Bad Paypal 1099

Docscoot said:
Fair concern, but I don't think inflation is ever factored in when calculating profits or losses on any sort of investment. Even just in a savings account these days I'm certainly losing to inflation but still paying capital gains tax on the (tiny tiny tiny bit of) interest. Same deal.
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Yes but the problem bets bigger than that..Do you still have the receipt from 1992 'to prove' your expense in that transaction was $100? 30 years ago and pre-internet? I don't have receipts from last year much less 1992..So you really cannot claim any expense reduction on your tax due on the $300 you got from ebay/PP/etc.
 
Yes but the problem bets bigger than that..Do you still have the receipt from 1992 'to prove' your expense in that transaction was $100? 30 years ago and pre-internet? I don't have receipts from last year much less 1992..So you really cannot claim any expense reduction on your tax due on the $300 you got from ebay/PP/etc
I guess you just do your best to document what they were selling for retail in 1992 and if IRS really pushes back on you (highly unlikely in my amateur opinion unless you’re being audited for other reasons already) then yes you’re on the hook for tax on the entire sale amount!
 
ToxicBot11 said:
Yes but the problem bets bigger than that..Do you still have the receipt from 1992 'to prove' your expense in that transaction was $100? 30 years ago and pre-internet? I don't have receipts from last year much less 1992..So you really cannot claim any expense reduction on your tax due on the $300 you got from ebay/PP/etc.
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As noted by jlaufer in post 206-he paid on the full amount. You may want to take this into account when deciding to sell or not
not to mention how you sell it
I don't have receipts either, but it certainly might be a good practice to keep them in the future. You can only do, what you can do.
You likely could get away with putting down something reasonable, but is it really worth it for the amount of tax on a knife-only you can decide
 
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Docscoot said:
Yes but the problem bets bigger than that..Do you still have the receipt from 1992 'to prove' your expense in that transaction was $100? 30 years ago and pre-internet? I don't have receipts from last year much less 1992..So you really cannot claim any expense reduction on your tax due on the $300 you got from ebay/PP/etc
I guess you just do your best to document what they were selling for retail in 1992 and if IRS really pushes back on you (highly unlikely in my amateur opinion unless you’re being audited for other reasons already) then yes you’re on the hook for tax on the entire sale amount!
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Copy's appropriate old Sear and Roebuck catalog page. Mails in with tax forms. Prays.
 
I think for most of us it’s less about the money or even the hassle, but more about the frustration over being collateral damage within the blind spots in this new policy. For me it’s just about my ideas of fairness, and it just seems deeply unfair to essentially have to pay tax three times on a tool/collectible I don’t decide to keep (bought with post tax earnings, paid sales tax, then tax again on sale price?!?).
 
Peter Hartwig said:
As noted by jlaufer in post 206-he paid on the full amount. You may want to take this into account when deciding to sell or not
not to mention how you sell it
I don't have receipts either, but it certainly might be a good practice to keep them in the future. You can only do, what you can do.
You likely could get away with putting down something reasonable, but is it really worth it for the amount of tax on a knife-only you can decide
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Not quite. In 2017 the 1099 was for ~$3k and with the records I had I was able to get the "profit" down to just over $600. Started keeping better records after that. For 2020 the 1099 was ~$4k and my profit was only $200. Not sure what the 1099 total amount will be for 2021, but the profit should be around $800.
 
jlauffer said:
Not quite. In 2017 the 1099 was for ~$3k and with the records I had I was able to get the "profit" down to just over $600. Started keeping better records after that. For 2020 the 1099 was ~$4k and my profit was only $200. Not sure what the 1099 total amount will be for 2021, but the profit should be around $800.
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So that was profit, or what you couldn't substantiate with records? If you don't have records (for an item)are you claiming the full amount(for that item) as profit?
I am interested to see how those that have already been doing this , are doing it.
 
Peter Hartwig said:
So that was profit, or what you couldn't substantiate with records? If you don't have records (for an item)are you claiming the full amount(for that item) as profit?
I am interested to see how those that have already been doing this , are doing it.
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Correct. Was blindsided by this in 2017 and had to scour PP and ebay to account for as much in expenses as I could. Started keeping records after that, but I still have a lot of stuff from before that with no record of how much I paid, so the only expenses I can claim are any PP/ebay fees and shipping. That's why for 2021 I'm right around $800 profit, cuz I sold several older items that I don't have records for.
 
As for not having receipts for early stuff you may want to contact your accountant or tax preparer. On Youtube there is a CPA who is also an eBay reseller who has a video on how to account for personal items turned into reselling inventory if you have not receipts. He talks of "lower of original cost or current market value" and being able to substantiate this looking back at similar items sold, current prices of the same item, etc.... Rather than go on his exact advice it does seem there is a system to allow for this but better to talk to a local accountant.
 
Quiet said:
I expect by 2023, you'll see almost all transactions on the Exchange pretty much using the payment methods I stated above, because people aren't going to want to take the tax hit.
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Before that happens, the tax man will cometh for F&F transactions as well.
 
I've got two questions sorry if they have been covered here.

1. For the sake of the simplicity, if I sold totally two knives in a given year with $700 for each and I profited $100 for one and lost $200 for the other (meaning I purchased them for $600 and $900 respectively) and let's assume I kept all receipts). Will I be taxes for the $100 profit even if I have a net loss of $100？

2. The PayPal 1099 people are or will soon be receiving is for the year of 2021 alone, right?
 
I sure hope we do not get 1099’s for 2021 - I was under the impression this started on 01/01/2022, for 2023 1099’s

I’ve bought / sold many knives, mostly here. Never sold any for profit, always at a loss ( pay to play ).



I seriously hope this started on the 1st on January.
 
sharp_edge said:
I've got two questions sorry if they have been covered here.

1. For the sake of the simplicity, if I sold totally two knives in a given year with $700 for each and I profited $100 for one and lost $200 for the other (meaning I purchased them for $600 and $900 respectively) and let's assume I kept all receipts). Will I be taxes for the $100 profit even if I have a net loss of $100？

2. The PayPal 1099 people are or will soon be receiving is for the year of 2021 alone, right?
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It's based on totals, not per transaction. So you would get a 1099 for $1400, and with records you would be able to show you originally paid $1500, plus any other expenses incurred when you sold them (PP fees, shipping, etc). So you should not have to pay any tax.
 
kreole said:
The second part of what jlauffer said is technically incorrect. A lot of people have mentioned planning to try this, but it's not right according to tax law as the IRS upholds it.

Hobby income is taxes without deductions. That means you're taxed on the full $1400. You do not get to deduct the original costs or any other (shipping, etc.).

To take deductions as jlauffer says, you need business income, not hobby income. Look up hobby vs business IRS guidelines (it's already been posted here also). You need to be profitable (or expect to be but due to unexpected/external influences weren't) and run it like a business. The example you give, two sales, is certainly not proving you're trying to run a business.

Your tax return to do with what you will, but any audit and the IRS is certainly going to say you owe back tax for the example as you gave it. The actual answer to your question according to tax rules is you owe tax on $1400 of sales because it is hobby income. Deductions to hobby income haven't been allowed since 2018.
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a. Hopefully (or not) someone else can confirm this. I believe it has been stated before, but not that clearly, and isn't that a bite in the butt. You would have to think hard about the knife being worth selling, and certainly hard about what you buy.
b. are you an accountant?
c. Would there be any difference if you were just selling a personal item-neither business nor hobby, and not an on going situation. Some here are collectors and hobbyist , but some are just trying to unload a couple knives for some money to pay the bills.
Thanks for the info
 
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Frankly, I'm getting to the age where I'd get more satisfaction out of giving them away rather than giving Uncle a second bite at the apple.

Although I have a lot invested in my knives, they don't represent money needed for living or future purchases.

I'm tired of being regulated to death.
 
kreole said:
The second part of what jlauffer said is technically incorrect. A lot of people have mentioned planning to try this, but it's not right according to tax law as the IRS upholds it.

Hobby income is taxes without deductions. That means you're taxed on the full $1400. You do not get to deduct the original costs or any other (shipping, etc.).

To take deductions as jlauffer says, you need business income, not hobby income. Look up hobby vs business IRS guidelines (it's already been posted here also). You need to be profitable (or expect to be but due to unexpected/external influences weren't) and run it like a business. The example you give, two sales, is certainly not proving you're trying to run a business.

Your tax return to do with what you will, but any audit and the IRS is certainly going to say you owe back tax for the example as you gave it. The actual answer to your question according to tax rules is you owe tax on $1400 of sales because it is hobby income. Deductions to hobby income haven't been allowed since 2018.
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I sincerely think you’re incorrect here. If I buy a couch for $1000 and sell it for $600 a few years later there’s just no way the expectation of the IRS is for me to consider that $600 as straight income. It comes down to the definition of income, and there’s room for common sense interpretation here. It’s not a deduction, it’s simply that the price paid up front is implicit in your calculation of income in this case (backed up with receipts of course). Not an expert but my experience in 30 years of doing my taxes, sometimes with professional help to sort out similar issues, has always been that common sense, believe it or not, does tend to apply even in complicated tax law. If In doubt, by all means take it to a tax preparer!
 
Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income. you must claim all hobby income and are not permitted to reduce that income by any expenses. For tax years prior to 2018, you can deduct expenses as an itemized deduction subject to 2% of your adjusted gross income.

4 Tax Tips for Money-Making Hobbies - TurboTax​


First, ask yourself if your hobby is a recreational pursuit or a profit-making endeavor. Earning a living doing something you love is a natural goal, but you must be clear about your intentions to claim expenses come tax time.
The IRS defines a hobby as an activity:
  • You do purely for the love of it, regardless of the cost.
  • You expect no profit in return.
This doesn't mean you're prohibited from earning any money. For example, if you tinker with cars, it's okay for a friend to pay you for an occasional oil change.
Generally speaking, your hobby is a business if:
  • Some or all of your income comes from the hobby. For example, you sell handmade candy on an e-commerce store, and the earnings account for half of your annual income.
  • Your hobby experiences profits and losses. For example, you earn significant profits from Valentine's Day sales, but you've spent too much on a flavor of Halloween candy that didn't sell.

Hobby income and expenses​

Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income. you must claim all hobby income and are not permitted to reduce that income by any expenses.
For tax years prior to 2018, you can deduct expenses as an itemized deduction subject to 2% of your adjusted gross income. Also, the amount that you claim as an expense cannot be greater than your income from the hobby. In other words, your hobby cannot generate a loss. For example, if you're a knitter and spent $300 on yarn and other supplies, and sold one sweater for $150, you can use only up to $150 in expenses ($300-$150 = $150). But, if you spent $300 on your knitting hobby and earned $300 from the sale of two sweaters, you can use the full amount of your expenses. The expenses you can deduct are called "ordinary expenses" and "necessary expenses."
  • Ordinary expenses are those required to carry out the hobby, such as fabric and thread for a quilter.
  • Necessary expenses are those that help you develop the skills your hobby requires, like attending a quilting class.

Itemized and standard tax deductions​

Taxpayers can choose to itemize deductions on their tax returns or take the standard allowable deduction. Hobby expenses can only be deducted if you itemize your deductions for tax years prior to 2018.
If you’re taking the standard deduction:
  • Select the appropriate standard deduction you qualify for from the chart provided by the IRS. This amount is based on your income and filing status, such as married, single or widower.
  • Enter the amount on your tax form along with other required information.
If you're itemizing deductions for years 2017 and earlier:
  • List your hobby expenses on Schedule A.
  • Note the total of your hobby expenses.
  • Calculate 2% from your adjusted gross income.
  • Subtract the 2% amount from your hobby expenses to arrive at the amount you can deduct as an itemized deduction.
For example:
  • $48,000 (your AGI) x 2% = $960
  • $4,000 (your hobby expenses) - $960 = $3,040.
  • $3,040 is the amount of hobby expenses you can deduct as an itemized deduction provided you had at least $4,000 in hobby income.

From hobby to business​

Keep records if your hobby becomes more of a business than a recreational pursuit. Business owners typically use Schedule C to report profits and losses and to deduct a broad range of expenses not available to hobbyists. The IRS might consider your hobby a business when any or all of the following apply:
  • The things you do to run your hobby-business, like hiring knowledgeable employees and advertising, point to your intent to make a profit.
  • You earn your livelihood from the hobby.
  • You've made a profit for at least three of the past five years.
  • You hope to make a profit from some of your business assets down the road, like animals for breeding.
  • You've made a profit from a similar hobby in the past.
Because the responsibility is on you to show that your hobby-business is entitled to business tax breaks, keeping detailed records will come in handy in case of an IRS tax audit.
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.
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If you sell an item at a loss it’s a loss. It’s not income. Even if knife collecting is a hobby, selling a knife at a loss is not hobby income. If there is a tax attorney out there who would like to correct me please by all means do. If you’re just another amateur like me I think we’ve had enough of those opinions by now :)
 
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