The inflation thing is annoying. Say i bought a record for $10 in 1990 and i sell it for $20 today. My original purchase price would be $29 in today’s dollars, but instead of selling it at a loss of $9, the IRS thinks i’m selling it at a profit of $10 and i owe taxes on that.
Yep. It's about the profit. I imagine there is no adjustment allowed for 'inflation' over the years. It's about what you paid vs. what you sell it for and can "prove" the tally. There's still 8 months to go before all this goes into play. There may be a reassessment afoot via the government as more people realize what's going to happen and enough people complain about this. (I doubt it, but it may happen). I'm being naive, but hopeful.
I haven’t done any selling this year, but once i do, i suppose it will be easy enough to export all my sales data into a spreadsheet and then assign a reasonable cost of goods for each sale so i can calculate profit. It won’t be provable with receipts, but it will be reasonable, and hopefully sufficient if i get audited.
So if you're selling for reasons like to declutter and basically to fund your hobbies like collecting physical media, would it even be possible to claim "hobby" if there are say 200+ sales in a year? I can see selling as a routine but it sounds like if it's not just "every now and then" that it could automatically be assumed to be a "business." The distinctions are kind of annoying and especially if you're selling your personal collection, even if it may be a lot of them spaced out over time and even if a lot of them are still sealed. Some of us have huge backlogs that have not been used since it obviously takes a lot of time to get around to them and impulse purchases are something every collector has probably faced. I also have some multiples that I got for trades and then unfortunately figured out it's tough to find people who would want them and so ended up selling them or throwing them away. Some of us probably have accumulated way more media than we could ever need and end up cherry picking them out as we run out of space. I'd imagine most small time sellers do not do record keeping when selling their personal items and have no receipts in addition to not understanding the "business" aspects of how to do book keeping. Online selling still seems like a routine garage sale in this regard.
Lots of assumptions, and fewer questions. The 1099 is just a report on funds and does not mean you are on the hook for it all tax wise. Yes, reality can be annoying. Keep good records, and it should help a lot.
Discogs and paypal fees would eat into your $10 and you would be raking in even less than that. You might just be paying someone to take your records off your hands.
I'm going to cap sales at $560.00 in total revenues at eBay this year, same on Amazon. Shut them both down without going into 1099 territory. I'll deal with just Discogs for that Schedule C attachment. I have a big bag of receipts that I saved from 15 years ago, plus I have been saving the thrift store receipts in the last two years. Between all that documentation I should be able to keep taxes in check.
It still seems like such a grey area when you don't have receipts and have to guess on what was paid years ago. I do not have that kind of memory recall. Perhaps it's more cut and dry for services like Uber or contract work, but selling personal items is a headache since it's kind of a he said she said thing without proof of receipt.
I won’t speak for my cpa, but I asked her about how to deal with selling vintage baseball cards, which I started collecting in the early 1960s. Obviously I will have capital gains but I have no proof of what I paid as a kid for wax packs or stuff I bought as an adult at card shows. She said it was unlikely that I would be challenged if I used a best guest estimate for my costs. It would seem that would also apply to records and CDs that I’ve owned for decades. If a seller makes a huge amount from a sale then claims a net profit of 10%, it might invite an audit. The bigger challenge for me is selling a promo disc, I’ve been a jazz journalist for over 34 years but sometimes pick up promo discs of items not serviced to me. Again and again, it comes down to not being greedy or not reporting significant income from sales.
You don't have to report income from sales. PayPal will be doing that for you. You have to report expenses.
Paypal (/eBay/Amazon/etc.) will report to the IRS the total of all money disbursed to you. That is the total that includes any shipping paid to you. And the total won't be reduced by any returns you accept or refunds you make or other money you may spend. It's just the gross total of all money that goes, even temporarily, into your account. You have to report that money on your taxes if you get a 1099k. You have two options: Do nothing else, in which case the total will be taxed as ordinary income. Or file a schedule C where you indicate what portion of that total on the 1099k is your cost basis. Many people won't understand how to do that, and they'll get taxed on the entire 1099k amount, which for almost everyone is more than the correct taxable amount. The government is hoping for that. Worst case scenario: Sell LP for $100 that you paid $20 for. Ship for $6. Buyer pays $106. ~$103 ($106- $3.07 PayPal fees) is reported on 1099k. Later, buyer returns the LP for whatever reason. You refund total amount and pay for return shipping. $106 (original payment) - $106 (refund) - 2.9% of $106 (PayPal fees that they don't refund) - $6 (return shipping) -------------------------------- -$9.07 (loss) You're in the hole for over $9 on this sale, but the 1099k will STILL include $103 for this transaction. If the buyer doesn't return the LP, you made $80 MINUS PayPal fees, MINUS platform (eBay or Discogs) fees. So you will make (based on your cost) less than $70. But your 1099k will state you received $103. Oh, and your cost basis of $20 is not inflation adjusted, so if you bought it for $20 in 1975, your inflation-adjusted cost basis would be $107--meaning you actually lost money on the sale. But, sorry, you don't get to do that.
No, it will report $106. 1099-Ks report gross income. It's then up to you to write off things like bank expenses and losses.
Exactly. Nobody needs to produce receipts from 40-60 years ago as long as they're providing a reasonable estimate.
I would hate to get audited and have them demand more documentation, and doubt your LPs cost anywhere near $25 to $40 each, and dispute CDs ever cost $29 even for imports.
Since I bought most of my vinyl in collections or at thrifts I'm valuing them at a dollar each. I don't anticipate any blowback from that.
I strongly advise you guys, to not get a 1099-k next year, if you have never reported your online sales to the IRS. They are hiring more auditors. Coincidence? No way.... IRS is staffing up. Does that mean more people will get audited? (usatoday.com)
How do you suggest people go about not getting a 1099? You say it like it's an optional thing. Report accurately and keep good records and an audit shouldn't be a problem.
Of course it's optional. Don't sell anything = no 1099-k. The audit becomes a problem for past year sales that were never reported.
