HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

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Jay In Northern Ca.
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HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Jay In Northern Ca. » Mon Mar 29, 2021 11:08 am

I took this from a mineral specimen buy sell trade group I am in and thought people here should know this new tax liability just enacted into law.

if you’re in the US and you haven’t been paying taxes on your minor mineral sales (even just occasional hobby sales), be aware that the IRS is now tracking this significantly more than in the past. The previous reporting threshold for payment processors like PayPal was $20,000 annually. Now it is $600 annually.
Summary Edit #2: make sure that you keep good records of your transactions (buying, selling, other related expenses - even if you're not a dealer) and be mindful of the tax implications of any sales, especially because they're now tracked by the IRS at a far lower dollar threshold.
Original post:
I’d like to hear some dialogue/get some other opinions on this. Seems that this is primarily relevant to US based collectors who make the occasional sale at a profit. Hopefully we can help other collectors avoid the possibility of a nasty letter from the IRS next year. Let’s see some discussion in the comments!
Summary from my understanding: In the past, payment processors (PayPal, etc) were only required to report your annual income on their platform above $20,000 within 200 or more transactions. A provision in the American Rescue Plan Act of 2021 (aka the latest COVID relief bill) significantly lowers that annual reporting threshold to $600 annually.
Practical example: you sold some Moldavite that you had stashed away and made a big profit- you profited $600! PayPal has reported this to the IRS, which is expecting you to report this in your taxes next year.
To be clear, capital gains taxes as illustrated here are nothing new. However I imagine that most collectors who make the occasional sale at a profit don’t think about it coming back to haunt them during tax season.
This is not meant as any sort of political discussion. Trying to keep it strictly practical for other collectors.
References:
https://www.congress.gov/.../117th.../h ... /1319/text section 9674 has the original text of the bill
https://www.ecommercebytes.com/C/abblog ... 53514.html
https://www.politico.com/.../gig-workers-coronavirus...

Here's another article on the topic
Buried in the new stimulus bill is a provision that will change how PayPal and other third party networks will issue tax forms to you – and the amount has dropped significantly.
If you use PayPal to receive payment for goods and/or services (like eBay transactions, Facebook marketplace, etc) or any similar platform, you will find a new change coming, courtesy of the just-passed stimulus bill.
New Reporting Requirement for PayPal and Other Platforms
Note that I am not a tax or financial professional and am not providing advice for financial or tax purposes. If you have questions about this, check with your accountant or tax professional.
What is the Reporting Requirement for Third Party Platforms?
This will apply to all third-party payment platforms but PayPal is the one that likely affects many of us the most. This will also mean for platforms like Etsy, etc.
The current IRS reporting law (here is a link that describes the previous language) for these platforms is that they only had to provide a 1099-K tax form to users if they processed more than $20,000 and 200 transactions in a year. So, if you sold $40,000 worth of stuff on eBay in one year but only in 150 transactions total (as processed by PayPal), you would not receive a tax form from PayPal (except in a couple of states).
By law, you are still supposed to claim any profits on these sales but the payments themselves were not reported to the IRS. This made things easy if you, like me, would occasionally find some deal on something and flip it at the same price you paid, after all fees were collected. Many may find that strange but it is a nice way to get some easy spending done – and sometimes make a little bit extra (which could easily be reported in returns).
The New Reporting Requirement for Third Party Platforms
However, (and thanks to George from Travelbloggerbuzz for the first heads up on this), the newly passed American Rescue Plan, the $1.9 trillion stimulus package, included a new provision that would change all of that going forward. Here is the language from the bill as it was passed:
SEC. 9674. 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”.
(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.
What Does This Mean?
So, what exactly does this mean? It means that, for returns beginning next year, third party network platforms like PayPal will be issuing forms and reporting to the IRS for all accounts if the transactions exceed $600 for that year. Fortunately, they did make the clarification that this will only apply to things that are categorized as “Goods or Services” as opposed the “Friends and Family” option with PayPal.
Why will this matter? It will likely affect a lot of people who had just listed some old stuff around their house on eBay that they were no longer using as getting over $600 will now trigger a 1099-K form. Also, it means that if use any third party payment network for anything, it will now be automatically reported if it is over $600 meaning you had better make sure you have all your receipts to show your deductions against that sale price!
This little addition to the stimulus bill will likely bring in a ton of tax money that was not being reported on before this. But, it will catch many people flatfooted if they were not aware of this and they get a tax form for clearing out old things from their house or selling an old computer to fund a new one, etc.
As a reminder, this is set to kick in starting January 1, 2022.
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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by TRDxB2 » Mon Mar 29, 2021 12:33 pm

It appears to be true! Note that PayPal to Friends and Family are not to be reported if under $14,000.01. This CNN report indicates thatthe Tax Law will be in effect in 2022 sales, unless repealed. https://www.cnbc.com/2021/03/26/its-goi ... sales.html
Realistically, a $600 threshold with not limit on the number of sales would be a nightmare for the IRS to process let alone audit. Another issue is that the sales/services websites would need a persons Tax ID (Social Security Number) to issue the 1099-K Form. When that issue becomes Public I would imagine the backlash will be significant. Remember: they said they would not raise taxes on your income but they didn't say that they would not raise what you would need to report as income. :o
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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Henry K. Lee » Mon Mar 29, 2021 12:42 pm

Thanks for the heads up Frank and of course Jay! Just another reason why I am quitting. Too much BS and paperwork.

All the Best,

Hank
Last edited by Henry K. Lee on Mon Mar 29, 2021 3:45 pm, edited 1 time in total.


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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by tom_strickling » Mon Mar 29, 2021 1:04 pm

Thanks for the info Can anyone tell me how this helps our nation recover from COVID ?????????

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Mark Gregush » Mon Mar 29, 2021 1:14 pm

Yes this is being talked about in the eBay community forums. Most of my selling stuff; was gotten at swap meets, flea markets, given to me or comes out of my personal collection (if part is needed for customers car) so don't have receipts for 99+% of it. That means that, after payment, less fees and shipping, the rest on paper is 100% profit as an individual selling stuff not being a business (so no related expenses to write off). Even if they pay by check, that money is going to show up in your checking or savings account.
I know the voices aren't real but damn they have some good ideas! :shock:

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Dan Hatch » Mon Mar 29, 2021 1:43 pm

This may help bring back swap meets. Cash is King.


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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by kmatt2 » Mon Mar 29, 2021 3:30 pm

Dan, I remember a time here in California when the Ca Franchise Tax Board decided that Ca was not getting enough Ca sales tax $$ from swap meets and sent agents to require reporting from sellers at the larger Ca swap meets. I haven't sold at swap meets in years and don't know what they do now a days.

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by TWrenn » Mon Mar 29, 2021 3:51 pm

Guess this will be the end of using PayPal then. Check or money order, since cash in the mail is too risky of course.

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by TRDxB2 » Mon Mar 29, 2021 4:30 pm

TWrenn wrote:
Mon Mar 29, 2021 3:51 pm
Guess this will be the end of using PayPal then. Check or money order, since cash in the mail is too risky of course.
PayPal to a Friends and Family will work okay - no problem. But a sale to a Business will - but like I said total confusion because of "used" item profits. All we need to do is make sales receipts for each other for whatever s small profit. Its like Lottery winnings you get to claim a loss not to exceed winnings (net zero tax) - some people save their loosing tickets and sell them -win win :roll:
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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Dan Hatch » Mon Mar 29, 2021 4:39 pm

Sales tax has always been a problem at swap meets. You MUST have a PA tax number to get a space at Hershey. You must have a State sales tax number to be a jobber with MACs or whatever they call themselves now.
This is about income tax. But what did they get Al C for?
Income tax evasion.


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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by kmatt2 » Mon Mar 29, 2021 7:40 pm

Dan, Don't think that Ca didn't go after those swap meet sellers for Ca income tax on those swap meet earnings, they probably sent info to the IRS also.
What was the reason those Founding Fathers dumped the tea in Boston harbor. Yes, they didn't want to pay the British King's tax on the tea they bought from other countries. The King taxed all tea because he could, all tea had to go to Britan frist, and look where that led. No, not the revolution yet, but the British Parliament did change some things.

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Mark Gregush » Mon Mar 29, 2021 8:17 pm

Ya keep using Friends and Family for buying stuff, at some point they will crack down on that too. Same thing eBay did with fees when people padded the shipping and sold that big buck item for $1.
I know the voices aren't real but damn they have some good ideas! :shock:

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by Henry K. Lee » Mon Mar 29, 2021 8:33 pm

History of taxes was a unique subject back in my college years. The 18th Amendment had in its description of conditions of lost revenue due to alcohol sales, for the first time..., personal income taxes. The government was going to be missing out on 6 million dollars a year. With the repeal of the 18th amendment it was suppose to be withdrawn from the IRS tax code. Every 5 to 10 years our law makers reinstate it. Nice Folks!

Now for a little fun..., I have always done my taxes on a 10 column worksheet, journal, etc. Been audited twice.., no big deal. Watch a young IRS agent try to read a hand scripted set of books in a number two pencil! Just Funny as al H311! You get a 5% error deal because you are human, but zero if you use a computer program. DAH!

My $.03 of taxes,

Hank

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Re: HEADS UP ON NEW TAX LIABILITY ON OCCASIONAL SALES

Post by TRDxB2 » Tue Mar 30, 2021 10:50 am

Whats interesting is that the Government cannot pass a law that would require people to buy an Electric Vehicle but it could increase the already in place Tax credit for buying one, give a Tax credit for disposing of your gas driven one and Tax the heck on owing a gas driven one.
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