is this is a hobby for almost all of us, not a business. In the old days we would meet at cons or in person, sell pieces and keep the profits. One thing I always liked was putting money directly into the hands of artists (I remember George Tuska and Gene Colan, both of whom were living on a fixed income and needed every dollar from a sale at a con). The exchange of e-payments for greater access to taxable income is not a fair one, I fear, for any of us.

 

It was just as reportable back then as it is now.  Whether or not that cash got reported is a matter between the individual and the IRS.

[cstojano]

So I just hopped onto Ebay to find my current sales tally for the year and... I cannot find it. 90 days is what they want to service. Surely they have the data for the 1099. Why is it so hard eBay?

[vodou]

On 12/29/2021 at 2:18 PM, cstojano said:

So I just hopped onto Ebay to find my current sales tally for the year and... I cannot find it. 90 days is what they want to service. Surely they have the data for the 1099. Why is it so hard eBay?

Not too hard, you can set it up with custom date range (including YTD) here: https://www.ebay.com/sh/fin/report

[cstojano]

thanks!

[MAR1979]

With the current prices of OCA my guess is first sale of the new year triggers the threshold for almost all.