Sell on ebay? The $20,000 IRS reporting threshold is now been lowered to $600
tincup
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Not sure of all of the details... but ran across the following; just an heads up on what may be coming. Previously, If you were below $20,000 sales on ebay, you did not receive a 1099k form for reporting to the IRS. But now appears that may be changing to $600, from a clause added into the Coronavirus stimulus bill:
https://zerohedge.com/markets/freelancers-punished-new-irs-rule-covid-stimulus
"A few hundred pages into the latest $1.9 trillion Covid relief law, the “American Rescue Plan Act of 2021,” you’ll find Section 9674. It says that a “third party settlement organization” does not have to report to the Internal Revenue Service (IRS) any payments to contract workers under $600.
These third parties include Uber, Airbnb, Etsy, eBay, Freelancer, and other platforms which facilitate payments to gig workers. The problem is that this little amendment lowers the reporting threshold from $20,000 to $600. Previously, a gig worker could earn up to $20,000 on these platforms without the IRS being informed of their income.
What this means:
From this rule change the IRS expects to collect an additional $1 billion annually, presumably from the poorest gig workers who previously earned under $20,000 per year. These low earners previously flew under the radar.
But now they could be met with surprise bills from the tax man when it comes time to file. And as many of these contractors are living paycheck to paycheck, they may incur additional IRS penalties if they are unable to pay what the IRS says they owe.
Of course, the same politicians who snuck this into the bill are the ones who declared over and over that their tax policies would only affect millionaires and the ultra wealthy. But now, one of the first things they do is shake down the lowest tax bracket.
We hope these gig workers enjoy their stimulus checks. They are soon going to learn that nothing is free when it comes to the government. There are always strings attached."
Comments
And this is NOT intended to be a political thread. Only being posted since many here sell their coins and currency on ebay, and this is a look ahead on what may be on it's way.
If it helps looks like it does not start till 2022
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There's already discussion of this on one of the threads. The threshold was really always $600 but "marketplaces" or "3rd parties" had the higher $20,000. BUT, several states were already requiring $600 1099s.
The only people who should care are tax cheats. That $20k maximum wasn't $20k tax free, it was just $20k without a 1099 issued. The income was always reportable.
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I presume "under the radar" means able to cheat on their taxes without getting caught?
All comments reflect the opinion of the author, even when irrefutably accurate.
ebay sellers are not contract workers are they?
it's great to see such relief for Americans.
no issue here, I've been "compliant" since inception of the auto reporting.
Actually may be in effect when bill is enacted: From the bill itself:
"(c) Effective date.—
(1) IN GENERAL.—The amendment made by subsection (a) shall apply to returns for calendar years beginning after December 31, 2021.
(2) CLARIFICATION.—The amendment made by subsection _(b) shall apply to transactions after the date of the enactment of this Act. _"
There are people who post here who don't appear to have a problem with cheating eBay, PayPal and the post office. Do they draw the line at cheating the tax man? Who knows?
That's not how the law reads. It's "3rd party settlement organizations"
MODIFICATION OF EXCEPTIONS FOR REPORTING OF THIRD PARTY NETWORK TRANSACTIONS.
(a) In General.—Section 6050W(e) of the Internal Revenue Code of 1986 is amended to read as follows:
“(e) De Minimis Exception For Third Party Settlement Organizations.—A third party settlement organization shall not be required to report any information under subsection (a) with respect to third party network transactions of any participating payee if the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions does not exceed $600.”.
(b) Clarification That Reporting Is Not Required On Transactions Which Are Not For Goods Or Services.—Section 6050W(c)(3) of such Code is amended by inserting “described in subsection (d)(3)(A)(iii)” after “any transaction”.
The definition of a "third party settlement organization" is from:
https://www.w9manager.com/faqs/what-is-a-third-party-settlement-organization/
A third-party settlement organization is the central organization that has the contractual obligation to make payments to participating payees (generally, a merchant or business) in a third party payment network.
Characteristics of a third-party payment network include:
The existence of a central organization with whom a substantial number of providers of goods and services (who are unrelated to the central organization) have established accounts
an agreement between the central organization and the providers to settle transactions between the providers and purchasers
the establishment of standards and mechanisms for settling such transactions, and
the guarantee of payment in settlement of such transactions.
The most common example of a third-party settlement organization is an online auction-payment facilitator, which operates as only an intermediary between buyer and seller by transferring funds between accounts in settlement of an auction/purchase.
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That is probably true. But there are also those who.... just plain don't realize the obligation.
deleted due to duplicate listing...
I know I'll get flamed - what else is new - but as someone who pays income taxes and collects sales taxes, I actually favor them cracking down on things like this. It puts me at a competitive disadvantage.
NY State taxes non-bullion coin sales and bullion under $1000. Yet when I go to a NY State coin show, there is somewhere around 20% of dealers that are actually collecting the tax. It puts me at an 8% disadvantage. And if those same people are cheating the IRS, it puts me at more like a 30% disadvantage.
All comments reflect the opinion of the author, even when irrefutably accurate.
That is true. But I think there are more people who just know they can get away with it.
All comments reflect the opinion of the author, even when irrefutably accurate.
My apologies if there was a previous thread regarding the change... I did not see it.
Someone might, but it won't be me. I spent a good part of the day getting stuff together for an appointment with my tax guy later this week.
No need to apologize. I don't think it was the main topic of the thread but it popped up in an eBay thread.
All comments reflect the opinion of the author, even when irrefutably accurate.
Yeah, I spent more time than I care to recall trying to sort through the ridiculous PayPal spreadsheet. I don't think I'll miss them.
All comments reflect the opinion of the author, even when irrefutably accurate.
That was fun, wasn't it? I'm sure they must have had a reason (at least, I hope they did), but it doesn't help when they change the "Type" description for the same kind of transactions part way through the year. Or have more than one "Type" for the same sort of thing.
so PAYPAL will be doing the same, even if it is from BST here?
They need to figure a way to tax 6 year olds running lemonade stands.
No need to apologize. I don't think it was the main topic of the thread but it popped up in an eBay thread.> @davewesen said:
Yes. Paypal is also a 3rd party settlement org. That's why they issue 1099s now
All comments reflect the opinion of the author, even when irrefutably accurate.
That's silly. The cost of collection would far outweigh the receipts.
All comments reflect the opinion of the author, even when irrefutably accurate.
All income is required to be reported to the IRS by the earner. Reason the IRS has to depend on third parties to report income is because they can't count on taxpayers to voluntarily comply with tax law.
It means "low earners" will no longer be able to cheat on their taxes.
There is no surprise if a taxpayer pays his estimated quarterly taxes on income that has not had taxes withheld. The IRS expects their cut at least quarterly. For those earning paychecks the IRS gets it weekly or bi-weekly.
Governments can print currency. Only the people can print faith in it — and they’re running low on ink.
it’s low earners that won’t be able to cheat on their taxes meanwhile the millionaires can continue their tax loopholes. It’s kinda like what my wife says when I drive 5 or 10 miles an hour over the speed limit and someone goes racing by. She tells me I’m the guy the cop can catch. Easier to catch those $600 guys not worth hiring a lawyer than the millionaires who can tie you up in court forever.
And yet millionaires pay the most taxes and get audited most frequently.
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You don’t know that someone told you that. I’m certain as a percentage of real income they do just fine.
From the IRS website:
Higher-income taxpayers face greater chance of audit
Despite common misperceptions about IRS examination rates, the reality is that the likelihood of an audit significantly increases as income grows.
https://www.irs.gov/about-irs/irs-audit-rates-significantly-increase-as-income-rises
The reasoning behind the $20k was that the people that fall into that category are not people running retail shops, paying employees or such. A break was given because these lower earner folks have problems with record keeping as they are just trying to stay afloat. So, sink the boat is Biden's plan it seems. What happened to we will not tax the lower and middle classes?
I pay my taxes and a couple of years ago actually had to file and pay FICA but no tax (I'm retired and my income is usually not taxable). So, these folks get to pay that too?
What the heck is this world coming to?
bob
I would be surprised to hear that the government ever had a policy of excusing people from paying taxes on income below a certain level.
Surprise!
Governments can print currency. Only the people can print faith in it — and they’re running low on ink.
Well I've read where it's been said"We are all in this together". So I guess it is true.
The only time they seem to pay less is when their income is largely due to long term capital gains. This is for two reasons: lower long-term capital gains rates and no FICA/Medicare taxes on investment earnings. However, this "loophole" does not apply to the rich, it applies to everyone. If you are retired with only SS and 401k income, you also have a much lower tax bill than a working stiff in the SAME tax bracket.
And don't forget that almost half of all wage earners pay zero income tax.
All comments reflect the opinion of the author, even when irrefutably accurate.
https://www.debt.org/tax/brackets/
https://www.cbo.gov/publication/56575
All comments reflect the opinion of the author, even when irrefutably accurate.
https://www.ntu.org/foundation/tax-page/who-pays-income-taxes
All comments reflect the opinion of the author, even when irrefutably accurate.
Actually this overlooks self-employment taxes which start at $0.
It is true that if you have income below a certain level, there are no income taxes due although that isn't so much because the income is exempted as income but that the tax rate is zero.
All comments reflect the opinion of the author, even when irrefutably accurate.
I think it's pretty amazing we went from $20k and 200 transactions in 1986 money (about $48k today) to $600 today. Real nice FU to all the small time sellers from the government.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
How is this a FU...the required tax hasn't changed...just the required reporting...if small time sellers were all paying their required taxes nothing is different...
Just file and work in all your deductions and you may be left with owing next to nothing.
I know a lot of low income people who don't even file which is stupid. Filing right is to the advantage of citizens. The weird thing about self employment is that often the IRS has little in the way of records unless income is tied to ss#s. Nothing to fear if you file right.
It would appear another poster has indicated previously that he is confused by the difference between not owing taxes and not being expected to pay taxes owed.
Cool, when you sell your old gaming console, peripherals, some video games, and an old video card on eBay, have fun tracking down your receipts to show your cost basis so you don't pay taxes on the revenues generated by that activity instead of the profits (which should be nonexistent). 99% of the population never reports that stuff.
It's just creating more paperwork for the IRS to deal with, thus drawing more attention off high income payers, and focusing it on lower incomes.
What about the impact on businesses like GreatCollections? Heritage? They now have to 1099 anybody who sells $600 or more of coins through them.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
I was 10 years old when I started collecting. I was buying ASE's and junk silver with lawn mowing money and snow shoveling money. Today, 30 years later I have acumulated a decent amount of silver and coins, I have no cost basis on any of it, as my 10 year old self never kept records of my transactions. 20 years from now if I decide to sell, how does that get reported to the IRS? I always assumed I would lose money on most transactions, but I was buying when silver was $6 oz.
There was a lot of discussion on this in the Congressional Finance Committees. The IRS took the position that to monitor and audit such accounts was a waste of money below that threshold. Ebay pushed for no reporting but the IRS and Committee said no and ended up at the $20k/200 transactions. These thresholds were decided that anyone selling this numbers were doing "business" and selling on ebay for income purposes.
All income is taxable. This applies to reporting to the IRS via the 1099 forms from Ebay et al.
bob
I imagine if you wrote up an estimated purchase date and claimed a cost basis of $6 an ounce, they'd probably accept that. It's when your cost basis is obviously too high that they get all excited (smell blood in the water).
Makes sense.
Which is why I said I'd be surprised to hear that the government ever had a policy of excusing people from paying taxes due if their income was below a certain level.
Traditionally, the IRS has allowed some of my clients to claim a fair market value in the year it was acquired. I have had clients successfully use Red Book and Greysheets if necessary. Personally, I don't get a receipt at coin shows where I buy and sell alot, so I have no idea/nor remember half the time. I go home and input the red book or PCGS retail price into my spreadsheet for tracking cost basis/profit and call it a day.
The IRS is very reasonable about "garage sale" income. It won't be hard for them to tell the difference between someone who sells $10,000 per year in gaming equipment and someone who makes a one time $100 sale.
All comments reflect the opinion of the author, even when irrefutably accurate.
If you're getting 1099'ed you need to show receipts or its income. Plain and simple.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
Not in my experience. The IRS listens to reason. They are not trying to jam people up for having online garage sales.
But if you want receipts, this is just another good reason to always use a credit card.
All comments reflect the opinion of the author, even when irrefutably accurate.
I always report and never worry about 1099"s as I report it all.
I use a CPA, makes life much easier.
I have already submitted my books to my CPA so my taxes should be done soon.
The real stand out this year was the mileage on my vehicle, I dove a total of only 2000 miles last year
, got to love the home office 
I would just do your best preferably with an accountant to help. Probably well into the six figures even seven figures is where the three letter men (and women) and their computers may send out a letter requesting more information. A lot of buying and selling is like day trading, lots of gross income not a lot of net, especially in this shrinking business. Have you seen the latest statistics on audit and other cases from the IRS? They are going after major cases, making an example out of others; it is more the state tax agencies that can play hardball especially if they get complaints with possibly other criminal tie ins.