Anybody Else Pulling Their Hair Out Over Taxes and This 1099-K Crap for Selling Used Gear?

I don't think you need to do a full schedule C because you are not a business and will not be able to deduct any costs (unless you are actually selling gear for a profit on a regular basis). What I did was file a schedule 1 and put the gross sale value (box 1a + box 1b) on line 8i.

Note: I'm not a financial adviser and have no background in taxes. If you want actual advice find a qualified CPA.
 
fcs101 said:
That's why I try FB Marketplace or Craig's List first.
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Technically, from what I understand, you are required to report these sales as untaxed income as well. Reverb is just following the law as it is written. The IRS currently has no way of knowing that you engaged in these local cash sales and it is upon you to report them (but if you don't report them it won't be a problem unless you are audited).

I think this is stupid / bad policy and the tax rules need to be overhauled.
 
OrganicZed said:
I don't think you need to do a full schedule C because you are not a business and will not be able to deduct any costs (unless you are actually selling gear for a profit on a regular basis). What I did was file a schedule 1 and put the gross sale value (box 1a + box 1b) on line 8i.

Note: I'm not a financial adviser and have no background in taxes. If you want actual advice find a qualified CPA.
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@OrganicZed
Thanks for that suggestion. I will look into it. But doesn't that add the full receipt of the sale to your gross income? Where do you account for the fact that you purchased the item first and the proceeds are the net value less your cost? I would love to find a simpler way to account for this.
 
@22 frets

Yes, it adds the full sale value to your income. I don't think you're allowed to account for the fact that you paid money to purchase the item(s) unless it is a business expense and you are selling gear as a business. Selling gear not for profit is classified as a hobby and you cannot deduct any costs from the dollar amount you received in the sale. It is considered a capital gain.
 
22 frets said:
@OrganicZed
Thanks for that suggestion. I will look into it. But doesn't that add the full receipt of the sale to your gross income? Where do you account for the fact that you purchased the item first and the proceeds are the net value less your cost? I would love to find a simpler way to account for this.
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This is from the TurboTax website:

"Enter in the 1099-K information where you would enter in self-employment income. Then choose the type of income received, which is 1099-K. Once you enter the sales, turbo tax will ask if you want to record expenses. In the expense section, choose inventory as an expense type. Enter zero for the value of beginning and ending inventory. The next screen will ask the cost of the goods. Put the value of the goods sold in the cost of purchases box and continue. If it is worth more than what you got, then you won't be taxed on the sale."

https://ttlc.intuit.com/community/t...-loss-this-link-suggests-no/00/1031403/page/2
 
I have, in the distant past, filed a separate Schedule C for all my gear purchases. My recollection of the rules (probably changed now) was you needed a "profit motive", but didn't actually need to show a profit. There was a number of years within so many years that you could do this, and if you didn't show a profit, the previous deductions would be then disallowed, and you'd need to show them as income, or something to that effect, but I never bothered with it. I wouldn't advise doing it that way now (since I didn't follow through with the rules, young and dumb, yada yada), but by taking the deductions when you purchase, you can at least get some amount of relief from having to include the entire selling price as income, provided you understand the entire process, and keep it all above-board, so to speak. Not intended to be tax advice, but instead, something to possibly explore, moving forward. I mean, if they're gonna make us treat the small sums of money gained from selling shit, wee should be able to take the deductions when its purchased, or at least see if its possible.
 
Stewart said:
This is from the TurboTax website:

"Enter in the 1099-K information where you would enter in self-employment income. Then choose the type of income received, which is 1099-K. Once you enter the sales, turbo tax will ask if you want to record expenses. In the expense section, choose inventory as an expense type. Enter zero for the value of beginning and ending inventory. The next screen will ask the cost of the goods. Put the value of the goods sold in the cost of purchases box and continue. If it is worth more than what you got, then you won't be taxed on the sale."

https://ttlc.intuit.com/community/t...-loss-this-link-suggests-no/00/1031403/page/2
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Thanks @Stewart That certainly does make sense and seems a lot easier. I will give it a try. I must have searched all over the web, but I somehow missed that explanation. Cheers.
 
mr_fender said:
This ↑. If you've received a 1099, that income has already been reported to the IRS on your behalf. Ignoring it would be like ignoring a speeding ticket. Not a wise move.
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I have claimed all my income as a gigging musician/contractor since 1993. Needless to say, I have spoken with
other musicians and artists over the years who fudge their income and don't claim certain cash payments. They are
f'ing proud of it, too, for some reason. It ALWAYS comes back and bites them in the ass. Maybe the IRS contacts
them and then they have to try and recall what happened 7 or 8 years ago with NO paperwork. Or they get old
and need SSI and it is not very much.... because they didn't claim all they made for the past 30 years. DOH!! WTF??

I literally NEVER complain about paying taxes. Ever. Doesn't mean I agree with how it is always spent. I just know that
we are blessed in the US to live where we do and have the freedoms (and civic obligations) that billions of other people
around the world would love to have, and die for the chance to complain about. :)
 
Stewart said:
This is from the TurboTax website:

"Enter in the 1099-K information where you would enter in self-employment income. Then choose the type of income received, which is 1099-K. Once you enter the sales, turbo tax will ask if you want to record expenses. In the expense section, choose inventory as an expense type. Enter zero for the value of beginning and ending inventory. The next screen will ask the cost of the goods. Put the value of the goods sold in the cost of purchases box and continue. If it is worth more than what you got, then you won't be taxed on the sale."

https://ttlc.intuit.com/community/t...-loss-this-link-suggests-no/00/1031403/page/2
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@Stewart This worked like a charm. Was relatively easy to follow and made sense. Glad you mentioned the inventory procedure. I probably would have not treated that correctly. After all, it has been a while since Accounting 101. :tearsofjoy::tearsofjoy::tearsofjoy:

In your honor I am going to file my taxes and list you as my CPA. I am sure that when the IRS sees that "Stewart" has signed as my tax accountant they will not question this!!! Cheers!! ;)
 
Why doesn't the IRS go after one billionaire? Just one. It would literally pay for all the effort involved if they pulled it off.

Instead of 100 agents uncovering Jeff Bezos' tax havens(and likely recouping all of the manpower costs in the process) we get 100 IRS agents going through eBay 1099-K's to make sure @shredmechanic paid his fair share of taxes on that used Charvel Pro-Mod.

The IRS has some serious "spend a dollar to make a dime" energy.
 
Because the billionaires are rich enough to hire teams of accountants and lawyers to find legal loopholes to exploit. You pick the low hanging fruit first.
 
mr_fender said:
Because the billionaires are rich enough to hire teams of accountants and lawyers to find legal loopholes to exploit. You pick the low hanging fruit first.
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True, but it would also be quite easy for a billionaire to avoid paying taxes. Imagine you have one billion dollars worth of stock in a company that pays no dividend. Rather than sell your stock and have to pay capital gain taxes, you go to a bank and borrow $50 million using your stock as collateral. You put that $50 million in a bank account earning no interest, and you just withdraw what you need to live off of (and even to make the payments toward the loan). You would have no income, and owe no taxes. An you could live pretty well for a long time off the $50 million.
 
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shredmechanic said:
Why doesn't the IRS go after one billionaire? Just one. It would literally pay for all the effort involved if they pulled it off.

Instead of 100 agents uncovering Jeff Bezos' tax havens(and likely recouping all of the manpower costs in the process) we get 100 IRS agents going through eBay 1099-K's to make sure @shredmechanic paid his fair share of taxes on that used Charvel Pro-Mod.

The IRS has some serious "spend a dollar to make a dime" energy.
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You are not thinking like our government. Lets say there are 300 million people in the US, and around 750 are billionaires (says Google). Lets dream after lawyers and accountants we can somehow get them to pay an extra $10m in taxes ea = $7.5T, maybe after years of battles

BUT - that leaves 2.9999m of us - lets say GOV'T can force 50% of us to pay $500 more in taxes = $75T, ten times the 'revenue', they will get it THIS year and we can't afford to fight back... for only $500...
 
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