New Ebay Tax Requirement/Form For 2022 - USA Sellers

Which is acceptable as long as you are setup and file taxes as a business. "In a five-year period, you can claim a business net loss up to two years without any tax problems. If you report operating losses more frequently, the Internal Revenue Service (IRS) might rule your business is only a hobby. In that case, you'd have to report the income but couldn't write off any expenses."

If you do not file as a business and you sell your excesses through an online venue you will get a 1099-K at the end of the year, it counts as personal income, and you will pay income taxes on it.
Don

"If anyone has an issue with 'who pays what taxes' the correct focus would be with the politicians who write the tax laws (which in the US is the Congress)."

You mean the people who write the laws that have loopholes that favor those who fund their campaigns?

"I use ebay sales to get rid of duplicate/unwanted items, and to fund new purchases."

Using the income to fund new purchases does not make it not a business.

this will impact ebay dramatically! who is going to want to have to report income for a few transactions? there are a huge amount of people who buy and sell a few thousand dollars a year with and now will have to report and file documents to support it? it is not worth it. I finish and label around 60 baseball bats a year for my friends and a couple of local baseball teams. I mainly do it because I can get a better bat cheaper than at the sporting goods store. Now I will have to ask all my customers to pay in cash not through the app. what a pain. If they would go after all the governments bodies that waste enormous amounts of money I think they could quickly get the money they need.

Is this income?

I buy a collection for $200.
I pull out about $100 worth of stamps for my collection.
I re-sell the remainder for $75.
I use the $75 to purchase additional stamps for my collection.
The process is repeated.

I suspect most hobby trading is like this - at least for me it is. I end up breaking even at best. Sometimes I lose. Sometimes I gain a bit. It is no big deal - it helps me build my collection.

The tax man is not my friend. Neither is the government. Evasion is something quite different than the penny-ante trading described above which I think is typical for a hobbyist.

It isn't worth the hassle...

John

The reporting requirements are not limited to "sales" As I understand the reporting requirement it is based on receipt of money. So if I go to dinner with a group of friends and we divide the check and put it on my credit card and they transfer their portion of the check to me with Venmo or a similar cash app, I will get a 1099-K if the total for the year hits $600. The person collecting at the office for a holiday gift or retirement luncheon will generate a 1099-K if the amount is over $600 if people pay with a cash app. This is going to a much bigger headache than just ebay sellers.

Yes the reporting is based on gross receipts and it is per payment processor, i.e., if you meet the $600 threshold with PayPal and ebay and Venmo, you would receive a 1099 from each. It's then up to you to provide any offsetting deductions (and be able to substantiate them in the event of audit), which may vary depending on whether the economic activity is a hobby or a business... Which is where many will get tripped up (and the IRS is licking its collective chops).

SPQR - You are 100% correct. And they fully intend to pursue the little guy which is why the provision in the ironically named American Rescue Plan also funded 81,000 more IRS "compliance" personnel. Meanwhile the US just sent 308 million dollars to the Taliban in "humanitarian assistance".

here is my problem.I bought a large accumulation of stamps over 30 years ago for $3000. now I want to break it up and sell. How do I assign a cost for each item? There are over 50,000 items! Do I base it on the value when purchased or now? many of todays catalog values are lower then back then. What about insurance and storage costs, utilities for the last 30 years? DO I include my time identifying and handling for safe proper storage for 30 years as if it was a business? At what rate? As for research to identify items of value do I include computer usage, phone for taking photos and internet? And what if I assign a cost to something and it doesn't sell? Can I add that cost to an item I am sure will sell? I am pretty sure if this was a business I would have been out of business over 29 years a go. This is not tax evasion, it is a poorly created process. Unless I missed something I am looking of advice!

I was under the impression that per the IRS regulations going back a few years that all hobby income was taxable and you weren't allowed to deduct any expenses. Before that you could only deduct up to 2% of your adjusted gross income which was something, but not much. It sucks, but it looks like they are making sure that people are paying their taxes. And the way they did it is going to pull in people that shouldn't have to pay taxes on many of their transactions because the people who make the rules aren't the brightest people, but we seem to keep allowing them to make the rules.

Don, I agree with you on the taxing of "used" material. Just look at cars. How much money have states made off of the same car being sold multiple times.

almost everyone one of us defined by this new law is that we are each a business not a hobby anymore. Selling or "trading" $601 a year is a very tiny, tiny business. and it is $601 sales. I do not mean profit. because once you have to start keeping track of expenses to offset the sales you become a business. how many hobbyist will decided to just pay taxes on the sales ebay or paypal reports because it will be cheaper than working like a business to show expenses related to them and risk getting audited? unfair.

That was my point. Saying it's a hobby means that you can't deduct expenses, but have to pay taxes on income. That isn't new. The only way you could was to call yourself a business. The IRS is now making sure that people going around the system are going to pay. In reality, they probably just put a dent in the number of people going to use 3rd party apps to receive payments.

turbo tax has this as guidance:

Business tax deductions for ebay sellers
The only tax deductions you can use to reduce your gross ebay sales income are those authorized by the IRS, but you'll have quite a few to choose from. Consider whether you qualify for:

Costs to purchase or fix up the items sold
Deductions for business use of your vehicle, either actual expenses or the standard mileage rate deduction, 56 cents a mile in 2021
Advertising expenses
Apportioned amount of phone and Internet charges related to your ebay business
If you're still unsure if something is deductible, check out a more comprehensive list of common small business expenses.

Common small business deductions include costs for:

Automobiles
Bad debts
Depreciation
Employee compensation
Home office
Insurance
Interest
Legal and professional fees
Pension plans
Rent
Taxes
Travel, meals and entertainment
Other
Expenses you can't deduct

list of Expenses you can't deduct
Sorry, the news on write-offs isn't all good: Some business expenses are not deductible under any circumstances.

While the cost of entertainment at social, athletic, luncheon, sporting, airline and hotel clubs is deductible, the dues you pay to be a member are not, even if your membership is for business.
Federal income tax payments
Lobbying expenses
Penalties and fines you pay when you break the law
Political contributions

This is going to really ding the payment apps business. I went to pay for an auction purchase this AM using Paypal and thought better of it, using a debit card instead. A couple of auction firms recently began offering Zelle. Who will use it now?

Rog, could you please explain to me why someone should be concerned with outgoing funds (purchases) as opposed to incoming funds (sales)?

If they are counting any transaction, in or out - then this would affect virtually every adult in the country...

I am confused (a normal state for me)

John