New Tax Reporting ($600 Threshold per year) and Consignments 21 21

[manetteska]

On 1/3/2022 at 6:54 PM, FlyingDonut said:

I cannot state this enough - everyone worrying about this is overthinking it. Call your tax guy.

Well, there is worrying about it because one is overthinking the math, and then there is worrying about it because the payment to the IRS will go from $0 to several thousand. 

[FlyingDonut]

On 1/3/2022 at 8:02 PM, manetteska said:

Well, there is worrying about it because one is overthinking the math, and then there is worrying about it because the payment to the IRS will go from $0 to several thousand. 

If you're going from $0 to several thousand you've been significantly under reporting your income and I hope you enjoy Leavenworth. Again, call your tax guy.

[Bird]

On 1/3/2022 at 5:37 PM, Beige said:

How do you show you bought a book back in the , say 1980's from a store and now you are selling and its worth say $1000?

answering your question in a practical manner, you do not have to actually show it to them.  as the airborne pastry said (and he knows more than me about this guaranteed) you are only dealing with aggregate income so they just want the tax form filled out (income, costs, profit) and not a box of receipts.

[manetteska]

On 1/3/2022 at 7:05 PM, FlyingDonut said:

If you're going from $0 to several thousand you've been significantly under reporting your income and I hope you enjoy Leavenworth. Again, call your tax guy.

Correct (to the under-reporting, not necessarily Leavenworth). 

Many view the buying and selling as a hobby and don’t consider it (or know about the reporting laws) when it comes to tax time. Now the low threshold for a form is forcing them to find out and with the exponential prices seen on many keys it will be interesting times.

[shadroch]

I've been putting side 10% of my sales to cover taxes and it works well.  As people keep reminding everyone, you only pay tax on your profits and your profits are sales minus expenses. You can make a good faith estimate for things you don't have receipts for. If you regularly sell your books, traveling to and from your local comic shop might be a deductible event. 

[stock_rotation]

On 1/3/2022 at 7:54 PM, FlyingDonut said:

I cannot state this enough - everyone worrying about this is overthinking it. Call your tax guy.

C'mon, you know everyone panicking here doesn't have "a tax guy". 1040EZ4LYFE!

[Beige]

On 1/4/2022 at 12:28 PM, Bird said:

answering your question in a practical manner, you do not have to actually show it to them.  as the airborne pastry said (and he knows more than me about this guaranteed) you are only dealing with aggregate income so they just want the tax form filled out (income, costs, profit) and not a box of receipts.

Thanks - but I guess I'm asking is there a length of time of ownership when the book becomes 'tax-exempt'?

Again with a home 12 months of owner-occupation removes all capital gains tax when you sell it - regardless of when you bought the house.

You just have to have lived in it for 12 months.

I don't see how someone who has kept a book for 40 years and then sold due to retirement should pay tax the same as a flipper who bought the book 3 months ago and then sold pre-movie.

Currently in Aus, if you own (don't quote me) something published prior to 1970 OR paid less than $600 for the item - you don't pay capital gains tax.

To change that to taxing every cent over $600 in sales profit over a year will have huge ramifications - hence my question.

 

Interesting times ahead.

[AGGIEZ]

On 1/3/2022 at 11:20 AM, musicmeta said:

ok, then it's two long boxes of drek. LOL.

Screw it…every key I sell comes with a long box of my 1985-1995 baseball cards….that’s a legitimate loss right there! Greg Jeffries and Jerome Walton rookies for er’body!!

 

Seriously though, one of my concerns is the uncertainty around “proof”. Hardly anyone in this hobby, or any hobby for that matter, prints off eBay/CLINK/Heritage wins (“receipts”) or makes a note of off-line transactions that occurred years/decades ago. People keep saying it’s net, not gross, but you may have to prove your cost basis otherwise it’ll be gross 🤮…

[lizards2]

On 1/3/2022 at 9:43 PM, AGGIEZ said:

Screw it…every key I sell comes with a long box of my 1985-1995 baseball cards….that’s a legitimate loss right there! Greg Jeffries and Jerome Walton rookies for er’body!!

 

Seriously though, one of my concerns is the uncertainty around “proof”. Hardly anyone in this hobby, or any hobby for that matter, prints off eBay/CLINK/Heritage wins (“receipts”) or makes a note of off-line transactions that occurred years/decades ago. People keep saying it’s net, not gross, but you may have to prove your cost basis otherwise it’ll be gross 🤮…

I don't recall getting receipts from purchases at the shops or cons during the 70s, 80s, 90s....,

I do have accounting ledgers going back that far, but they are arranged by date.  I would have to hire 20 chimpanzees to sort that out.

[chrisco37]

On 1/4/2022 at 3:26 AM, lizards2 said:

I don't recall getting receipts from purchases at the shops or cons during the 70s, 80s, 90s....,

I do have accounting ledgers going back that far, but they are arranged by date.  I would have to hire 20 chimpanzees to sort that out.

You can deduct that from your profit.  

[rsouxlja7]

On 1/3/2022 at 9:51 PM, Beige said:

Thanks - but I guess I'm asking is there a length of time of ownership when the book becomes 'tax-exempt'?

Again with a home 12 months of owner-occupation removes all capital gains tax when you sell it - regardless of when you bought the house.

You just have to have lived in it for 12 months.

I don't see how someone who has kept a book for 40 years and then sold due to retirement should pay tax the same as a flipper who bought the book 3 months ago and then sold pre-movie.

Currently in Aus, if you own (don't quote me) something published prior to 1970 OR paid less than $600 for the item - you don't pay capital gains tax.

To change that to taxing every cent over $600 in sales profit over a year will have huge ramifications - hence my question.

 

Interesting times ahead.

There's a similar rule for the sale of a home in the US (2 years of living in it in the previous 5 years will let you exclude 250K in profit). There is no length of time for comic books or any other form of investment in which it would become tax exempt due to length of ownership. 

[Hamlet]

On 1/3/2022 at 11:43 PM, AGGIEZ said:

Screw it…every key I sell comes with a long box of my 1985-1995 baseball cards….that’s a legitimate loss right there! Greg Jeffries and Jerome Walton rookies for er’body!!

 

Seriously though, one of my concerns is the uncertainty around “proof”. Hardly anyone in this hobby, or any hobby for that matter, prints off eBay/CLINK/Heritage wins (“receipts”) or makes a note of off-line transactions that occurred years/decades ago. People keep saying it’s net, not gross, but you may have to prove your cost basis otherwise it’ll be gross 🤮…

If you make a good faith effort to come up with a cost basis, I doubt very much that you'll have any issues.  Honestly, the odds of an audit is pretty tiny if you report numbers that are plausible.  The IRS is pretty understaffed.  If their computers don't flag your return as in error, it is really unlikely that you are going to have a problem. 

[buttock]

The key is to sell every book at a loss.  

[theCapraAegagrus]

It's interesting when the gov shills reveal themselves.

[Nazirite]

I saw this today on IG

[snitzer]

I love getting books on trade. Good times ahead 

[Dr. Love]

On 1/3/2022 at 6:18 PM, shadroch said:

 As people keep reminding everyone, you only pay tax on your profits and your profits are sales minus expenses. 

This is incorrect.  Since the passage of the Tax Cuts and Jobs Act, for the years 2018-2025, expenses are no longer deductible.  You owe tax on the sales price minus the cost of goods, if that results in a gain.  Period.  Yes that means commissions are not deductible, including Ebay.  Nor shipping costs, bags, boards, pressing fees, slabbing fees, safety deposit box fees, gas to get to and from wherever - the list goes on.

There is an exception - if you sell comics as a business.  Which the IRS calls "for profit".  Then all those expenses are deductible.  Yes, we all mean to make a profit, otherwise we wouldn't sell our books, right?  But that doesn't make it a business, and if it's not a business, then by definition it's a hobby.  That's it, no choice from Column C.

There are 9 guidelines the IRS uses to help determine if you buying and selling comics is a hobby or a business:

  - Whether the activity is carried out in a businesslike manner and the taxpayer maintains complete and accurate books and records.

  - Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable.

 - Whether they depend on income from the activity for their livelihood.

 - Whether any losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business.

 - Whether they change methods of operation to improve profitability.

 - Whether the taxpayer and their advisers have the knowledge needed to carry out the activity as a successful business.

 - Whether the taxpayer was successful in making a profit in similar activities in the past.

 - Whether the activity makes a profit in some years and how much profit it makes.

 - Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.

These guidelines are subjective.  Many of us meet some if not all of them and yet we don't call ourselves a business.  If you're serious about going the "business" path, you don't have to be a convention going dealer, but you should think about taking some easy logistical steps that will help if you want to make a case for having a business:  get a resale certificate; open up a separate bank account for the sale proceeds; have a separate credit card for the sales expenses.  Document your purchases.  Establish a basis (cost) value for your inventory.

Additionally, a statutory safe harbor is provided that, if met, causes a presumption that the activity is a for-profit endeavor.  To meet the safe harbor, an activity must generate a profit in at least three of five years ending with the tax year in question. If this safe harbor is met, the burden of proof for lack of profit motive is shifted to the IRS. The IRS can still rebut the profit motive presumption by proving that the activity is not engaged in for profit (e.g., by showing that the profitable years generated immaterial profits while the unprofitable years generated large losses). In most cases, if the safe harbor is met, the IRS will not attempt to rebut the presumption unless there are extenuating circumstances.

[Old Fashion PB and J]

On 1/2/2022 at 11:46 PM, FlyingDonut said:

You're not taxed on your 1099. You're taxed on your income. If you're reporting your income from the 1099, you really need to contact a tax professional.

Over the years, you have been the constant voice of reason regarding how to properly sell on Ebay. Thank you! And let's be real, if you are selling enough volume you will know how to file and prove actual income. You are 100% right that if you are an online seller or reseller you should speak with a professional and know how to protect yourself.

[AGGIEZ]

On 1/4/2022 at 6:17 PM, lizards2 said:

I've thought about the same. Maybe even a add a discount for cash.

Although checks and cash I believe are run in and out of your checking or savings account when cashed.

 

You mean we can’t event cash cash now?!? W…T….Ffffffffffff……

[lizards2]

On 1/4/2022 at 6:26 PM, AGGIEZ said:

On 1/4/2022 at 4:17 PM, lizards2 said:

I've thought about the same. Maybe even a add a discount for cash.

Although checks and cash I believe are run in and out of your checking or savings account when cashed.

 

You mean we can’t event cash cash now?!? W…T….Ffffffffffff……

What I meant is that banks were supposed to be tracking even cash deposits for reporting to the IRS - Not sure that survived whatever it is congress is working on.