Did anyone notice this from Reverb?

  • Thread starter Thread starter espquade
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Basically my understanding is if you sell anything over 600 AND make a profit on it you owe taxes.

In other words if you paid 1200 for something and sold it for 1000 you had a loss. No taxes. If you soldi it for 1500 you pay taxes on 300.

Philip McKnight has a bit on this on his YouTube channel recently. I’m not a financial advisor but tha was my understanding
 
You only pay tax if you have a gain. By the way... that was always the case...there was just no enforcement mechanism. The new rules help with enforcement....along with the 89 thousand new IRS agents Brandon and the Demon-crats want to hire to audit all the billionaires and millionaires. lol

You have to prove your cost basis, if the IRS asks for it. Keep receipts. The IRS doesn't have to prove anything to force you to pay tax. They can force you to pay tax on the whole 1099 amount if you can't substantiate a cost basis.
 
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I guess they are taxing the money you receive through third party payment apps, like paypal..... looks like we may have to go back to the old school postal money order days. I stopped using paypal a few years ago, as well as ebay. This is really going to make online selling interesting in the future
 
I posted this somewhere else but here you go:

From the Horses Mouth:

https://www.irs.gov/pub/irs-pdf/i1099k.pdf
And if you use PayPal, Venmo, etc.:

How these new tax reporting changes may impact you when paying or accepting payments with PayPal and Venmo for goods and services
Recently, there have been some questions regarding changes to upcoming U.S. tax reporting requirements that could impact the information PayPal shares with the Internal Revenue Service (IRS) about transactions made using PayPal and Venmo for the sale of goods and services. While a lot of questions still need to be answered, and in some instances, legislation finalized and signed into law, we’ve answered some of the most pressing questions below – and we’ll be sure to keep this list updated as more details are finalized.

Q: Will I have to pay taxes when sending and receiving money on PayPal and Venmo - what exactly is changing?
To answer this, we need to break it into two specific areas which are currently being discussed by Congress. This includes lowering the reporting threshold for goods and services transactions on a 1099-K, as well as potential changes to how financial institutions report in-flows and out-flows of money on customers’ accounts. Here’s a quick summary of both:
  • 1099-K Threshold Change:
    • This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.
    • This change was introduced in the American Rescue Plan Act of 2021, which amended some sections of the Internal Revenue Code to require Third-Party Settlement Organizations (TPSOs), like PayPal and Venmo, to report goods and services transactions made by customers with $600 or more in annual gross sales on 1099-K forms. Currently, a 1099-K is only required when a user receives more than $20,000 in goods and services transactions and more than 200 goods and services transactions in a calendar year.
  • In-flow and Out-flow Reporting Changes
    • The In-flow and Out-flow Reporting Changes are currently only a legislative proposal, which could potentially be considered by Congress this year. The proposed change would ultimately require all banks and payment service providers, including PayPal and Venmo, to report total inflows and outflows for accounts with at least $10,000 of total deposits and/or withdrawals to the IRS. This is intended to increase the visibility the IRS has into money coming in and out of customer accounts.
    • At this stage, unlike the 1099-K Threshold Change, this is just a proposal and the details are still up for debate. As the situation changes, we’ll be sure to keep this updated as we learn more.

Q: Will the updated 1099-K Threshold Change apply if I sell personal property, like a couch or an item at a garage sale, for $600 or more if it was sold for less than its original value? Will I be issued a Form 1099-K?
Form 1099-K is an IRS informational tax form that is used to report goods and services payments received by a business or individual in the calendar year. While banks and payment service providers, like PayPal and Venmo are required by the IRS to send customers a Form-1099K if they meet the $600 threshold amount, there are certain amounts that may be included on the form that are generally excluded from gross income and therefore are not subject to income tax. This includes:
  • Amounts from selling personal items at a loss
  • Amounts sent as reimbursement
  • Amounts sent as a gift
So, for example, if you purchased a couch for $1200 and sold it for $800, this amount would not be subject to income tax.
We encourage customers to speak with a tax professional when reviewing their 1099-Ks to determine whether specific amounts are classified as taxable income.

Q: What is a Goods and Services payment with PayPal and Venmo?
PayPal Venmo Goods and Services

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Both PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as either personal/friends and family or goods and services by choosing the appropriate category for each transaction. Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service. These transactions are also eligible for coverage under PayPal and Venmo’s Purchase Protection Program. Goods and services payments are designed to provide both buyers and sellers peace of mind knowing that they may be covered if the transaction doesn’t go as expected.
You can find out more on PayPal Goods and Services transactions here, and Venmo Goods and Services transactions here.
 
Q: Is the 1099-K Threshold Change specific to PayPal and Venmo?
No. This is industry wide for all Third-Party Settlement Organizations (TPSOs) that you may use to accept payments for the sale of goods and services.

Q: When do these changes come into effect?
The 1099-K change will take effect January 1, 2022. PayPal and Venmo will be required to provide customers with a 1099-K form if they receive $600 or more in goods and services transactions during the 2022 tax year.
This means you will need to take into account the Threshold Change with your Tax Year 2022 filings. The In-flow and Out-flow change has not been considered by Congress yet and therefore doesn’t have an effective date.

Q: What is a Form 1099-K?
Form 1099-K is an IRS informational tax form used to report payments received by a business or individual for the sale of goods and services that were paid via a third-party network, often referred to as a TPSO or credit/debit card transaction. The IRS requires TPSOs, such as PayPal and Venmo, to issue a Form 1099-K, which shows the total amount of payments received from a TPSO in the calendar year. Taxpayers should consider this amount with their tax advisor when calculating gross receipts for their income tax return. For more information, visit the IRS website here.

Q: What do I need to do in 2022 when the 1099-K Threshold Change takes effect?
You may notice that in the coming months we will ask you for your tax information, like a Social Security Number or Tax ID, if you haven’t provided it to us already, in order to continue using your account to accept payments for the sale of goods and services transactions and to ensure there aren't any issues when these changes take effect in 2022. This helps us meet our obligations to the IRS and ensures that you will be able to continue using your account and access PayPal and Venmo features and services.
For the 2022 tax year, you should consider the amounts shown on your Form 1099-K when calculating gross receipts for your income tax return. The IRS will be able to cross-reference both our report and yours.

Q: Haven’t I always had to declare my income from the sale of goods and services transactions? What's different?
Reporting and declaring any income, either personal or through a business, has always been a requirement when filing your taxes with the IRS. The change broadens the scope of reporting such that all TPSOs, like PayPal and Venmo, need to collect tax information once you near or reach $600 in goods and services transactions (instead of the prior threshold of $20,000 and 200 transactions), so that we can remain compliant with our regulatory requirements and share those details with the IRS.
This change impacts every financial institution and TPSO that you might use to transact for goods and services, not just PayPal and Venmo. This includes your bank accounts, and other ways you send and receive money.

Q: How does this 1099-K Threshold Change impact how I use PayPal and Venmo?
This change should not impact how you use PayPal and Venmo. You can still continue to use the PayPal and Venmo platforms as you do right now, and the benefits that are offered by sending money via our goods and services P2P feature – including buyer and seller protections on eligible transactions for PayPal and Venmo.

Q: What information do I have to provide to PayPal and Venmo? What do I have to do to ensure I remain compliant?
In the coming months, we may ask you to provide tax information like your Employer Identification Number (EIN), Individual Tax ID Number (ITIN) or Social Security Number (SSN), if you haven’t provided it to us already. For background, generally businesses use an EIN, while sole proprietors and individuals will use an ITIN or Social Security Number.

Q: Why is this happening now?
The 1099-K reporting requirement was part of the American Rescue Plan Act of 2021 passed earlier this year by Congress and signed into law by the President. The effective date for these new changes is January 1, 2022.

Q: Where can I find more information?
Here are some further helpful resources if you wanted to read more:

Disclaimer: PayPal does not provide tax advice. This content has been prepared for general informational purposes only and is not intended to be relied on for tax advice. For questions regarding your specific circumstances, you should consult with a tax advisor.
 
$600 is such a low number. Crap… you could make that over the course of a weekend by having a big enough garage sale.
 
I guess just sell using PayPal gift to people you know or trust. That way you won’t get 1099’d.
 
srommes said:
I guess just sell using PayPal gift to people you know or trust. That way you won’t get 1099’d.
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Yeah but if you get audited tax evasion is a federal offense. It’s a risky effort to pull.
 
glpg80 said:
Yeah but if you get audited tax evasion is a federal offense. It’s a risky effort to pull.
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An IRS auditor would have to dig pretty deep to find that. You also have about a .1% chance of getting audited unless you make millions.
 
I got hit with a 1099 for 14k last year from Paypal.
 
Hmm, so my conclusion so far is that as long as I'm not making a profit on sales through Ebay, Reverb, etc. then I'm not required to report that as income. And if I get audited, as long as I have proof of a loss via receipts then I'm in the clear. Sound accurate?
 
Meeotch said:
Hmm, so my conclusion so far is that as long as I'm not making a profit on sales through Ebay, Reverb, etc. then I'm not required to report that as income. And if I get audited, as long as I have proof of a loss via receipts then I'm in the clear. Sound accurate?
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If there’s a 1099 generated you have to report it regardless and file the losses under a schedule C or line 8 of a 1040. Better to file it and show a loss so that you get the tax write off than to not file at all, I looked into this as well.
 
I tried to sell everything I didn't want to take to the grave by 12/31. $600 is absurdly low.
 
So at what rate will any “profits” be taxed at?
 
OMG...I just sold a pickup for $70 that I bought for $69. I might get audited.


Seriously guys, think of ALL of degenerate gear buying whores just like us that they will have to audit for all their piddly $600+ transactions.. And how many audits to make any sort of 'profit'? Does not compute!

non
issue

EDIT: This is not just guitar you know. Every fucking thing you can buy. IRS can NOT audit all that.

non
issue
 
This is a nightmare scenario for everyone, except lawyers as usual.

The taxman will use it as a "back-door charge" after they get you for something else you did that they don't like, they'll always be able to find something here. On everyone, for anything.
 
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