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Dawgbone, I don't disagree with you in principle but I just don't want more paperwork just to prove to the government that I didn't make a profit on 99% of things I've sold. After some spring cleaning I offloaded a ton of speakers, pedals, amps, and guitars. Not looking forward to the hours it would take to dig up receipts for those and NO I did not plan accordingly when I initially purchased them because YES I was pretty ignorant of potential tax implications because I'm a spoiled W-2 earner with a relatively rudimentary understanding of taxes related to self-employed income compared to many of the pro musicians on this forum.
You know the ironic bit right? If the government taxed every transaction in real time, that would actually reduce the cognitive load and the stressful burden that tax season creates. I'd gladly pay taxes on gains as they occur.
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01-20-2023 08:27 PM
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Understanding Your Form 1099-K | Internal Revenue Service
Originally Posted by Stringswinger;[URL="tel:1243652"
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This is why I haven't sold a guitar in 30 years :-)
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I've sold a couple in my lifetime. I never even considered paying tax on them, because I'm not in the music business, and I don't consider the proceeds to be income. I only made money on one, lost on the others. My definition of income is money paid to me for my labor. I am not in any business, and never have been. Selling some of my property does not generate income. If the IRS wants to audit me, I'll deal with that when and if it happens. If I were a professional musician, things would be different, but I'm not, never have been, and never will be.
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The IRS (and the law) has a different definition of income than you do. 1099's from the online platforms will end up educating a lot of people on the legal definition of income and not in a good way. Originally Posted by sgosnell
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It doesn't matter whether you consider it income. The IRS does consider it income. Likewise, if you sell a chess-set or beanie babies, that is also considered income. You could not only get audited and end up having to pay back taxes on that stuff but you could potentially face a penalty and interest. Originally Posted by sgosnell
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I understand that my definition does not match that of the IRS. If I should get a 1099, I'll deal with that. Without one, they don't have nearly enough auditors to catch me. There are rich people evading millions of dollars in taxes. It's not worth the effort to try to go after me for a few dollars. I generally don't itemize anyway, just take the standard deduction. Social Security and the RMD from my IRA aren't enough to be worth the effort, and if I do have to pay $10 or so, so be it. I also don't pay the quarterly estimated taxes on my RMD. I just pay the ~$30 penalty and keep the money to earn interest.
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I do hope for you guys that this income is the difference between how much you paid for it and how much you sell it for. It'd probably be utopia but ideally inflation should be taken into account. Oh, and another nice utopic thought: being able to add the losses you incur to your deductable debt (if such a thing exists)... Originally Posted by Stringswinger
This reminds me a bit of how the EU decided to levy tax and import duties on anything arriving from outside the EU, no longer allowing member countries to apply a tax-free limit. (That was some 3 years ago, IIRC at the time brexit became effective and undoubtedly linked to that.)
I've been hit with a few unannounced billings I had to pay to my friendly maillady in the beginning but I have the impression that shipments where this cost isn't handled at the source have started to slip through again. Understandably: there's a cost to it, one you probably can't completely charge to the people being billed. Same should apply to the IRS...
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FWIW, maybe you shouldn't be explaining in too much detail how you are doing things in this domain? Originally Posted by sgosnell
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Very true. And what always got me is that the same people who complain about taxes are usually the same people who complain about the quality of public services. Originally Posted by sgosnell
I have a friend whose wife makes a great living as a public school teacher. She makes more than him. He constantly complains about taxes.
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What, me worry? Originally Posted by RJVB
FWIW, maybe you shouldn't be explaining in too much detail how you are doing things in this domain?
I think the statute of limitations has run out on my transactions. I'm not selling stuff every week like some here. I've sold fewer than 10 items in total this century. I buy stuff, but rarely sell it. And yes, the US income tax is only on the profit from the sale, not on the selling price. Many etailers have started to charge sales tax on everything, though. Sales tax and income tax are different things, and you can deduct the sales tax from your income tax if you want to go to the trouble. In fact, the IRS lets you use a standard formula based on your location's tax rate without even keeping records of the sales tax you paid, if you want to do that. However, in my case it's moot. Each year I spend time with TurboTax working through every loophole I can find, and since I retired it's better to just take the standard deduction than to itemize. That's certainly not the case for everyone, but it is for me. Taxpayers who take the standard deduction are in very little danger of being audited, unless they have a lot of unreported income. A thousand or so from the sale of gear wouldn't change my tax at all.
I do get 1099s from financial institutions for interest payments to some bank accounts. I report them, but if I didn't I doubt the IRS would come after me for the $10 or so that they total. Banks charge high interest on loans, but pay almost nothing on deposits. Don't get me started on the evils of credit card debt.
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I am not sure that you would have to provide original receipts of what you paid for personal items that you sell and get 1099’d unless they are obviously very valuable and you get audited. You just need to show a loss as an offset for what is shown on the 1099 on your 1040. If push comes to shove you could probably prove with comps that you didn’t make any money on the sale.
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Comparisons with the average selling price of the things you sold? That sounds a bit to reasonable to be something the fisc would accept (easily). It might fly in case you do get an audit but I'd expect to have to pay for a taxation by an assermoned expert, and good luck getting that after a sale.... Originally Posted by lammie200
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I'll buy through Reverb but no more selling through them
I had good experience with buying but tried to sell once and no more, no way!
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Taxes? Ha, all the better to sell on Craigslist when you can. I sold 3 guitar’s there last year, plus two turntables, which didn’t cost me a cent.
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I think the $20,000 limit was much more reasonable as it was set before. This is going to be pretty unpopular when it rolls out and I think was a bad decision at the very least politically.
This was put forward as a way they could try to get more funding to hire auditors for the IRS that was palatable to both parties. Instead of you know, passing a spending bill to do so.
I’m not an accountant or tax attorney but the little I’ve seen the real money in tax evasion comes from perfectly legal loopholes designed to benefit those who have political influence.
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Seems like double dipping by the gov't to me. I buy a new Gibson, I pay the sales tax. The Gibson gets the 1099. Then I sell the guitar on reverb, and the buyer pays more tax. Then I possible get a 1099.
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The Feds have been double dipping (and more) for years. Look at Corporate tax law. The corporation pays tax on it's profits and then distributes those profits to the shareholders in the form of dividends. Those dividends get taxed again. If the shareholder spends that money, in most States there will be sales tax on those purchases. If the shareholder has a large nest egg and dies without having spent those dividends, there will be a estate tax levied on those dividends. Originally Posted by Woody Sound
Death and taxes. The only sure things in this existence.
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I think myself and many others are mostly a tad irritated because we don’t make any profit off our hobby and it just brings us a modicum of joy. And now we have to make sure to keep meticulous records and accounting to indicate how much profit we aren’t making and the fear of an audit by an IRS that’s looking to make a mark with this legislation.
Luckily I have records and I can show just how non-profitable my ventures are!
If you are making 20k buying and selling instruments that seems substantial and may need some review tax wise. That’s well we’ll beyond anything I’ve done in a year.
For me it’s about focus there are plenty of other ways to make tax revenue other than targeting hobbyists. I pay my taxes regularly and don’t have issue with that. Though I do wish more went to infrastructure instead of missiles and tanks and jet fighters(there has to be some defense spending but I’m also not an expert regarding that).
I understand gig work gets accounted for in this and that’s a separate pickle. If someone is scraping together some small amount of side income I think there are bigger fish to fry but the regular folks don’t have lobbyists or influence.
Anyways, this topic certainly derailed and I will cease helping it do so!Last edited by Ric Lee; 01-28-2023 at 01:11 PM.
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