IRS Delays Tax-Reporting Rule On Venmo, Paypal Payments Over $600

https://www.foxbusiness.com/money/i...payments-600

First article I have seen, likely not the last.

Edit:



Forbes' version: https://www.forbes.com/sites/kellyp...5a00d9ace695

Most people are selling stamps at a loss. No worries for us. :)

Unless you are setup as a business (and most people are not) with the IRS, selling stamps at a loss won't help you with this tax.
Don

This has been extensively covered on SCF over the years. But in a nutshell, you are so, so wrong.

When you are paid, that is tracked and if the total or other reporting criteria is met, then you and the IRS (some states too, if not directly, then via the IRS) get5 a report of GROSS earnings. YOU must then track all of your expenses in a tax legal manner to deduct your expenses for the items sold to show you sold at a loss and thus the 1099-k is not taxable income. Unless you do that, it is assumed the reported amount is fully taxable income.

Now most small sellers who trigger the reporting threshold will not find the paperwork keeping worth their time, even when done without money cost, just a time cost, to them. Add the cost of a CPA to handle the information and it will likely not be cost effective at all.
It will be easier and less expensive to take the tax hit on the reported "income" and go on with you life.

Of course if you hit the threshold for several years, with no profit, you will be called a hobby and lose all the expense deductions anyway.

The above text is the rantings of a mad man and in no way reflects actually tax advice information. Please refer to your preferred tax adviser (or use my ) for a complete explanation how this may affect you.

Edit: Yes I type and post more slowly than Don. Second edit to change "mine" to my.

That's what is wrong with this tax. Small sellers have no way to legitimately deduct cost of item, cost of ebay charges, cost of shipping/supplies, etc....Completely unfair and unnecessary.

This discussion goes in circles every time it comes up, but my couple of notes:

1) it is not that hard to keep records of cost. It is a pain to keep enough records to make sure you get through an audit if it happens. I report my activities on my 1040 as part of schedule C, it only requires a few numbers.

2) THIS IS NOT A NEW TAX. The tax obligation already exists (the old tax line that "income from whatever source derived is income" remains true). The reporting requirements only make it more likely that the IRS will find someone who isn't paying taxes on business activities. If you are selling and making money at it, you have a tax obligation, whether you realize it or not.

This all makes me wonder if, in an "emergency," sold items identical or very close found in ebay's advanced search could more or less as exemplars? I realize record keeping does not have a true substitution, but even the IRS uses exemplars for things like donation of used furnishings, cars, etc.

With enough research, based on your have list, one could build a library of this information.

Not a chance this would fly in an audit.

The automatic reporting is new, the tax obligation is not.

"not be required" is the operative term here. I know for a fact that the 1099K's are being sent with a $600 trigger by some payment platforms that are being "proactive".

here is more to this issue
In a key revision to the law, the IRS said that starting in tax year 2024 it will transition toward the new rule by increasing the reporting threshold from $600 to $5,000. That means people who receive more than $5,000 in payments via PayPal and other apps in 2024 would receive the 1099-K tax form in early 2025 to complete their 2024 tax returns.

For the 2025 tax year, the threshold would step down to $600, unless the IRS makes additional changes.

Another important factor is that an increasing number of states have LOWER mandatory reporting thresholds than the federal thresholds, so it's important to research your state's specific threshold, lest you be surprised when you receieve a 1099-K from PayPal or ebay et al, when you weren't expecting one based on the federal threshold.

A little more correctly, the IRS at present is choosing not to enforce the statute at levels below $5,000, but since the IRS lacks the authority to rewrite the statute, as Roger noted, some services may send the forms anyway. The law says $600, and that's the law unless Congress changes it. And the IRS' position could change at any time and probably will, given the forthcoming election year and the perception that the IRS is improperly denying the Treasury of an estimated $6 billion in revenue.

A point not yet made in this thread is that even if the obligation to pay applicable tax under this scheme is isn't new, the burden shifting aspect of it is. The bride receiving more than $600 in gifts by Venmo from out of town invitees, or the guy at the office who paid for the holiday lunch and has business partners reimburse him, may now have to prove that these transactions were non taxable gifts in the face of a new Form 1099 that presumes they were income.

There is a reason cash exists and can be more convenient that electronic payments in the two scenarios noted above.

If you pay 300 dollars for a stamp collection and then sell it for 200, that is called a loss to me. If the IRS wants to waste time collecting losses from stamp collectors, so be it.

It is your proving that your $200 received was in fact a loss as you state. The necessary record keeping to show the transaction as a loss will be far more expensive than just paying the tax on the $200 reported. Now if you only made on sale for $200, then you are below the reporting threshold, but one such sale per quarter puts you over in a year.

Likewise it is not the IRS that wants to chase the money, it was Congress who passed the law and the POTUS who signed it. The IRS is only a middleman collecting what it is told to collect.