E-Bay and the IRS

ModernCrapNut · May 11, 2007 11:32AM

I looks as if it's time for everyone to cover their butts with both hands. Big Brother wants to watch.

Link

Zoins · May 11, 2007 11:37AM

Well ... income from eBay is still income. A lot of other income records are already electronically submitted to the IRS.

Coxe · May 11, 2007 11:39AM

I don't care that the IRS knows about how much I sell as it will match my records of reported income. I don't think they have any need whatsoever with respect to what I sold outside very broad categorical information. They certainly don't need to know what I buy. Do I trust eBay with my SSN? No. I do believe PayPal has enough identifying information on sellers and most who do significant business on eBay are hooked up with PayPal. If the gov't wants to chase down cheats, they can do so with a bit more than instantaneous effort. They'd need to know whom they are targeting rather than use data filters to locate potential targets.

flaminio · May 11, 2007 11:41AM

<< Well ... income from eBay is still income. >>

Not if it's hobby income...

cmerlo1 · May 11, 2007 11:41AM

Thanks for this...we're developing an auction site right now, and this is good info.

--Christian

MORGANHUNTER2 · May 11, 2007 11:46AM

Anything I do on Ebay is a garage sale- I bought it with my hard earned $$ of which I have already paid an exobitant amount of tax on, and I'm going to sell it on ebay and could care less what the IRS wants- they can screw themselves- and they will not get any info from me- and if ebay gives it to them- then they have violated there own standards and lawyers will jump on this like flies on fly paper in a cattle ranch.

What if I lived in Canada and sold to only folks in the US- is the IRS coming after me for income not reported to them?

We need to take back our country and we better do it quick before they change the name. Think about it folks not to long ago we hated a country called U.S.S.R. - and we are looking like it each and every day.

Rarity · May 11, 2007 11:49AM

<< 

<< Well ... income from eBay is still income. >>

Not if it's hobby income... >>

Tax rate for hobby profit is between 30-38% if my memory is correct

21Walker · May 11, 2007 11:52AM

OT to this thread, I think we should have a class action suit against Haliburton for rapeing the government and on a side note for the government for rapeing and squandering the taxpayers money. I don't mind paying taxes........BUT...........Rick

Wolf359 · May 11, 2007 11:54AM

<< 

<< Well ... income from eBay is still income. >>

Not if it's hobby income... >>

Income is income, actually. If it's a hobby you aren't allowed to deduct expenses, but still must claim it.

ldhair · May 11, 2007 12:20PM

<< 

<< 

<< Well ... income from eBay is still income. >>

Not if it's hobby income... >>

Income is income, actually. If it's a hobby you aren't allowed to deduct expenses, but still must claim it. >>

You can't deduct expenses?

7over8 · May 11, 2007 12:21PM

Income declared in excess of your cost basis,

flaminio · May 11, 2007 12:22PM

<< 

<< 

<< Well ... income from eBay is still income. >>

Not if it's hobby income... >>

Income is income, actually. If it's a hobby you aren't allowed to deduct expenses, but still must claim it. >>

And I'll do that ... as soon as I make any money off coins.

Usually I end up on the losing side of the transaction

...

ziggy29 · May 11, 2007 1:25PM

<< Tax rate for hobby profit is between 30-38% if my memory is correct >>

I believe the tax rate for "hobby income" is simply your marginal income tax rate. What sucks is that you pay the full tax rate on profits but can't deduct losses from it.

Connecticoin · May 11, 2007 1:29PM

I never understand why people get bent out of shape over this. If you make income on Ebay, Teletrade, Overstock, stubhub, or at the race track it is income and is taxable, period. If you properly report and document your income, you have nothing to worry about.

Coxe · May 11, 2007 9:18PM

That's how I feel too. Pay the taxes. If you don't agree with the taxes, lobby your representatives.

My problem isn't with paying the fair share or even having the gov't know what the gross sales were that you will be reporting income from, even though I don't believe that is appropriate. (The W-2 argument doesn't really play because sale are not equal to income.) My problem is with two things: (1) exactly how much the gov't wants to know and retain and (2) eBay maintaining SSNs.

TwoSides2aCoin · May 11, 2007 9:39PM

People are not unfair.
Taxes are !
I know..., I pay them

But what is even more unfair is having to pay $1.40 plus shipping and handling for a Sacagawea Dollar from the mint.
I know..., I pay them, too

sweetwilliet · May 11, 2007 9:47PM

The problem for me is maintaining records/not having records from many years ago. For the last year or so, I have maintained good records of all my cost basis of my purchases, but what about the coins I have sold from years ago I bought raw and then got slabbed and sold them? I know the answer, but it is a little unsettling that I am in this for the hobby and have not made a net profit any year ever (I don't really care to, it is my hoobby) but can't PROVE it.

I buy more coins than I sell, only selling to fund the next purchase.

dieabolical · May 11, 2007 9:56PM

That's enough to motivate me to consolidate my collection this year.
How many people have records for every coin purchase to determine cost basis?
With eBay near a 52-week high, maybe it's a good time to short it.

jgrinz · May 11, 2007 9:58PM

Its going to get really ugly if they try to persue this.
What will be the defining line in calling oneself a 'business' or NOT

I actually sell Different items on EBAY -

SOME are auto parts ( my actual business ) which I declare on my Schedule C as Misc
SOME are consignments - which I declare on my SChedule C as Misc
SOME are coins which I do not declare, as in my mind, this is NOT a business.

Any and ALL revenue generated is for REinvestment and goes back into the collection to side step costs.
There will be NO income reported if they push this.

Then they will try to call it inventory ...

If I am not mistaken INVENTORY is not taxed until sold and is itemised as an asset in the meantime is this correct ???

Ring in tax guys

sweetwilliet · May 11, 2007 10:07PM

Its going to get really ugly if they try to persue this.
What will be the defining line in calling oneself a 'business' or NOT

One of the defining qualities that makes something a business and not a hobby (see the hobby act or something like on the IRS website) is that it is conducted like a business. I find it amusing that for your hobby, you may now be required to keep cost basis calculations to determine profit, which guess what, would make your hobby run like a business and the qualify as a business.

Oh, ignorance is bliss. Ha ha!!

BAJJERFAN · May 11, 2007 10:12PM

<< SOME are consignments - which I declare on my SChedule C as Misc >>

I'd be wary of taking consignments as YOU might be stuck with the tax liability on someone else's coin since the sale of record would be in YOUR name and not THEIRS.

If you sell a coin at a profit you are still liable for the tax on the profit whether you invest the proceeds in another coin or not.
"
I'd guess a lot of this might be hopefully a "from now on" thing as opposed to retroactive. If you can't prove your cost in a coin then your basis will be assumed to be zero or face value and you will be taxed on the entire proceeds less expenses.

jgrinz · May 11, 2007 10:17PM

<< I find it amusing that for your hobby, you may now be required to keep cost basis calculations to determine profit, which guess what, would make your hobby run like a business and the qualify as a business.
Oh, ignorance is bliss. Ha ha!! >>

Probably true as I have to track expenses on ANY investment similar to stocks and bonds.
I guess we will just have to look forward to the YEARS of losses for a while if implemented ...

Do not call me ignorant - SIR - As I have done nothing to insult you !

jgrinz · May 11, 2007 10:22PM

<< 

<< SOME are consignments - which I declare on my SChedule C as Misc >>

I'd be wary of taking consignments as YOU might be stuck with the tax liability on someone else's coin since the sale of record would be in YOUR name and not THEIRS.

If you sell a coin at a profit you are still liable for the tax on the profit whether you invest the proceeds in another coin or not.
"
I'd guess a lot of this might be hopefully a "from now on" thing as opposed to retroactive. If you can't prove your cost in a coin then your basis will be assumed to be zero or face value and you will be taxed on the entire proceeds less expenses. >>

GOOD points ... Howver on the sales of coins/parts is itemized as labor as I do not take any of the 'per item' profits
my consignors get. I write them a check for the FULL proceeds then bill them via my invoice head the fee for services rendered.
( Labor Charge )

Yes - RETRO would suck

... However It would eaier for me to CONVERT as I am already doing schedule C's so its just a minor inconvienece
and BEING a business already WE HAVE VERY MANY DEDUCTIONS ... Al l ot NOT being used as this time.

Thanks for the INFORMATIVE response ..

sweetwilliet · May 11, 2007 10:41PM

<< I find it amusing that for your hobby, you may now be required to keep cost basis calculations to determine profit, which guess what, would make your hobby run like a business and the qualify as a business.
Oh, ignorance is bliss. Ha ha!! >>

Probably true as I have to track expenses on ANY investment similar to stocks and bonds.
I guess we will just have to look forward to the YEARS of losses for a while if implemented ...

Do not call me ignorant - SIR - As I have done nothing to insult you !

I wasn't calling anyone ignorant, just stating that the situation above can be avoided by ignoring your cost basis. Of course, ignorance really isn't bliss, just a saying.

fishcooker · May 11, 2007 10:54PM

Only problem I see is that the $5000 minimum is too high. If somebody profits $1000, they have plenty of money for $250 income tax.

crito · May 11, 2007 11:50PM

Only problem I see is ebay/paypal fees then become the same as a broker's commission and knowing how they gouge buyers/sellers the IRS would probably have to issue retroactive refunds.

Wolf359 · May 12, 2007 12:13AM

<< 

<< 

<< 

<< Well ... income from eBay is still income. >>

Not if it's hobby income... >>

Income is income, actually. If it's a hobby you aren't allowed to deduct expenses, but still must claim it. >>

You can't deduct expenses? >>

Not for hobbies.

If you file Schedule C (business) and lose money 3 out of 5 years, the IRS may call it a hobby because business is supposed to be for profit - and refuse to allow you to deduct
expenses.

roadrunner · May 12, 2007 12:31AM

The IRS could audit you for a hobby activity. If you cannot show a reasonable cost basis, they can assume it for you or even state zero, and expect taxes on that difference. Ignorance is not bliss.
One should have a documented cost basis for anything substantial.

Reinvestment may work in very specific cases but as a rule trading or putting profits back into something are still taxable events. The IRS lists a "like-kind exchange" criteria where one can avoid taxes on trades. But it is very detailed with many limitations. I posted one coin lawyer's interpretation of it (Coin World's own Armand Vartian).
Do a search for it on the CoinForum...you'll be amazed on what little if anything qualifies. Amazing. Be ready to pay those back taxes on all your trades over the years. Armand's article, with some emphasis added, will be in the next post. If you ever need to refer to it search for "like-kind exchange" in the title.

Do track your hobby losses as they are an offset to your profits but limited to $3,000 per year. You can carry forward excess coin losses from past years to offset current gains. For instance a $10,000 coin loss could be carried foward for several years until it's all used up.

While the IRS has claimed that one needs 3 of the last 5 years to be profitable to claim a business, one could have detailed records to show otherwise. What if you took massive losses after being out of the business for a few years (say after 1990 when coin prices fell by 70%?). You could show no net profit as a small part time dealer for several years while cleaning up that mess. Document. Document.
The same scenario might apply in 2012 after the next major bust.

If you are showing your "hobby" as an income generator (investor), I would imagine things like air fare or hotels to get to major conventions and auctions to buy would be deductable.

roadrunner

roadrunner · May 12, 2007 12:33AM

Lawyer Armen R. Vartian did a great piece on "like-kind exchanges" in Coin World (9/4/2006). Since this topic has been discussed many times here this article was well worth keeping. There are numerous restrictions assuming Vartian's opinions are correct. In summary:

limited circumstances only:
arms length's parties (not relatives for example or your business buddy)
related parties must each hold the property for at least 2 years!!!
held purely for investment purposes (not a hobby) - profit motive!!
collectors who act as dealers for tax purposes to deduct expenses can not use like-kind-exchange
dealers trading their stock is not allowed
item must be of "like-kind" (no bullion items since that's cash)
findings against some trades in different metals have been disallowed - no guarantee that a trade of a large cent for a silver
dollar grouping would be allowed for example.
must file form 8824 for the exchange (see code 1031 exchanges) to trigger the IRS - that's always fun to red flag you for an audit.
barter exchanges (such as coins for residences does not fly)

The 2 year hold for both parties, profit motive, investment coins put back for several years, eliminates most every transaction from consideration. I can't believe the 2 year rule for both parties. You basically have to monitor another investor's time frame to legitimize your own holding period!!!! But that's what Vartian is saying.

Good luck with this one if what Vartian says is correct. Having to go through this many hoops essentially destroys the concept of an exchange. In other words, uncle doesn't want this being done.

Russ · May 12, 2007 1:32AM

<< I'd be wary of taking consignments as YOU might be stuck with the tax liability on someone else's coin since the sale of record would be in YOUR name and not THEIRS. >>

This is not an issue, since the only profit is the commission charged for the service and that is reported on Schedule C.

<< If you file Schedule C (business) and lose money 3 out of 5 years, the IRS may call it a hobby because business is supposed to be for profit - and refuse to allow you to deduct
expenses. >>

Only if you have W-2 income.

Russ, NCNE

E-Bay and the IRS

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