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Post by valenciajim2 on Dec 22, 2023 13:42:26 GMT -8
Has anything changed this year as far as the $600.00 in sales for us modelers that are trying to sell our unwanted or unused model trains at a loss? Last year I stopped at $595.00 so I did not go over $600.00 to get 1099nd for this year. Bruce Yes, on November 21, 2023, the IRS announced that the Form 1099-K reporting rules for 2023 Forms 1099-K that will be filed in 2024 will be covered by the pre-existing rules. In other words forms must be sent to payees with over 200 transactions who were paid over $20,000. The IRS also announced that, for 2024 forms 1099-K, the IRS intends to use a $5,000 reporting threshold instead of the $600 threshold mandated by Congress. In 2025, the IRS expects to fully phase in the new rule. The hope is that after the 2024 elections the new Congress will deal with this issue for 2025 and subsequent years. The IRS reporting thresholds for 2022-2024 are inconsistent with the tax statutes as presently written. For the full text of the IRS announcement, see www.irs.gov/newsroom/irs-announces-delay-in-form-1099-k-reporting-threshold-for-third-party-platform-payments-in-2023-plans-for-a-threshold-of-5000-for-2024-to-phase-in-implementation. The IRS has really done a poor job of explaining how to report these transactions if you are a hobbyist selling off excess stuff or if you are having a virtual garage sale on eBay. They need to apply some sort of safe harbor method for determining the cost of items sold in those circumstances--particularly for items that were sold for an amount less than original cost. |
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Post by lvrr325 on Jan 3, 2024 22:01:08 GMT -8
Starting to think people are just beyond dumb. Been posting things as a choice listing, buy one, two, or all road numbers. I constantly get asked if I combine shipping - outside of the fact there's no way to separately ship items purchased that way. Even after explaining in the listings all items ship together. From people with decent amounts of feedback.
I had another one the other day trying to make an offer on auction listings. (eye roll .gif).
The only good news is over NYE weekend I sold so many things I made a trip to the 24 hour post office lobby Friday night with eight and still had nine more on Tuesday.
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Post by rockisland652 on Jan 4, 2024 13:30:44 GMT -8
Has anything changed this year as far as the $600.00 in sales for us modelers that are trying to sell our unwanted or unused model trains at a loss? Last year I stopped at $595.00 so I did not go over $600.00 to get 1099nd for this year. Bruce The IRS has really done a poor job of explaining how to report these transactions if you are a hobbyist selling off excess stuff or if you are having a virtual garage sale on eBay. They need to apply some sort of safe harbor method for determining the cost of items sold in those circumstances--particularly for items that were sold for an amount less than original cost. Sellers would have to file a Schedule C and take the value of the item sold. Schedule C for most hobbyists unloading excess models would be negative. I wonder how kindly The Service will look at that. |
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Post by 12bridge on Jan 4, 2024 15:30:13 GMT -8
Starting to think people are just beyond dumb. Been posting things as a choice listing, buy one, two, or all road numbers. I constantly get asked if I combine shipping - outside of the fact there's no way to separately ship items purchased that way. Even after explaining in the listings all items ship together. From people with decent amounts of feedback. I had another one the other day trying to make an offer on auction listings. (eye roll .gif). The only good news is over NYE weekend I sold so many things I made a trip to the 24 hour post office lobby Friday night with eight and still had nine more on Tuesday. I have had plenty of ebay sellers refuse to combine shipping only to have things arrive together in the same box. Have also had plenty of sellers not combine shipping..and ship things..in separate boxes.. |
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Post by el3625 on Jan 5, 2024 13:31:09 GMT -8
So, for us not so smart people, is there NO $600.00 selling limit this year (2024) to get 1099nd and are they trying to get the limit to $5,000.00? I was told by customer support at Ebay that I can sell up to $20,000.00 with no more than 200 listings now, so is this correct? I Have been staying under the $600.00 limit because I do not want to have to deal with it. I never make any more money on anything than I paid for it, most all of it is at a loss. If I do, it would be less than 1/2% of my sales or even less. I really do not sell that much anymore on Ebay, never did, only items that are harder to sell. In plain English then, so I can understand it, what amount can I sell this year, 2024, and not get 1099nd? I think there is much confusion on this subject and I need some clarification.
Confused,
Bruce
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Post by valenciajim2 on Jan 7, 2024 17:23:52 GMT -8
The IRS has really done a poor job of explaining how to report these transactions if you are a hobbyist selling off excess stuff or if you are having a virtual garage sale on eBay. They need to apply some sort of safe harbor method for determining the cost of items sold in those circumstances--particularly for items that were sold for an amount less than original cost. Sellers would have to file a Schedule C and take the value of the item sold. Schedule C for most hobbyists unloading excess models would be negative. I wonder how kindly The Service will look at that. From a purely technical perspective, I am not sure that the correct answer is to report the items on Schedule C because they were not acquired with the intent of reselling. They are most likely capital assets, but the IRS forms would not likely recognize that. Ostensibly the IRS is looking into how to treat eBay sales, etc. by hobbyists or people who are just having an online garage sale. Furthermore, if the items were NOT acquired for purpose of resale, but rather in the taxpayer's capacity as a model railroad hobbyist, the hobby loss rules would likely come into play. Those rules only allow deductions equal to income. I have a client who has had hobby losses (yes there are more expensive hobbies than model railroading) and the commercial tax preparation software has a box to check if an activity is subject to the hobby loss rules. I am not sure how it is done on TurboTax, etc. The IRS recently updated the information in its website about reporting the sale of personal items. It can be seen at www.irs.gov/newsroom/irs-announces-2023-form-1099-k-reporting-threshold-delay-for-third-party-platform-payments-plans-for-a-5000-threshold-in-2024-to-phase-in-implementationThe relevant parts of that announcement are as follows: "People who sold personal items must determine if the amounts on their forms were losses or gains. If taxpayers are unsure of the original price, they can learn more on how to figure out the items worth and how to establish basis/" There is a link on the website above that explains this in greater detail. "Selling personal items at a loss: If taxpayers sold at a loss, which means they paid more for the items than they sold them for, they'll be able to zero out the payment on their tax return by reporting both the payment and an offsetting adjustment on a Form 1040, Schedule 1. This will ensure people who unnecessarily get these forms don't have to pay taxes they don't owe. Specifically: If you sold personal items at a loss, you have 2 options to report the loss: Report on Schedule 1 (Form 1040) You can report and then zero out the Form 1099-K gross payment amount on Schedule 1 (Form 1040), Additional Income and Adjustments to IncomePDF. Example: You receive a Form 1099-K that includes the sale of your car online for $21,000, which is less than you paid for it. On Schedule 1 (Form 1040): Enter the Form 1099-K gross payment amount (Box 1a) on Part I – Line 8z – Other Income: "Form 1099-K Personal Item Sold at a Loss, $21,000" Offset the Form 1099-K gross payment amount (Box 1a) on Part II – Line 24z – Other Adjustments: "Form 1099-K Personal Item Sold at a Loss $21,000" These 2 entries result in a $0 net effect on your adjusted gross income (AGI). Report on Form 8949 You can also report the loss on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D, Capital Gains and Losses. Selling personal items at a gain If they were sold at a gain, which means they paid less than they sold it for, they will have to report that gain as income, and it's taxable. If you receive a Form 1099-K for a personal item sold at a gain, report it on both: Form 8949, Sales and other Dispositions of Capital Assets Schedule D (Form 1040), Capital Gains and Losses" I suspect the IRS will experience considerable difficulty applying these rules to taxpayers' situations and a lot of taxpayers are going to get hate mail from the IRS trying to resolve any perceived discrepancies. Congress really needs to address these rules. |
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Post by valenciajim2 on Jan 7, 2024 17:35:28 GMT -8
So, for us not so smart people, is there NO $600.00 selling limit this year (2024) to get 1099nd and are they trying to get the limit to $5,000.00? I was told by customer support at Ebay that I can sell up to $20,000.00 with no more than 200 listings now, so is this correct? I Have been staying under the $600.00 limit because I do not want to have to deal with it. I never make any more money on anything than I paid for it, most all of it is at a loss. If I do, it would be less than 1/2% of my sales or even less. I really do not sell that much anymore on Ebay, never did, only items that are harder to sell. In plain English then, so I can understand it, what amount can I sell this year, 2024, and not get 1099nd? I think there is much confusion on this subject and I need some clarification. Confused, Bruce Bruce-- I discussed this in my earlier post and the link to the IRS announcement discussed the rules for 2023, 2024 and 2025 in greater detail. For the reporting of sales in calendar 2023, which will be accomplished by filing Form 1099K in January 2024, the rules are the old rules. In other words, forms must be sent to payees with over 200 transactions who were paid over $20,000. For the reporting of sales in calendar 2024, which will be accomplished by filing Form 1099K in January 2025, the IRS intends to use a $5,000 reporting threshold instead of the $600 threshold mandated by Congress. The announcement is silent with respect to the number of transactions that will trigger the filing requirement in 2024. With respect to the reporting of sales in calendar 2025, which be accomplished by filing form 1099K in January 2026, the IRS expects the law to be fully phased in and will enforce the statute as written. I hope this helps. Regards, Jim |
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Post by valenciajim2 on Jan 7, 2024 18:06:20 GMT -8
Because it is considered income, and the government wants its take. How many of you sell your model equipment for more than you paid for it? It is likely less. If so, your income from the sale is negative. Do we get to take this realized loss on our taxes now? If not, then the reporting rule is completely out of bounds. In a related policy push from the Regime: The Potato-in-chief's handlers want to tax unrealized gains. Do we also get to deduct unrealized losses too? The tax code is designed to enrich tax attorneys and CPAs. Unfortunately, the way the tax rules have worked since 1913 is that the gains from the sale of personal items are taxable, while the losses from such sales are not deductible. As a practical matter you frequently are unable to offset gain by losses incurred in the same year unless the transactions are integrated. With respect to the taxation of unrealized gains, that is generally unconstitutional and is not permitted under the 16th Amendment. The American Institute of Certified Public Accountants is not in favor of a wealth tax. Wealth taxes are extremely difficult and expensive to administer. No workable proposals have been introduced and I would be surprised to see a wealth tax on appreciated assets. There is a tax case that the Supreme Court heard last month. I am fairly certain that the decision in that case will be that a wealth tax is unconstitutional. With respect to tax attorneys and CPAs being enriched by the tax code, fees have increased, but the cost of dealing with the complexities has increased at a higher rate. One of the big causes of tax law complexity is that Congress sees a tax rate increase as a tax increase and a reduction of tax rates as a tax decrease. In reality, taxes are computed by multiplying income by a tax rate. When Congress needs to raise revenue, they leave the rates alone (or reduce them claiming the tax law change is a tax cut) but change the definition of income to increase the amount of taxable income. Changing the definition of income to raise revenue inevitably results in greater complexity. Blame Congress for that--not the tax professionals. The change made to the Form 1099K reporting requirements is a way for the government to raise revenue without raising the amount of tax that is legally owed by taxpayers, so Congress can say it is not a tax increase. |
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Post by lvrr325 on Jan 8, 2024 21:19:38 GMT -8
Starting to think people are just beyond dumb. Been posting things as a choice listing, buy one, two, or all road numbers. I constantly get asked if I combine shipping - outside of the fact there's no way to separately ship items purchased that way. Even after explaining in the listings all items ship together. From people with decent amounts of feedback. I had another one the other day trying to make an offer on auction listings. (eye roll .gif). The only good news is over NYE weekend I sold so many things I made a trip to the 24 hour post office lobby Friday night with eight and still had nine more on Tuesday. I have had plenty of ebay sellers refuse to combine shipping only to have things arrive together in the same box. Have also had plenty of sellers not combine shipping..and ship things..in separate boxes.. I actually have one I have to ship uncombined - it's cheaper that way. About $32 combined, but I can fit them in the USPS "shoe" box in a way they'll ship for like $16 and $10. Mostly due to the size combined and the distance, I think if they shipped closer to me it wouldn't be nearly as bad. I did have a buyer apparently on a phone unable to request a total and pay extra. He emailed and explained it, so I just refunded the shipping difference. But I mostly wanted to vent, I don't understand why you'd even think when you buy three items at once in one transaction that the seller would hit you up for three times the shipping. Two separate listings, ok I see why you'd ask. I am sure there are some folks who pack an item up before listing it, so when it sells they can just mail it. I pack once paid, because I also will sell local or at shows. Two or three in one box saves me materials and time. The new tax rules will just drive people selling their old stuff back to in person cash sales. If it's too hard to comply with IRS rules or you're too worried about being audited, you just sell for cash, hold onto it and use it for whatever. Near impossible to track. It will probably drive smaller sellers out of business entirely if they have no means to sell in person. The rest is just play the game - whatever deductions you're able to take, take. Can you deduct the value of your inventory against your liability? Maybe you have a big enough inventory to have no liability. Problem solved. |
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Post by valenciajim2 on Jan 8, 2024 22:00:58 GMT -8
"Can you deduct the value of your inventory against your liability?"
The answer is no. The Internal Revenue Code requires you to maintain an inventory and you can only offset sales proceeds with costs of goods that are actually sold.
You are right about these requirements causing people to revert to cash sales.
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Post by Baikal on Jan 9, 2024 8:40:01 GMT -8
The new tax rules will just drive people selling their old stuff back to in person cash sales. If it's too hard to comply with IRS rules or you're too worried about being audited, you just sell for cash, hold onto it and use it for whatever. Near impossible to track. It will probably drive smaller sellers out of business entirely if they have no means to sell in person. The rest is just play the game - whatever deductions you're able to take, take. Can you deduct the value of your inventory against your liability? Maybe you have a big enough inventory to have no liability. Problem solved.
The USA income tax rules are complicated on purpose. What that purpose is... is a different subject. But the burden falls hardest on the (shrinking) middle class. The very wealthy use tax attorneys and the poor file a 1040EZ or don't file at all. Speculate away.
The gov't could greatly simplify things if they wanted to. But they don't. On the contrary taxes get more complicated every year as exceptions and new rules are applied like a Jenga tower. Some state income taxes are also complicated, California for example.
If you have a small business, especially one with employees, you'll almost always need professional prep. I'm not blaming tax preppers & accountants. They don't hold the power, they don't run the system.
The fact that casual modelers even have to concern themselves with tax codes is ridiculous.
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Post by valenciajim2 on Jan 12, 2024 23:25:01 GMT -8
Equating flat tax with tax return simplicity is an illusion. Taxes are computed by applying a tax rate to taxable income. The actual tax calculation itself is usually the simple part of the tax return preparation process. The complexities arise when computing taxable income. Also, I attended a seminar a few months before the pandemic and one of the speakers' presentations discussed what it would take for a flat tax to be revenue neutral to the government. It would have to be at a 28% rate. That means everyone pays tax at a 28% rate from the first dollar of income on. Wealthy people would get a tax break, while not so wealthy people would pay more in tax. Essentially everyone would pay 28% of their income in federal income tax--a much higher rate than most Americans currently pay.
Small businesses have an extremely high tax administrative burden relative to larger businesses. That is why you are seeing business consolidation.
I prepare will about 45 tax returns this year. Most of my clients are wealthy--mid to high six figures of income, some more. Since the 2017 tax law changes, it takes me about 30% longer to prepare most of my client's tax returns. Clients generally are not willing to pay 30% more to have their tax returns prepared, so profit margins are reduced.
Before I retired from being a partner in a Big 4 accounting firm, I signed, as a paid preparer, the returns for several billionaires and many with a nine-figure net worth. We used to laugh how a first-year associate paid more in tax than these mega rich people do. Wall Street has lots of investment products that are effectively tax shelters for the mega wealthy. Wall Street has enormous political power which exacerbates the phenomenon.
As to US tax return complexity vs. that of other nations, from what I have seen income taxes are becoming more complex across the globe. Every country has its nuances. I certainly would not hold the Russian tax system out as a model for others to emulate. While I have never prepared a Russian tax return, I know professionals who have prepared Russian tax returns and they told me that the rules on how to compute taxable income are ambiguous and the Russian tax authorities do not administer the rules fairly.
As to state taxes, they are becoming increasingly complex because they adopt some, but not all of the federal changes and no two states are alike (except for those states that do not impose an income tax). I have clients who do business in multiple states and preparing their state returns takes at least as long as preparing a federal return.
My personal belief is that federal taxes are going to have to increase to deal with the deficit and the national debt. There is not enough discretionary spending to solve the fiscal problems solely with spending cuts. I would not be surprised to see a VAT in the next few years. As we have seen in Europe, as VAT taxes take hold, they also become increasingly complex. They also are extremely regressive.
Well it is getting late, and I need to rest up so I can decal a PRR box car tomorrow morning.
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Post by Baikal on Jan 13, 2024 9:40:33 GMT -8
Equating flat tax with tax return simplicity is an illusion. Taxes are computed by applying a tax rate to taxable income. The actual tax calculation itself is usually the simple part of the tax return preparation process. The complexities arise when computing taxable income. Also, I attended a seminar a few months before the pandemic and one of the speakers' presentations discussed what it would take for a flat tax to be revenue neutral to the government. It would have to be at a 28% rate. That means everyone pays tax at a 28% rate from the first dollar of income on. Wealthy people would get a tax break, while not so wealthy people would pay more in tax. Essentially everyone would pay 28% of their income in federal income tax--a much higher rate than most Americans currently pay. Small businesses have an extremely high tax administrative burden relative to larger businesses. That is why you are seeing business consolidation. I prepare will about 45 tax returns this year. Most of my clients are wealthy--mid to high six figures of income, some more. Since the 2017 tax law changes, it takes me about 30% longer to prepare most of my client's tax returns. Clients generally are not willing to pay 30% more to have their tax returns prepared, so profit margins are reduced. Before I retired from being a partner in a Big 4 accounting firm, I signed, as a paid preparer, the returns for several billionaires and many with a nine-figure net worth. We used to laugh how a first-year associate paid more in tax than these mega rich people do. Wall Street has lots of investment products that are effectively tax shelters for the mega wealthy. Wall Street has enormous political power which exacerbates the phenomenon. As to US tax return complexity vs. that of other nations, from what I have seen income taxes are becoming more complex across the globe. Every country has its nuances. I certainly would not hold the Russian tax system out as a model for others to emulate. While I have never prepared a Russian tax return, I know professionals who have prepared Russian tax returns and they told me that the rules on how to compute taxable income are ambiguous and the Russian tax authorities do not administer the rules fairly. As to state taxes, they are becoming increasingly complex because they adopt some, but not all of the federal changes and no two states are alike (except for those states that do not impose an income tax). I have clients who do business in multiple states and preparing their state returns takes at least as long as preparing a federal return. My personal belief is that federal taxes are going to have to increase to deal with the deficit and the national debt. There is not enough discretionary spending to solve the fiscal problems solely with spending cuts. I would not be surprised to see a VAT in the next few years. As we have seen in Europe, as VAT taxes take hold, they also become increasingly complex. They also are extremely regressive. Well it is getting late, and I need to rest up so I can decal a PRR box car tomorrow morning.
A huge number of gov't & non-gov't people benefit from complicated taxes, so they defend the current system and oppose anything simplier- something that the average American could do themselves.
A simplified tax structure would put many tax preppers and attornies out of business. The USA is a "service" economy now.
Complicated taxes and businisses formation rules & regs stiffle economic activity. They drive business underground, so zero taxes on that.
Around here, many sidewalk vendors are popping up, Mexican food, fruit is common. Household goods are sold from trucks that circulate the (many) low-income neighborhoods, etc. All cash businesses. At the same time restaurtants and brick y mortar retailers are fleeing for lower-tax states, or just the hell with it. More cash deals everywhere.
Most people would support a simplification of the tax system, so not likely to happen.
As always: cui bono?
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I stand by my earlier comments.
The USA income tax rules are complicated on purpose. What that purpose is... is a different subject.... The gov't could greatly simplify things if they wanted to. But they don't.
The fact that casual modelers even have to concern themselves with tax codes is ridiculous.
Do you think that a person selling $1,000 worth of models via eBay, swap meets, etc should have to file it on any tax form? I wouldn't be surprised if the costs of collecting these type of taxes (gov't) & record keeping (payer & gov't) exceeds the ecomomic benefit generated. Maybe the primary function of the tax code isn't the generation of income to run the country but something else?
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Post by valenciajim2 on Jan 13, 2024 18:38:21 GMT -8
Baikal,
I do not necessarily disagree with you; I was merely adding some commentary. I have been a tax practitioner for over a half century and I have studied tax policy extensively. I personally would prefer simpler taxes-particularly for small businesses. It is one thing when you have a large fortune 500 company with exceedingly complex business operations, but most mom and pops have pretty simple stuff. If all somebody has are W-2 wages and other income, such as interest and dividends reported on a Form 1099, the IRS should be able to take that information, prepare a pro-forma tax return, send it to the taxpayer. If the taxpayer agrees with the return, they notify the IRS and they settle up and are done. Just like getting a bill from a vendor. If there is a dispute, such as wages or interest that was reported but not received, there should be a venue to deal with it. This would be a perfect application of AI.
You said, "A simplified tax structure would put many tax preparers and attorneys out of business. The USA is a "service" economy now."
Actually, the ones who really will be in trouble are TurboTax, H&R Block etc. In other countries, the tax authorities have software that is accessed online by taxpayers to file their returns, but TurboTax has lobbied Congress to prevent that from happening. For many major law firms, practicing tax law does not generate the same profit margins as other areas of the law and they have deemphasized tax law.
You are right to an extent that tax complexity stifles business activity for small businesses, but as I tried to point out, tax complexity is a political problem. Congress is afraid to raise tax rates, so when they need additional revenue, they mess around with the definition of taxable income, or enhance enforcement through ridiculous measures like the Form 1099-K.
The tax code is used for many purposes besides raising revenue. Many of the complexities are the result of the government trying to subsidize a certain activity or industry or discourage other activities. Other complexities in tax law are the result of intensive lobbying. More lobbying money is spent on taxes than on anything else. Lobbying for tax benefits always results in complexity. Politicians need lobbyists because it is expensive to get elected, so there you go.
Consider two provisions that were enacted to help businesses out in the pandemic--Paycheck Protection Loans and the Employee Retention Credit. Both are incredibly complicated and are plagued by massive amounts of fraud. The reason why this happened is because Congress wanted to narrowly target who qualified for these benefits and had to create a complex set of rules to do so. The rules are very difficult and expensive to administer.
The Form 1099-K reporting is an attempt to raise tax collections without raising taxes. Politicians don't want to be accused of raising taxes when additional revenue is needed, so they make the rules more complicated to hide the fact that there is a hidden tax increase. What makes it worse is that the mechanics of this reporting was poorly conceived by Congress and poorly implemented by the IRS.
In terms of sidewalk vendors, etc. They are still much more prevalent in other countries, but we are catching up. The tax gap (the difference between what taxpayers are legally supposed to pay and the amount that is actually collected) in the US is proportionately smaller than in most other countries.
Anyway, I really appreciate the civility of this conversation. You have raised some excellent points.
Now back to those PRR box cars before my tax season overwhelms me.
Jim
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