Paypal 1099-k

[monkeymcgee]

Originally Posted by balxoriolesx

not sure how tracking your purchases, sales, supplies bought, shipping costs, fee costs, etc. Does not help you if you have hobby income and need to file that on taxes. If you read through the other comments in this thread, people are literally telling others to track everything. And that is what you are doing here.

Anyways, what i did is not against the forum rules.

You cannot deduct hobby expenses anymore

[BALxORIOLESx]

Originally Posted by monkeymcgee

you cannot deduct hobby expenses anymore

If you are receiving a 1099-K then it is more than a hobby. It is likely a business.

[monkeymcgee]

Originally Posted by BALxORIOLESx

If you are receiving a 1099-K then it is more than a hobby. It is likely a business.

And around and around we go...I'm done

[Cpdjoe77]

I’m sure this has been asked and answered so my apologies. Quick scenario, I buy a box for $200 would I subtract that then from the total sales of cards pulled from that box? And second part, if total sales come in under $200 would that have any bearing on the overall picture?


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[BALxORIOLESx]

Originally Posted by monkeymcgee

And around and around we go...I'm done

[rcmb3220]

How about an example?

Say you bought a card for $100, paid $20 to grade it, sold it for $1000, paid $130 in fees to eBay and paid $5 to ship it.

That means you owe taxes on how much if you treat this as a hobby?

I forgot to add: please don’t answer if you are just guessing

[mjohnatgt]

Originally Posted by Cpdjoe77

I’m sure this has been asked and answered so my apologies. Quick scenario, I buy a box for $200 would I subtract that then from the total sales of cards pulled from that box? And second part, if total sales come in under $200 would that have any bearing on the overall picture?

Are you a hobbyist or a business? That is the first question you need to answer. If you're a hobbyist, no deductions. If you're a business, deductions presuming you do it correctly. Now do you split the $200 across the 450 cards in the box evenly? Or do you assign it to the first $200 in sales? I do not know. As long as you do it CONSISTENTLY and write it down so it can be explained in the case of an audit, you are probably okay.

[mjohnatgt]

Originally Posted by rcmb3220

How about an example?

Say you bought a card for $100, paid $20 to grade it, sold it for $1000, paid $130 in fees to eBay and paid $5 to ship it.

That means you owe taxes on how much if you treat this as a hobby?

$1000.

If your tax advisor tells you to treat it as an investment vehicle, you may be able to say your cost was $120, and pay capital gains tax on $880 (or even less depending on their rules).

BLUF (Bottom line up front): Many of the people in this thread, if single and they earn less than $30K adding up their hobby income and their job income, will owe next to nothing in taxes. It's the people who are already making $100K at work and then another $100K in "hobby" income in 2020 because of the violent ramp in prices upward; those are the ones that are going to have to pay 25-30% of their hobby income in taxes unless they were treating their income like a business.

So people are really only looking at their own personal aspect, then they try to give that same advice to others who are at a completely different place in job, earnings, and hobby income.

[discodanman45]

Originally Posted by mjohnatgt

$1000.

If your tax advisor tells you to treat it as an investment vehicle, you may be able to say your cost was $120, and pay capital gains tax on $880 (or even less depending on their rules).

BLUF (Bottom line up front): Many of the people in this thread, if single and they earn less than $30K adding up their hobby income and their job income, will owe next to nothing in taxes. It's the people who are already making $100K at work and then another $100K in "hobby" income in 2020 because of the violent ramp in prices upward; those are the ones that are going to have to pay 25-30% of their hobby income in taxes unless they were treating their income like a business.

So people are really only looking at their own personal aspect, then they try to give that same advice to others who are at a completely different place in job, earnings, and hobby income.

This is exactly how I read the tax law and I believe this to be correct.

The reason a lot of people here are arguing and have incorrect information is the tax law for hobbies is nonsense right now. Tax laws should be simple and easy for people to report. Hobby tax should be to simply calculate your profit and then pay tax on it. No deductions on a hobby is stupid, especially with the 1099-K forms being given out to people for $600 in sales in some states. You could say your hobby is non-profit, but then if you have profits that is another red flag for the IRS.

I report to the IRS my net proceeds every year and pay tax on that in the hobby section. Am I doing this correctly? According to the law I am not. However I have $3000 in sales on eBay and most of that I took a loss on from "online garage sale." Without a 1099-K form they won't bother coming after me. An audit would be far too expensive for them to try to get a few hundred dollars out of me. However, I refuse to pay taxes only on the sold price of a card that I bought on eBay and paid sales tax on already. If I sell a card for $400 and paid $350, I put down $50 for my hobby income. This is not correct, but I am not paying tax on $400 and loosing money on the transaction.

[Stech36]

Everyone who is new to this. Read what is written here and use them as questions for your CPA.

[tribefan26]

Originally Posted by mjohnatgt

$1000.

If your tax advisor tells you to treat it as an investment vehicle, you may be able to say your cost was $120, and pay capital gains tax on $880 (or even less depending on their rules).

BLUF (Bottom line up front): Many of the people in this thread, if single and they earn less than $30K adding up their hobby income and their job income, will owe next to nothing in taxes. It's the people who are already making $100K at work and then another $100K in "hobby" income in 2020 because of the violent ramp in prices upward; those are the ones that are going to have to pay 25-30% of their hobby income in taxes unless they were treating their income like a business.

So people are really only looking at their own personal aspect, then they try to give that same advice to others who are at a completely different place in job, earnings, and hobby income.

I think the taxable portion, if not reported on schedule C or D, would be $900. The taxable portion of the sale is the gain, not the revenue. If he can clearly connect the $100 purchase to the $1,000 sale, then only the gain is taxable. But there is little opportunity to deduct the other costs.

If schedule C, then the $1,000 is revenue and the remainder are expenses of business.

If schedule D, then the cost of sales would be net of fees and shipping, and the basis would include grading.

[JoeAdam]

I didn't know the 1099k would break down income by month. I simply went through and updated my spreadsheet to those numbers. Gonna save me a ton.

[hatchd]

Originally Posted by mjohnatgt

$1000.

If your tax advisor tells you to treat it as an investment vehicle, you may be able to say your cost was $120, and pay capital gains tax on $880 (or even less depending on their rules).

BLUF (Bottom line up front): Many of the people in this thread, if single and they earn less than $30K adding up their hobby income and their job income, will owe next to nothing in taxes. It's the people who are already making $100K at work and then another $100K in "hobby" income in 2020 because of the violent ramp in prices upward; those are the ones that are going to have to pay 25-30% of their hobby income in taxes unless they were treating their income like a business.

So people are really only looking at their own personal aspect, then they try to give that same advice to others who are at a completely different place in job, earnings, and hobby income.

Pro tip - you can always deduct the cost of what you sold whether or not you're claiming the sale as hobby or business income.


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[tribefan26]

Originally Posted by discodanman45

This is exactly how I read the tax law and I believe this to be correct.

The reason a lot of people here are arguing and have incorrect information is the tax law for hobbies is nonsense right now. Tax laws should be simple and easy for people to report. Hobby tax should be to simply calculate your profit and then pay tax on it. No deductions on a hobby is stupid, especially with the 1099-K forms being given out to people for $600 in sales in some states. You could say your hobby is non-profit, but then if you have profits that is another red flag for the IRS.

I report to the IRS my net proceeds every year and pay tax on that in the hobby section. Am I doing this correctly? According to the law I am not. However I have $3000 in sales on eBay and most of that I took a loss on from "online garage sale." Without a 1099-K form they won't bother coming after me. An audit would be far too expensive for them to try to get a few hundred dollars out of me. However, I refuse to pay taxes only on the sold price of a card that I bought on eBay and paid sales tax on already. If I sell a card for $400 and paid $350, I put down $50 for my hobby income. This is not correct, but I am not paying tax on $400 and loosing money on the transaction.

Nowhere that I see does it say that you are wrong. The gain on sale is taxable, whether business or not, not the revenue. The other issue is that this does not allow you to offset gains with cards that you sell at a loss. If you report on schedule C you can include COGS on cards that you lose money on to save tax.

[discodanman45]

Originally Posted by tribefan26

I think the taxable portion, if not reported on schedule C or D, would be $900. The taxable portion of the sale is the gain, not the revenue. If he can clearly connect the $100 purchase to the $1,000 sale, then only the gain is taxable. But there is little opportunity to deduct the other costs.

If schedule C, then the $1,000 is revenue and the remainder are expenses of business.

If schedule D, then the cost of sales would be net of fees and shipping, and the basis would include grading.

Schedule D IMO is the way to go. Schedule D is used for collectibles and cards are now an investment strategy. Many people are not hobbyists, but they consider themselves sportscard investors. Hobbies are fun to do, but once you see a card as an investment, schedule D is your answer.

Until the Hobby tax laws hopefully come back in 2025 I would ask people to talk to their accountants as either being a business and filing a schedule C or using cards as an investment and using a schedule D. These are the two top options. If you sell on eBay and get a 1099-K form, in my opinion that is no longer a hobby and you are a business. If you have to offer support to a customer, that is no longer a hobby.

[blitzaceod]

Originally Posted by tribefan26

Nowhere that I see does it say that you are wrong. The gain on sale is taxable, whether business or not, not the revenue. The other issue is that this does not allow you to offset gains with cards that you sell at a loss. If you report on schedule C you can include COGS on cards that you lose money on to save tax.

I was wondering about this. Could I (in theory) reduce my taxable by selling a bunch prospect busts for $5 each that I bought for $100 each and take that as a loss? (If I could prove I paid $100 each)

[rngrdanny22]

Originally Posted by blitzaceod

I was wondering about this. Could I (in theory) reduce my taxable by selling a bunch prospect busts for $5 each that I bought for $100 each and take that as a loss? (If I could prove I paid $100 each)

If you file a Schedule C, that would be baked into COGS.

[towerymt]

Originally Posted by JoeAdam

I didn't know the 1099k would break down income by month. I simply went through and updated my spreadsheet to those numbers. Gonna save me a ton.

I saw that when I first opened it, but didn't think about doing it month by month until you mentioned it.

[BALxORIOLESx]

Originally Posted by discodanman45

Schedule D IMO is the way to go. Schedule D is used for collectibles and cards are now an investment strategy. Many people are not hobbyists, but they consider themselves sportscard investors. Hobbies are fun to do, but once you see a card as an investment, schedule D is your answer.

Until the Hobby tax laws hopefully come back in 2025 I would ask people to talk to their accountants as either being a business and filing a schedule C or using cards as an investment and using a schedule D. These are the two top options. If you sell on eBay and get a 1099-K form, in my opinion that is no longer a hobby and you are a business. If you have to offer support to a customer, that is no longer a hobby.

BINGO


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[chezball]

Eight pages for a 1099k thread WTF.

[tribefan26]

Originally Posted by blitzaceod

I was wondering about this. Could I (in theory) reduce my taxable by selling a bunch prospect busts for $5 each that I bought for $100 each and take that as a loss? (If I could prove I paid $100 each)

You have that option if you report on Schedule C as a business or Schedule D as a capital gain/loss. I don’t see a way to use it reporting as a hobbyist.

[blitzaceod]

Originally Posted by tribefan26

You have that option if you report on Schedule C as a business or Schedule D as a capital gain/loss. I don’t see a way to use it reporting as a hobbyist.

Can't you still deduct COGS from hobby? I know you can't report a loss but wouldn't it be able to reduce the overall tax owed?

[dev6015]

At the risk of vastly oversimplifying this...can you just do total costs minus total proceeds from sales? Basically, I spent $1,000 last year on cards and grading and made $2,500 net of eBay fees and shipping. Ergo, my profits are $1,500. The issue there I guess is that I could still hold inventory that looks like its zero cost basis without offsetting purchases in future years.

I think the answer is no and I'm reading that you have to have a P&L (with cost basis) for every single sale for your CPA so s/he can take it from there.

[mjohnatgt]

Can't you still deduct COGS from hobby? I know you can't report a loss but wouldn't it be able to reduce the overall tax owed?

Some people are claiming you can, but have not shown any proof in terms of IRS articles or code snippets. Just hoping you believe them, for some reason.

[blitzaceod]

Originally Posted by mjohnatgt

Some people are claiming you can, but have not shown any proof in terms of IRS articles or code snippets. Just hoping you believe them, for some reason.

I am seeing it as a yes from here: https://www.taxwarriors.com/blog/did...e%20limitation.

Granted not an IRS site and it is 2 years old so still need a bit more research

To me it boils down to it is easiest to go hobby if you can document COGS and subtract it.