@JimTyler said:
Got my first one also. I’ve decided to just put it where turbo tax tells me and pay tax on all of it since digging up records is more work than I want to do. That should keep them happy right ? It’s a one year problem I’m done selling 💩 on ebay.
Most likely you could use schedule 1 line 8 with the reason given as 2020 PayPal 1099-K but you will be responsible for the gross amount. To take off selling expenses maybe schedule D and/or form 8849. Does the 1099-K break out any eBay or PP fees?
The 1099-K is what PayPal paid the recipient. The PayPal fees aren't included you need to get eBay fees from your invoices.
I would think you could make a Schedule for schedule 1 Line 8 as follows:
Make sure you have documentation to support your numbers.
In order to account for expenses you would need to use Sched D and 8949 and report the result as capital gains instead of other income. Choice is up to the filer. Since it is hobby money one might also have to use the 28% gain worksheet. JMO.
So do you keep track of individual coin sales on form 8949? You can get 14 entries on a page for 8949 so if you sell 500 coins you'd need about 36 pages. The 8949 makes a nice spread sheet in ts own right. This year I'll have maybe 20 short term completed stock trades.
As you may know depending on long or short term and some other variables different 8949s have to be filed and as you point out there may be a lot of them. However, I file electronically with H&R Block software and only have to enter 4 or 5 pieces of info in their user friendly questionaire for each transaction. And before I do that I have grouped all the sales for a single date into one "various" purchase date entry. Note that a "various" entry has to be for items held either short term or long term, not both, because each goes onto its own 8949.
I wasn't intending to post that; thought I had saved some of that as a draft. I will be lumping my stock trades on the 8949 as various stocks acquired on various dates with the sale date being the date of the last sale for the year.
While you can lump your buy dates together as long as they are all short term or all long term holds I don't believe you are allowed to lump together different sell dates. The software will accept 'various S' or 'various L' for date acquired, but requires a specific date for 'date sold.'
That's how my accountant did it last year when he transferred the trades from the 1099-B over to the 8949.
Then it's very likely the software lumps them together after requiring individual sell dates. Software likely set up this way to prevent taxpayer from making a mistake with all the different 8949 sheet possibilities.
As long as they were short term trades it shouldn't matter. The trade/sale dates are on the 1099-B so there's that. Not sure if it was his software or his input, but that's how it was done. If an agent reviews it they should be able to figure it out, but you never know.
That's why I prefer the software when it comes to capital gains. Just make five entries for each sale and the software determines which of the versions of the 8949 to enter the transaction. Software also takes care of reporting the collectible rate on the Schedule D.
@derryb Hi! I am curious about your use of H&R Block and how easy you say it is. In 2021, I started downsizing and selling off some collectibles I have had for many years. I got a 1099-K from PayPal and am having an agonizing time trying to figure out how to file our taxes using H&R Block. In fact, I have been trying to get help with their software since March 5, to no avail. Please, can you be just a tiny bit more specific on how you enter your numbers into the program? I would be ever so grateful!
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
Are you saying you pay Social Security Tax on your Capital Gain Sales? On what Captial Gains sales I do have my account has no problem deducting the expenses created by selling them....ebay fees, shipping, etc.
@derryb said:
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
I've never had an accountant recommend social security taxes be paid on collectibles buying and selling.
I'd just use the software recommended here or elsewhere as there are many types of free or inexpensive tax filing software for efilers and be sure to work in all your expenses. If you are not showing a profit over several years they may disallow expenses connected to a business. And I'd avoid the "free" library based tax preparers who seem to be intent on your paying more than you owe.
@amwldcoin said:
Are you saying you pay Social Security Tax on your Capital Gain Sales? On what Captial Gains sales I do have my account has no problem deducting the expenses created by selling them....ebay fees, shipping, etc.
@derryb said:
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
No, sorry if not clear, i said the Schedule C generated self employment tax.
@logger7 said:
I've never had an accountant recommend social security taxes be paid on collectibles buying and selling.
I'd just use the software recommended here or elsewhere as there are many types of free or inexpensive tax filing software for efilers and be sure to work in all your expenses. If you are not showing a profit over several years they may disallow expenses connected to a business. And I'd avoid the "free" library based tax preparers who seem to be intent on your paying more than you owe.
You don't pay self employment tax on collectibles if you report their sale on Schedule D. If you sell collectibles and are paid in a manner that generates a 1099K for your income (paypal, ebay) and you chose to report the sales on Schedule D (which is perfectly legal if you consider them investments) be prepared for a later tax bill on the 1099K income because the IRS did tax review program did not see income reported on Schedule C. I eventually won the battle but in order to not have to go through it again I simply now report all sales that generate a 1099K on Schedule C.
@amwldcoin said:
Are you saying you pay Social Security Tax on your Capital Gain Sales? On what Captial Gains sales I do have my account has no problem deducting the expenses created by selling them....ebay fees, shipping, etc.
@derryb said:
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
If you are a coin dealer - aren't you? - then is it appropriate to treat income from sales as "capital gains"?
If you are a coin dealer - aren't you? - then is it appropriate to treat income from sales as "capital gains"?
Yes, appropriate for coin dealers. I am not one. I invest in precious metals in coin and bar form and many of my transactions occur on ebay where a 1099K gets generated. I buy and sell PMs as investments. You got a problem with those who invest in precious metals reporting their investment income on Schedule D? The IRS doesn't. They do have a problem (I assume in their software that reviews electronically filed returns) with reporting 1099K income on anything buy Schedule C. Like I said, I straitened them out but I'm sure it will always be a case by case basis and in my opinion not worth the hassle.
If you are a coin dealer - aren't you? - then is it appropriate to treat income from sales as "capital gains"?
Yes, appropriate for coin dealers. I am not one. I invest in precious metals in coin and bar form and many of my transactions occur on ebay where a 1099K gets generated. I buy and sell PMs as investments. You got a problem with those who invest in precious metals reporting their investment income on Schedule D? The IRS doesn't. They do have a problem (I assume in their software that reviews electronically filed returns) with reporting 1099K income on anything buy Schedule C. Like I said, I straitened them out but I'm sure it will always be a case by case basis and in my opinion not worth the hassle.
I wasn't responding to you, I was responding to @amwldcoin who, I thought, was buying and selling coins as a business. It makes a huge difference in the tax liability.
Appolgies. With the Schedule C I find the added tax write offs compensate for part of the added self employment tax and the C is much, much easier than the D, even with tax software.
Believe me, I know what you are saying! I'm paying tax on a lot of coins that I have sold from my collection that technically qualify for Capital Gains. I'm selling my shell collection which is sizable. I've sold over 100K so far and to avoid the hassles am reporting them with a cost basis of 0.
I'm in for a major windfall if the IRS ever decides to make go through and document as I can probably claw back quite a few thousand. I just don't want to deal with it!
@amwldcoin said:
Are you saying you pay Social Security Tax on your Capital Gain Sales? On what Captial Gains sales I do have my account has no problem deducting the expenses created by selling them....ebay fees, shipping, etc.
@derryb said:
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
If you are a coin dealer - aren't you? - then is it appropriate to treat income from sales as "capital gains"?
@amwldcoin said:
I'm selling my shell collection which is sizable. I've sold over 100K so far and to avoid the hassles am reporting them with a cost basis of 0.
If it were me I would assign a reasonable cost basis even without documentation. "The dog ate my purchase records."
@derryb Hi again. Sigh. The reason I was trying to avoid Schedule C is that what I read online is that the IRS would not consider me a business (rightly so!), and I would get in trouble for not reporting my sales of collectibles on Schedule D. The problem I have is that H&R Block software, requires you to use Schedule C if you enter the 1099-K into the program. It in fact will not let you proceed with your taxes, stopping you in your tracks during the error review. Even the folks at H&R Block do not know how to fix this problem. Now I am wondering if it is an error of the IRS guidance! This seems like a gotcha situation all around. If I report it using SChedule D, then I get to spend a year battling the IRS. If I report it on Schedule C, then they can come after me since I do not fit their criteria for a business, and am selling collectibles which they have a whole separate category for. The irony of it is the 1099-K includes $5 for a rebate I got, and a sale where the buyer backed out and I had to refund her money. Insanity!
@daniel4ever said: @derryb Hi again. Sigh. The reason I was trying to avoid Schedule C is that what I read online is that the IRS would not consider me a business (rightly so!), and I would get in trouble for not reporting my sales of collectibles on Schedule D.
"A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit."
Use the Schedule C. If you're selling on-line, when it asks for business description use "Internet retail sales," for business category select "Non-store retailer" and for principle business code select "454110."
@derryb Thanks so much. After almost a month of agonizing over this and trying to figure out what to do, I feel like I can finally finish my taxes this weekend. You are very kind!
Comments
In order to account for expenses you would need to use Sched D and 8949 and report the result as capital gains instead of other income. Choice is up to the filer. Since it is hobby money one might also have to use the 28% gain worksheet. JMO.
As long as they were short term trades it shouldn't matter. The trade/sale dates are on the 1099-B so there's that. Not sure if it was his software or his input, but that's how it was done. If an agent reviews it they should be able to figure it out, but you never know.
That's why I prefer the software when it comes to capital gains. Just make five entries for each sale and the software determines which of the versions of the 8949 to enter the transaction. Software also takes care of reporting the collectible rate on the Schedule D.
I stopped selling on ebay.
Box of 20
@derryb Hi! I am curious about your use of H&R Block and how easy you say it is. In 2021, I started downsizing and selling off some collectibles I have had for many years. I got a 1099-K from PayPal and am having an agonizing time trying to figure out how to file our taxes using H&R Block. In fact, I have been trying to get help with their software since March 5, to no avail. Please, can you be just a tiny bit more specific on how you enter your numbers into the program? I would be ever so grateful!
Love H&R block software. Best to treat sales income that is reported to you (and the IRS) on a 1099K as business sales using Schedule C. I was treating the sales as capital investments (my bullion) and reported the sales on Scheduled D. Got to be a hassle each year with IRS because selling my capital assets on ebay involved receiving a 1099K from paypal (and now from ebay). For some reason the IRS sees 1099K income as business sales income only and I had to fight with them year explaining that I did in fact report the 1099K income in my tax return, but on the Sched. D. Each year after a lot of back and forth hassle they would agree with me that I did in fact report the 1099K income on Schedule D. Appears they expect it to be reported on Sched. C. While I won the battle with them each year it is just simpler for me to report it on the Sched. C and avoid the trouble of waiting on the phone for hours each year to explain things to the IRS.
If using the H&R Software report the 1099K income in the "Your own business" section of the software and the software will put it on the Sched. C. Do not report it as income in the "sales of collectibles and other investment income" section of the HR software, that will put the income on Sched. D, thus my problems with the IRS discussed above. The disadvantage of the Sched. C is it calculates a "self employment tax" (social security) that is added to what the software determines are your taxes owed for the year. The advantage is that you are able to claim more sales expenses than with the Sched. D. Remember you don't actually fill forms with the software - you answer questions and enter data into the software. The software selects and completes the correct forms based on your input.
If you are selling a lot throughout the year the IRS expects you to estimate and pay quarterly taxes on income. Otherwise you may get hit with a late penalty for waiting until the end of the year to pay them what you owe. This is why taxes are taken out of your paycheck each week and not paid all at once at the end of the year.
Are you saying you pay Social Security Tax on your Capital Gain Sales? On what Captial Gains sales I do have my account has no problem deducting the expenses created by selling them....ebay fees, shipping, etc.
I've never had an accountant recommend social security taxes be paid on collectibles buying and selling.
I'd just use the software recommended here or elsewhere as there are many types of free or inexpensive tax filing software for efilers and be sure to work in all your expenses. If you are not showing a profit over several years they may disallow expenses connected to a business. And I'd avoid the "free" library based tax preparers who seem to be intent on your paying more than you owe.
No, sorry if not clear, i said the Schedule C generated self employment tax.
You don't pay self employment tax on collectibles if you report their sale on Schedule D. If you sell collectibles and are paid in a manner that generates a 1099K for your income (paypal, ebay) and you chose to report the sales on Schedule D (which is perfectly legal if you consider them investments) be prepared for a later tax bill on the 1099K income because the IRS did tax review program did not see income reported on Schedule C. I eventually won the battle but in order to not have to go through it again I simply now report all sales that generate a 1099K on Schedule C.
If you are a coin dealer - aren't you? - then is it appropriate to treat income from sales as "capital gains"?
Yes, appropriate for coin dealers. I am not one. I invest in precious metals in coin and bar form and many of my transactions occur on ebay where a 1099K gets generated. I buy and sell PMs as investments. You got a problem with those who invest in precious metals reporting their investment income on Schedule D? The IRS doesn't. They do have a problem (I assume in their software that reviews electronically filed returns) with reporting 1099K income on anything buy Schedule C. Like I said, I straitened them out but I'm sure it will always be a case by case basis and in my opinion not worth the hassle.
I wasn't responding to you, I was responding to @amwldcoin who, I thought, was buying and selling coins as a business. It makes a huge difference in the tax liability.
Appolgies. With the Schedule C I find the added tax write offs compensate for part of the added self employment tax and the C is much, much easier than the D, even with tax software.
Believe me, I know what you are saying! I'm paying tax on a lot of coins that I have sold from my collection that technically qualify for Capital Gains. I'm selling my shell collection which is sizable. I've sold over 100K so far and to avoid the hassles am reporting them with a cost basis of 0.
I'm in for a major windfall if the IRS ever decides to make go through and document as I can probably claw back quite a few thousand. I just don't want to deal with it!
If it were me I would assign a reasonable cost basis even without documentation. "The dog ate my purchase records."
@derryb Hi again. Sigh. The reason I was trying to avoid Schedule C is that what I read online is that the IRS would not consider me a business (rightly so!), and I would get in trouble for not reporting my sales of collectibles on Schedule D. The problem I have is that H&R Block software, requires you to use Schedule C if you enter the 1099-K into the program. It in fact will not let you proceed with your taxes, stopping you in your tracks during the error review. Even the folks at H&R Block do not know how to fix this problem. Now I am wondering if it is an error of the IRS guidance! This seems like a gotcha situation all around. If I report it using SChedule D, then I get to spend a year battling the IRS. If I report it on Schedule C, then they can come after me since I do not fit their criteria for a business, and am selling collectibles which they have a whole separate category for. The irony of it is the 1099-K includes $5 for a rebate I got, and a sale where the buyer backed out and I had to refund her money. Insanity!
From the IRS website:
"A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit."
Use the Schedule C. If you're selling on-line, when it asks for business description use "Internet retail sales," for business category select "Non-store retailer" and for principle business code select "454110."
@derryb Thanks so much. After almost a month of agonizing over this and trying to figure out what to do, I feel like I can finally finish my taxes this weekend. You are very kind!