eBay's Trying to Fix What Aint Broken Again!

[Doug Rose]

If Uncle Sam wants to come after me he knows where I'm at.

Careful.

I stopped selling on eBay five years ago when Paypal sent 1099s to MA and two other states, including the Feds. You certainly don't want to mess with Uncle Sam....Doug

[TelePlay]

I stopped selling on eBay five years ago when Paypal sent 1099s to MA and two other states, including the Feds.

All sites:

=====
If you're a US seller, and reach more than $600 USD in gross sales in 2022, Etsy will provide you with a 1099-K form you can use when filing your 2022 taxes.

Receiving a 1099-K form doesn't necessarily mean you'll owe taxes on your Etsy sales. The 1099-K form we issue doesn't calculate your profit or indicate any tax liabilities you may have—it simply gives the total gross sales processed by Etsy Payments in 2022.

=====

As part of changes to U.S. law, beginning in January 2022, Poshmark is required to provide any seller with $600 or more in gross sales on our platform during the 2022 calendar year with a Form 1099-K.

=====

Starting January 1, 2022, we'll ask you for your tax information, such as your Social Security Number (SSN) or Individual Tax Identification Number (ITIN), if you haven't provided it to us already. This helps us meet our obligations to the IRS and ensures that you'll be able to continue using your account and access features to accept payments for sales on Marketplace.

The following summarizes the tax information we'll ask from you:

Last 4 digits of your SSN or full ITIN
Full 9 digits of your SSN or ITIN once your sales with checkout on Marketplace reach $499
We need to collect your tax information to comply with applicable laws and regulations. This information will be verified by our payment processor, PayPal. Your tax information won't be visible or shared on Facebook.

=====

. . . you're probably in one of two groups: you sell used goods on sites like eBay and Craigslist every once in a while for extra spending cash OR you sell self-made goods every day as a side job to boost your income.

In both cases, a portion of the money you earn needs to be declared for income tax, especially if you're in the latter group---but even one-off sales may count. Not reporting sales could lead to an IRS audit for tax fraud.

[markosjal]

I keep NOTHING as records, the money I make either goes to cover what SS doesn't or back into phones to resale and maybe one ever so often for myself. If Uncle Sam wants to come after me he knows where I'm at.

This is my attitude as well Now being terminally ill and living off SSI and a couple years away from Social Security retirement. The SSI I get is not enough and My social security may even be LESS when I change to that! If they want to come after me doe even several thousands of dollars in sales annually,  I DARE them . I need that money to live on because what  get off of SSI disability alone would not sustain me . One person at one time actually had the nerve to ask how my expenses exceeded my income, DUH!

[RDPipes]

This is my attitude as well Now being terminally ill and living off SSI and a couple years away from Social Security retirement. The SSI I get is not enough and My social security may even be LESS when I change to that! If they want to come after me doe even several thousands of dollars in sales annually,  I DARE them . I need that money to live on because what  get off of SSI disability alone would not sustain me . One person at one time actually had the nerve to ask how my expenses exceeded my income, DUH!

Yep, it can be pretty tough living on SS and without God's grace I'd be probably living in the back of my truck.

[countryman]

The issue with this comes when you are selling personal items that you no longer want, but I suppose if you can demonstrate that you sold them for less than you bought them for there shouldn't be an issue.

In real life, often no valid records will be available to prove the purchase price. The question is, was it a personal item or an item you owned as marketable good?
In the first case a sale will be tax free in most jurisdictions.
In the second case, you will be required to keep records and pay taxes on the profit. Remember that the cost you had will deduct from the tax debt.
On the other hand, losses you make with a hobby won't impress the tax collector much 
In fact, collectors can get in a disputable position when they buy and sell items of the same type on a regular basis.

[TelePlay]

In real life, often no valid records will be available to prove the purchase price. The question is, was it a personal item or an item you owned as marketable good?

I don't see a distinction. If extra money is added to all normal and usual sources of income in ones bank accounts, the source of that extra money has to be reported somewhere on a tax return and I've never seen a box to check that declared some extra money as personal or from a business/hobby, such as flipping phones for big bucks. All extra income is normally reported on a Schedule C with or without a 1099 being issued - the 1099 just makes the reporting a requirement instead of depending on the honesty of the tax filer.

[RDPipes]

And to think this started out as a run of the mill complaint about eBay, LOL!
 I'm outa here!

[compubit]

One thing I have is that I do most (99%) buying and selling on eBay, and I never delete an email message - so I do have the record of how much I paid for each item, whenever I get around to start listing/selling stuff.  Of course, I have to find the original purchase... That being said, with fewer and fewer IRS agents, the chances seem to get lower...

[markosjal]

Here is the real rub.......

I have to go ship a modem I sold on eBay for $70.

I bought it for                     $ 9.99 (plus I paid WA Sales tax on this item)
Drive to the Post office Lets say   $ 3.00
Shipping (free to buyer).           $17.05
Ebay Fees                           $ 9.96
Packaging                           $ 2.50 (Plus Sales Tax)


Cost                                $42.50

Profit                              $27.50

Interesting to note: that if I can not document something to the IRS like a cost, I can not count it. That is a GAME , especially considering that the $27.50 profit barely covers my time if I were an hourly employee. It is impossible to calculate REAL cost of finding an object say at an estate sale , even the part of the monthly auto related costs that should apply to that item. Sure the IRS makes "rules" for all that but its CRAP and they know it. It is designed for Us to lose and them to win

My Time

1 Hr to find this item
1 Hr test this item
1 Hr to pack and ship this item (was shipped alone no other items that day)

At one point does selling on eBay become more of a "hobby" or time killer than a profit center? That is LESS than $10.00 per hour and the IRS wants their part? THAT IS NUTS in this day and age where Low wage fast food jobs start at $17.00 per hour.

This is precisely the reason. I generally avoid listing items for under about $70 unless I already have them on hand.

[TelePlay]

For what it's worth (and for those who both understand and care about this very rigorous new law put into place by the current administration in one of the freebee money laws passed last year), this just showed up on my push notification site:

IRS Issues Another Tax Warning to Americans Who Made More Than $600 Online

Independent contractors who made money via online services will have their income reported to the Internal Revenue Service (IRS) starting in 2023, the agency said in a second warning issued Tuesday.

People who made money via eBay, Etsy, Poshmark, Uber, and other digital services will face the new scrutiny and rules. It applies to anyone who made more than $600 via those platforms or via Venmo, Cash App, Zelle, PayPal, or similar platforms in return for goods and services.

"This is the second in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A 'Get Ready' page outlines steps taxpayers can take now to make tax filing easier in 2023," the IRS said in a news release Tuesday.

It noted that before 2022, tax form 1099-K was "issued for third-party networks transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000." But the Biden administration-backed "American Rescue Plan Act of 2021 lowered the reporting threshold for third party networks that process payments for those doing business," according to the agency.

"Now a single transaction exceeding $600 can require the third party platform to issue a 1099-K. Money received through third party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable," it said.

Business owners were already required to report such income to the IRS. The new rule under the American Rescue Plan, passed last year, means that the agency will be able to figure out what businesses earned via cash apps or other digital services—regardless of what is reported via 1099-K forms.

And the new rule only impacts payments received for goods and services. For example, those who use Venmo or PayPal to send a family member a gift, to pay a roommate's rent, or to pay back a friend will be excluded from the new IRS rules.

"This doesn't include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips," PayPal said.

Digital services like PayPal and the others will be mandated to send users 1099-K forms if they met the $600 IRS threshold to report income.

"For the 2022 tax year, you should consider the amounts shown on your Form 1099-K when calculating gross receipts for your income tax return," PayPal also said on its website, adding that "the IRS will be able to cross-reference both our report and yours."

The full notification article has been attached as a PDF file.

Unless a person has kept the purchase receipt for EVERYTHING" they have ever purchased in their lives, selling any of these personal (and hobby) items will result in the full sale price (less shipping, fees and taxes) being considered profit (income).

They didn't put in a grandfather clause (exempting items purchased more than X years ago) so everything sold will need paper justification of cost to be subtracted from the sale price and if the justification is not there, it is 100% taxable, no cost of goods sold.

Of course, losses can be be subtracted from profits to end up with a net profit (or loss) for tax reporting purposes starting with 2022 filings in 2023.

[poplar1]

2 new updates added to seller page on eBay:

1) You can now go to the sold page, click on the order number, and if you have already purchased the eBay shipping label, it will show the net amount you received -- after deducting eBay fees, sales tax, and shipping cost for that *one* order.

2) Starting today, you can see total sales for all of 2022 and 2021. However, when you click on the underlined total for the year, the net sales vs. total sales are way off! Even if you had a zero basis (i.e., you obtained all the items for free), this grossly exaggerates the net amount.

[poplar1]

Of course, losses can be be subtracted from profits to end up with a net profit (or loss) for tax reporting purposes starting with 2022 filings in 2023.

Income for a hobby is taxable. Hobby expenses and losses are no longer deductible (2018-2025). If you don't make a profit in at least 3 years out of 5, then the IRS considers it a hobby.

For online sales, is the sales tax rate that of the buyer's location or the seller's? In any case, if we buy things from eBay or antique malls with the intention to fix then resell, then sales tax is being collected twice. Perhaps we should apply for a sales tax exemption on items for resale.

[poplar1]

They take a percentage of your sale and any listing fees, I think close to 10% nowadays.
I always list in Collectables or Antiques and they never charge a listing fee for those categories.

12.9% of the item sold + 12.9% of the sales tax + 12.9% of the shipping + $0.30 = about 20% of what the item only sold for.

[TelePlay]

In my state that is called a Sales and Use Permit obtained by opening an account with my State Agency. The permit can be used to purchase items and materials tax free if the materials are to be used with the purpose of selling a product including those materials as part of the cost of goods sold for hopefully a profit - something that does not always happen in an auction type sale.

A copy of the tax exempt permit must be given to the seller to justify they did not collect sales tax on their Sales and Use business sales tax filing.

When buying, eBay, for example, adds sales tax using my state/county/municipality tax rate and sends that tax collected to my state tax agency - the line on my tax return for online purchases will be under $5 this year, it was near $200 last year.

When buying I don't know how one would keep eBay from collecting a sales tax from me when if I still had my Sales and Use Tax permit since half my eBay purchases would be tax exempt, for resale, and the other half for personal use and taxable.

When I had my reseller permit, I had to file a separate tax return to the state to pay the sales taxes I collected from buyers on my resale items. I had to collect the sales tax at the rate the buyer would pay where they lived and had to paid that tax collected to their state (possibly 50 individual State sales tax filings). With cities and counties laying extra sales taxes on top of state taxes, it made it a  nightmare to figure out how much to collect and just (here State tax is 5% plus 0.5% county sales tax plus a 0.25% 3 county entertainment tax). Four counties over from me, the sales tax is 5.15%). If it was an out of State sale, I would have to know the buyers sales tax rate. Got around that  problem by never selling out of state.

eBay now collects sales tax based on my buyer's location and eBay collects sales tax on everything I buy at my local rate.

eBay made that easier but how would they know I was buying something for resale with a resellers permit and should be tax free?

The federal government is forcing every person to become a business with full record keeping requirements if they sell from online to flea markets. Record keeping requiring proof of purchase price of the item to be resold before allowing that cost of goods sold to be deducted from the selling price.

As you said, other than shipping and fees, unless one invested a lot of time and money into a complete bookkeeping system, the cost of an item sold is $0 and the selling price is pure profit.

I have been filling a Schedule C every year for a decade. Will do so again but unsure how to handle the cost of goods for stuff sold.

They really want to collect every penny plus the penny penalty we will pay for not having sales receipts for purchases now being sold many years after the original purchase.

I suspect this will have a huge chilling effect on individuals selling small volumes each year, easier to give it away or trash it than hire a bookkeeper and tax lawyer.

[RDPipes]

12.9% of the item sold + 12.9% of the sales tax + 12.9% of the shipping + $0.30 = about 20% of what the item only sold for.

Gees, I didn't realize they're taking that much, God only asks for ten percent.
But, Big Business has always thought they were above God.