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

[FlyingDonut]

On 1/4/2022 at 9:33 PM, lizards2 said:

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.

Deposits over $10,000 have to be reported per the PATRIOT Act. That hasn't changed since 2001.

[shadroch]

On 1/4/2022 at 4:58 PM, Dr. Love said:

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.

Which means you can lose money two of the five years.  From a practical sense, the only thing that changed is paperwork. The IRS has less agents so they demand more paperwork. 

[Ryan.]

On 1/4/2022 at 9:42 PM, FlyingDonut said:

Deposits over $10,000 have to be reported per the PATRIOT Act. That hasn't changed since 2001.

Last I looked they are seeking to decrease this reporting threshold significantly. 

The OA guys figured out years ago how to deal in cash. I expect that to carry over to comics. Maybe not for everyday online sellers so much but I know several local dealers that offer cash discounts. 

A couple of years ago I would have predicted that cash would be on its death bed by now. Now, I see a resurgence coming. 

[Shrevvy]

On 1/4/2022 at 9:33 PM, lizards2 said:

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.

There was a proposal (in the infrastructure bill maybe?) that would have required banks to report all deposits and withdrawals of $600 or more. It is a crazy proposal that has not been passed. Couple this with the $600 1099s and it seems like a concerted effort to track your money in every way possible. 

[snitzer]

On 1/5/2022 at 7:02 AM, Shrevvy said:

There was a proposal (in the infrastructure bill maybe?) that would have required banks to report all deposits and withdrawals of $600 or more. It is a crazy proposal that has not been passed. Couple this with the $600 1099s and it seems like a concerted effort to track your money in every way possible. 

Winner winner 

[october]

On 1/5/2022 at 6:02 AM, Shrevvy said:

There was a proposal (in the infrastructure bill maybe?) that would have required banks to report all deposits and withdrawals of $600 or more. It is a crazy proposal that has not been passed. Couple this with the $600 1099s and it seems like a concerted effort to track your money in every way possible. 

It dovetails nicely with civil asset forfeiture, where police can confiscate your physical cash and the burden is on YOU to prove it's not being used for illegal transactions. So lovely. 

[shadroch]

Why should honest taxpayers subsidize people who don't want to pay taxes? For every person who doesn't pay their fair share, there are a dozen honest people who have to pick up their slack.  Taxes suck, but they are necessary in our society. I don't understand why or how some people think they should be able to skate on paying them because it's just a fun hobby and they are just trying to make a little money on the side.

Tax evasion is a felony. Tax avoidance is our national dance.

[GACollectibles]

On 1/5/2022 at 6:54 AM, Ryan. said:

A couple of years ago I would have predicted that cash would be on its death bed by now. Now, I see a resurgence coming. 

My bank is ahead of the curve in planning for the resurgence, they charge for cash deposits over a certain amount per month(or quarter).  I found that out the hard way a few years ago when I was still doing shows where the majority of sales were via cash.

[Ryan.]

On 1/5/2022 at 9:36 AM, GACollectibles said:

I found that out the hard way a few years ago when I was still doing shows where the majority of sales were via cash

You accept electronic payment now for your private stripper shows?

[lizards2]

On 1/5/2022 at 3:54 AM, Ryan. said:

 

A couple of years ago I would have predicted that cash would be on its death bed by now. Now, I see a resurgence coming. 

I volunteer quite a bit at dinners and such at a local non-profit club - I continue to amazed at how much cash is exchanged, and I mean vs. check or credit card. Maybe 60-70% of all receipts are cash?

I'm a dinosaur that prefers dealing with checks, just from a safety standpoint. Makes me nervous having all that cash around, in multiple ways.

[GACollectibles]

On 1/5/2022 at 9:45 AM, Ryan. said:

You accept electronic payment now for your private stripper shows?

I can get paid for those??!!

[Ryan.]

On 1/5/2022 at 9:56 AM, GACollectibles said:

I can get paid for those??!!

I'm willing to pay in expired CGC credit.

[GACollectibles]

On 1/5/2022 at 10:02 AM, Ryan. said:

I'm willing to pay in expired CGC credit.

That means my books will be back in about the same time as unexpired credit, dunnit?

[Ryan.]

On 1/5/2022 at 10:10 AM, GACollectibles said:

That means my books will be back in about the same time as unexpired credit, dunnit?

CGC just made another service announcement update: They are no longer returning graded books to submitters but instead are donating them to charity in order to write off the taxes due for their new 1099.

[Buzzetta]

On 1/5/2022 at 9:22 AM, shadroch said:

Why should honest taxpayers subsidize people who don't want to pay taxes? For every person who doesn't pay their fair share, there are a dozen honest people who have to pick up their slack.  Taxes suck, but they are necessary in our society. I don't understand why or how some people think they should be able to skate on paying them because it's just a fun hobby and they are just trying to make a little money on the side.

Tax evasion is a felony. Tax avoidance is our national dance.

Seems that the more local restaurants and businesses are now offering a 10% to 20% discount if you pay in cash. 

Should be very interesting to see how things go moving forward. 

[Shrevvy]

On 1/5/2022 at 9:22 AM, shadroch said:

Why should honest taxpayers subsidize people who don't want to pay taxes? For every person who doesn't pay their fair share, there are a dozen honest people who have to pick up their slack.  Taxes suck, but they are necessary in our society. I don't understand why or how some people think they should be able to skate on paying them because it's just a fun hobby and they are just trying to make a little money on the side.

Tax evasion is a felony. Tax avoidance is our national dance.

I don't disagree with this. We look at this through the lense of collecting comic books though. My arguement since this was signed into law is that it ropes in way too many people that should not get 1099s. Sell your couch and living room furniture for $650, get a 1099. It is on you to prove that you bought it for $1500 and is by no means an "investment." The IRS is saying "guilty" and it is up to you to prove your innocence. I am never onboard with that mentality. I have filed taxes for multiple entities for well over a decade. This effects me exactly zero. It is a shake down on those most likely to need the money and most likely to not have professional representation. The average person who sold something on eBay or CL to get a little cash out of something they no longer use, will be coerced into paying taxes they do not owe. A letter from the IRS is very scary. It is a huge over step of the regulartory authority. Anyone thinking the $600 1099 threshhold and the $600 bank tracking scheme is coincidence, is naive. 

Honestly, if someone on here skipped out on not paying taxes on $800 of sales (on which they made say $200 and owe $44), I don't really care. I would much rather have some not pay taxes they owe than have some pay taxes that they do not owe. 

The "holier than thou" attitude of many defending this policy misses the much bigger picture. 

[shadroch]

I recently read that about 15% of the economy is untaxed, so it is fair to say that 15 cents of every dollar you pay in taxes is to make up for some  people not paying theirs. Instead of getting angry at the government for attempting to collect these taxes, why not get mad at the tax cheats?

 

 

 

You have no problem with a person skipping out on the $44 due on your hypothetical sale. Fine, so what happens when a million people do so and now the taxes lost are $44 million? Does that get your ire up a bit?  If you make money, you owe taxes. Why is that something that needs to be defended?

No one here would think of going in to their boss and asking him to only tax you on 90% of the income he pays you. Why is that? 

 

 

 

 

 

 

 

 

 

[rjpb]

On 1/5/2022 at 8:19 AM, Shrevvy said:

I don't disagree with this. We look at this through the lense of collecting comic books though. My arguement since this was signed into law is that it ropes in way too many people that should not get 1099s. Sell your couch and living room furniture for $650, get a 1099. It is on you to prove that you bought it for $1500 and is by no means an "investment." The IRS is saying "guilty" and it is up to you to prove your innocence. I am never onboard with that mentality. I have filed taxes for multiple entities for well over a decade. This effects me exactly zero. It is a shake down on those most likely to need the money and most likely to not have professional representation. The average person who sold something on eBay or CL to get a little cash out of something they no longer use, will be coerced into paying taxes they do not owe. A letter from the IRS is very scary. It is a huge over step of the regulartory authority. Anyone thinking the $600 1099 threshhold and the $600 bank tracking scheme is coincidence, is naive. 

Honestly, if someone on here skipped out on not paying taxes on $800 of sales (on which they made say $200 and owe $44), I don't really care. I would much rather have some not pay taxes they owe than have some pay taxes that they do not owe. 

The "holier than thou" attitude of many defending this policy misses the much bigger picture. 

The IRS doesn't have the manpower or the incentive to ask people to cough up receipts for second hand stuff they sell on ebay if the gross is in the low thousands. It's a pain that you may have to fill out a profit and loss form, but unless you are just plain unlucky, it's doubtful anyone will ask you to prove your original payment. However, if you appear to have a business selling second hand stuff, then be prepared to pay taxes on your profit, but once again, the tax forms themselves don't ask you attach proof of deductions, and the chances of being fully audited are very slim unless something looks hinky.

[Shrevvy]

On 1/5/2022 at 11:31 AM, shadroch said:

 

You have no problem with a person skipping out on the $44 due on your hypothetical sale. Fine, so what happens when a million people do so and now the taxes lost are $44 million? Does that get your ire up a bit?  If you make money, you owe taxes. Why is that something that needs to be defended?

No one here would think of going in to their boss and asking him to only tax you on 90% of the income he pays you. Why is that? 

 

I don't want people skipping out in paying taxes. What gets my ire up is that many people will pay taxes not owed out of fear and coercion from the IRS. I also don't think it is any business of the US Government (or anyone for that matter) on what I do with $600 (see the deposit/withdrawal legislation they tried to enact at roughly the same time).

You can see by the amount of confusion in this and the many other threads on this board on what taxes will be owed. How many times has donut and other said "you are taxed on NET not GROSS." And this is in a forum in which people are in the "buisness" of buying and selling (I use business loosely here). There will be many receiving a 1099 that will have no idea what it is other than they must pay taxes on the amount.

I can hold both positions. I want people to pay taxes they owe. I can also believe this is a poor and costly attempt at doing so. The mechanics are horrible and starting from a position of accusing everyone is guilty is even worse. 

If anyone truly believes that the "15%" (estimates vary widely on that number) underground economy lies between $600 and $20,000 for sellers on eBay, etsy, CL, etc, then they do not understand math.   

[shadroch]

Fear and coercion from the IRS? Wow. I'm not sure how to respond to that.