Heads up; New 1099 Rules Starting in 2022 (per my interpretation)

DelawareDoons

The stimulus bill that passed the senate and is pending passage in the house includes a modification to the laws around 1099's. It revises the threshold from $20,000 AND 200 transactions to just $600. The text reads, to me, that this new threshold begins in 2022.

The earlier bill that passed the house included this provision as well, so it is very likely to be in the final bill.

Yikes.

Source; https://www.congress.gov/bill/117th-congress/house-bill/1319/text?r=1&s=3

Mdcoincollector2003

Everyone love pork barreling

BAJJERFAN

Seems like an inducement to use no fee PayPal. So if you "garage sale" $10K worth of household junk and accept PP for that you're on the hook for a potential $10K in income?

DelawareDoons

@BAJJERFAN said:
Seems like an inducement to use no fee PayPal. So if you "garage sale" $10K worth of household junk and accept PP for that you're on the hook for a potential $10K in income?

If you took it as goods and services payment, yes.

This is terrible for Paypal. Will push people to Zelle, Venmo (owned by pp), and Cashapp, which all state in their rules that they are not for goods and services.

jmlanzaf

@DelawareDoons said:

@BAJJERFAN said:
Seems like an inducement to use no fee PayPal. So if you "garage sale" $10K worth of household junk and accept PP for that you're on the hook for a potential $10K in income?

If you took it as goods and services payment, yes.

This is terrible for Paypal. Will push people to Zelle, Venmo (owned by pp), and Cashapp, which all state in their rules that they are not for goods and services.

It is against the current terms and services to use it for goods & services payments as it is. If people continue to abuse the privilege, PayPal will be forced to clamp down.

Garage sales of $10k is NOT income of $10k as you could write off the cost of goods. You don't pay taxes on gross receipts, only net receipts.

DelawareDoons

@jmlanzaf said:

@DelawareDoons said:

@BAJJERFAN said:
Seems like an inducement to use no fee PayPal. So if you "garage sale" $10K worth of household junk and accept PP for that you're on the hook for a potential $10K in income?

If you took it as goods and services payment, yes.

This is terrible for Paypal. Will push people to Zelle, Venmo (owned by pp), and Cashapp, which all state in their rules that they are not for goods and services.

It is against the current terms and services to use it for goods & services payments as it is. If people continue to abuse the privilege, PayPal will be forced to clamp down.

Garage sales of $10k is NOT income of $10k as you could write off the cost of goods. You don't pay taxes on gross receipts, only net receipts.

Yeah, you got the receipt for your dishes from 15 years ago?

jmlanzaf

@DelawareDoons said:

@jmlanzaf said:

@DelawareDoons said:

@BAJJERFAN said:
Seems like an inducement to use no fee PayPal. So if you "garage sale" $10K worth of household junk and accept PP for that you're on the hook for a potential $10K in income?

If you took it as goods and services payment, yes.

This is terrible for Paypal. Will push people to Zelle, Venmo (owned by pp), and Cashapp, which all state in their rules that they are not for goods and services.

It is against the current terms and services to use it for goods & services payments as it is. If people continue to abuse the privilege, PayPal will be forced to clamp down.

Garage sales of $10k is NOT income of $10k as you could write off the cost of goods. You don't pay taxes on gross receipts, only net receipts.

Yeah, you got the receipt for your dishes from 15 years ago?

The IRS is pretty lenient about "garage sales". But, if you use credit cards for all your purchases, you have a receipt for your dishes from 15 years ago.

jmlanzaf

The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

DelawareDoons

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

I paid cash for coins ages ago, got them graded through friends since I don't submit enough to justify a membership myself, and occasionally sell them off as I upgrade my personal collection. I have no evidence of cost basis for that stuff.

All this does is hurt people who dabble and small timers. It restricts the flow of goods and hurts trade.

jmlanzaf

@DelawareDoons said:

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

I paid cash for coins ages ago, got them graded through friends since I don't submit enough to justify a membership myself, and occasionally sell them off as I upgrade my personal collection. I have no evidence of cost basis for that stuff.

All this does is hurt people who dabble and small timers. It restricts the flow of goods and hurts trade.

Again, they are not really trying to jam you up - although it could happen. But there are a LOT of people out there running businesses on eBay that aren't treating it like a business. Those tax cheats are the people they are trying to go after. I know people that have spent years buying at auction and selling on eBay that have neither collected 1 cent of sales tax nor reported 1 cent of income.

Edited to add: And why should the government care about restricting black market trade?

BAJJERFAN

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

My comment was simply a situation that if you take fee paid PP it's reportable after a certain amount. If you can't prove your basis for whatever you sold coins or old lawn mower, etc. then your basis is assumed to be $0

jmlanzaf

@BAJJERFAN said:

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

My comment was simply a situation that if you take fee paid PP it's reportable after a certain amount. If you can't prove your basis for whatever you sold coins or old lawn mower, etc. then your basis is assumed to be $0

Yes and no. If you supply no basis, they will assume it is zero. But you could declare a basis, with or without receipts. If audited, you can likely justify it. They are pretty reasonable, if you've ever sat down with them.

The first year that PayPal reported 1099s to the Feds, I filed my return using the NET income from PayPal. I'd always done it that way for simplicity. So, of course, the IRS caught it and sent me a bill based on a zero basis for the difference, as you suggest. I called them, explained the problem. They were VERY reasonable and just asked for a letter of explanation. They then allowed my numbers and actually sent me a 64 cent refund. [LOL. Probably cost them $80 to cut the 64 cent check!]

DelawareDoons

@jmlanzaf said:

@BAJJERFAN said:

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

My comment was simply a situation that if you take fee paid PP it's reportable after a certain amount. If you can't prove your basis for whatever you sold coins or old lawn mower, etc. then your basis is assumed to be $0

Yes and no. If you supply no basis, they will assume it is zero. But you could declare a basis, with or without receipts. If audited, you can likely justify it. They are pretty reasonable, if you've ever sat down with them.

The first year that PayPal reported 1099s to the Feds, I filed my return using the NET income from PayPal. I'd always done it that way for simplicity. So, of course, the IRS caught it and sent me a bill based on a zero basis for the difference, as you suggest. I called them, explained the problem. They were VERY reasonable and just asked for a letter of explanation. They then allowed my numbers and actually sent me a 64 cent refund. [LOL. Probably cost them $80 to cut the 64 cent check!]

That's great for you, but using that method for me would result in something like negative 15,000 in income. I don't think that's gonna fly.

PQueue

The requirement for issuing 1099-C (Miscellaneous Income) has been $600 for as long as I remember. It sounds like the instructions for the Payment Settlement Entities who are required to issue 1099-K's for Third Party Network Transactions is just being aligned.

1099-C's cover:
Rents.
Prizes and awards.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
Payments to an attorney.
Any fishing boat proceeds.
Many filer's receiving 1099-C's generate some of their revenue through 3P networks these days.

Nic

I've gotten 1099's for years, for winning payouts of $600 or more, in sporting clays tournaments. Just clamping down on those 3rd party under the radar as @PQueue states?

jmlanzaf

@PQueue said:
The requirement for issuing 1099-C (Miscellaneous Income) has been $600 for as long as I remember. It sounds like the instructions for the Payment Settlement Entities who are required to issue 1099-K's for Third Party Network Transactions is just being aligned.

1099-C's cover:
Rents.
Prizes and awards.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
Payments to an attorney.
Any fishing boat proceeds.
Many filer's receiving 1099-C's generate some of their revenue through 3P networks these days.

Actually, I think some states had been requiring this of PayPal for a number of years.

@DelawareDoons said:

@jmlanzaf said:

@BAJJERFAN said:

@jmlanzaf said:
The IRS isn't trying to get a piece of garage sales. They are trying to stop tax cheats. I actually support that and I hope the sales tax people do the same thing for all the coin show tax cheats. It will create a more level playing field for the people who aren't cheating.

My comment was simply a situation that if you take fee paid PP it's reportable after a certain amount. If you can't prove your basis for whatever you sold coins or old lawn mower, etc. then your basis is assumed to be $0

Yes and no. If you supply no basis, they will assume it is zero. But you could declare a basis, with or without receipts. If audited, you can likely justify it. They are pretty reasonable, if you've ever sat down with them.

The first year that PayPal reported 1099s to the Feds, I filed my return using the NET income from PayPal. I'd always done it that way for siYmplicity. So, of course, the IRS caught it and sent me a bill based on a zero basis for the difference, as you suggest. I called them, explained the problem. They were VERY reasonable and just asked for a letter of explanation. They then allowed my numbers and actually sent me a 64 cent refund. [LOL. Probably cost them $80 to cut the 64 cent check!]

That's great for you, but using that method for me would result in something like negative 15,000 in income. I don't think that's gonna fly.

I wouldn't recommend declaring -$15,000, of course. LOL. But you can declare zero as a hobbyist (or garage saler) not a business.

jmlanzaf

@Nic said:
I've gotten 1099's for years, for winning payouts of $600 or more, in sporting clays tournaments. Just clamping down on those 3rd party under the radar as @PQueue states?

@PQueue said:
The requirement for issuing 1099-C (Miscellaneous Income) has been $600 for as long as I remember. It sounds like the instructions for the Payment Settlement Entities who are required to issue 1099-K's for Third Party Network Transactions is just being aligned.

1099-C's cover:
Rents.
Prizes and awards.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
Payments to an attorney.
Any fishing boat proceeds.
Many filer's receiving 1099-C's generate some of their revenue through 3P networks these days.

Shhhh....it's a conspiracy!

Congratulations on the tournament wins!

yspsales

It pays to keep good records.

Even hobby related expenses.

Been going thru my 2019 and 2020 purchases.

OPA

My understanding is , that this has nothing to do with the $20k & 200 parameter, currently in place. The $600 1099-C threshold has been in place for many years.

Does it cover cc rewards of $600 or more?

derryb

@DelawareDoons said:

All this does is hurt people who dabble and small timers. It restricts the flow of goods and hurts trade.

Is there not a section in the tax code that exempts a "hobby?"

patrickahearnesq

@derryb said:

@DelawareDoons said:

All this does is hurt people who dabble and small timers. It restricts the flow of goods and hurts trade.

Is there not a section in the tax code that exempts a "hobby?"

Hobby deductions and exemptions were removed a few years back. It's best to just form an entity at this point to take the proper deductions and claiming expenses.

derryb

This reduction in threshold was predicted here on the forum when the 1099's came to life. Thresholds mean nothing to the honest taxpayer. Thresholds do not change the requirement to report income, they only assist the IRS is making sure taxable income does in fact get reported. If all taxpayers were honest the IRS would not need 1099s.

1099s simply require a third party to report income that the person receiving the income might choose to illegally not report. They keep both honest and dishonest people honest.

derryb

@OPA said:
My understanding is , that this has nothing to do with the $20k & 200 parameter, currently in place. The $600 1099-C threshold has been in place for many years.

I believe the 1099 C is issued (by one of the parties) for transactions between two parties, while the one in the OP is for third party processors such as paypal and ebay.

Does it cover cc rewards of $600 or more?

Or ebay bucks?

patrickahearnesq

That is honestly why I am shocked it won't begin until after 2021. At least they are giving people time to prepare. They have the full capability to make it start immediately and just have those companies issue 1099s at the end of this taxable year.

amwldcoin

Dang... if they start going after ebay bucks that means all the coupon clippers will have to keep up with all the savings they accumulated from using coupons!

@derryb said:

@OPA said:
My understanding is , that this has nothing to do with the $20k & 200 parameter, currently in place. The $600 1099-C threshold has been in place for many years.

I believe the 1099 C is issued (by one of the parties) for transactions between two parties, while the one in the OP is for third party processors such as paypal and ebay.

Does it cover cc rewards of $600 or more?

Or ebay bucks?

LanceNewmanOCC

just a ttt for an important reminder to those to start keeping receipts/records whom previously did not.