eBay Tax 1099?

[Tom007]

I wanted to get some clarity/info on the new tax structure when selling on EBay that is mentioned in our threads. There now is supposedly a $600 limit that when exceeding that limit in sales, you get a 1099 issued to claim said income on taxes? So am I understanding this right if you purchased a new Turkey vest from a store for $100 dollars and paid the appropriate sales tax, if you sell it on EBay for $90.00 and the buyer pays the appropriate tax, you have to claim that as income? This is ludicrous if it's true? Input welcome....

[joey46]

If you bought it for $100 and sold for $90 I think you're covered.  Karmela may be in charge of this.  She'll get back to you. Lol.  My spell check first changed Karmela to Oatmeal.  Double lol.

[HookedonHooks]

As I said in the other thread, tax season will certainly be interesting next year.

That being said, I've discussed this with my uncle who's a tax accountant at a big firm here in Kansas City, because I use these platforms for reselling items FOR profit as a means to make intentional income. It is his understanding of the new law at this time that things such as the example you laid out, will not be taxed on that as income, but he said you may have to prove you didn't clear a profit, because they will be taxing the profits of those sales. Proving of the purchase price may be difficult of older items if they really try nickel and dime every eBay seller they can. I'm not looking forward to it, that's for sure, but I'm not gonna avoid either. Many in the sports card industry are trying to work around this with having people pay Friends & Family, and their PayPal accounts are being locked and funds held because they're inaccurately doing business through "gift" transactions. This will likely increase the amount of people asking for Friends & Family on here for call sales as well.

[Jbird22]

This will likely increase the amount of people asking for Friends & Family on here for call sales as well.

That, along with more people asking for money orders.

Just another stroke of brilliance by this brain-dead regime...

[HookedonHooks]

This will likely increase the amount of people asking for Friends & Family on here for call sales as well.

That, along with more people asking for money orders.

Just another stroke of brilliance by this brain-dead regime...

It has certainly seemed like intentional pounding of the average American's rear end since the passing of the torch.

[Treerooster]

Your "profit" would be taxable. Sales tax doesn't come into play with income tax unless the sales tax is included in your gross income on the 1099 from Ebay. Which I do believe it will be. I'll try to explain.

Example (using round figures)...you buy something for $100 and it appreciates in value and sell it for $200. your made $100 bucks...but not really because Ebay charges you a fee, say $10. But there was also  shipping which you got reimbursed for from the buyer $5, and sales tax $5.

So you received the $200, + $5 shipping and $5 sales tax from the buyer. Your gross amount from the sale would be $210. Your taxable profit would be the $210 minus all the expenses of the sale and the purchase price of the item.

$210 minus $100 purchase price, $5 sales tax, $5 shipping AND the $10 Ebay fee. That equals $210 minus $120 and equals a taxable profit of $80.

If you sell for an equal or less amount than you bought the item for, it is doubtful you will have a taxable profit. However if you sell more than $600 gross sales (that includes purchase price AND the shipping & sales tax fees you get reimbursed for) you WILL get a 1099 and have to account for the expenses or end up paying tax on whatever is on the 1099. With Ebay sales it should all be accounted for in your Ebay account. Any real profit would be considered a capital gains tax reported on sch D of the 1040.

Probably clear as mud...eh? 

AND FWIW...This is how it has always been. At least since 1981 when I got into preparing tax returns. In the past the IRS just didn't mess with small private sales of things. Pretty hard to track it back then. But now with all the internet sales, both state and federal government is losing out on all these internet transactions and they want their share. Both from local sales tax and income tax. The IRS is just now starting to crack down on these type of sales for income tax. The IRS are the ones requiring Ebay to submit 1099's on sales greater than $600.

AND Another FWIW (and I am really an Apolitical person). All this was coming about well before the current administration. It started years ago with the state and local govt's wanting their share of sales tax from internet sales. I remember not having to pay sales tax from the big internet stores like Amazon and Walmart. Not anymore.

[Tom007]

As I said in the other thread, tax season will certainly be interesting next year.

That being said, I've discussed this with my uncle who's a tax accountant at a big firm here in Kansas City, because I use these platforms for reselling items FOR profit as a means to make intentional income. It is his understanding of the new law at this time that things such as the example you laid out, will not be taxed on that as income, but he said you may have to prove you didn't clear a profit, because they will be taxing the profits of those sales. Proving of the purchase price may be difficult of older items if they really try nickel and dime every eBay seller they can. I'm not looking forward to it, that's for sure, but I'm not gonna avoid either. Many in the sports card industry are trying to work around this with having people pay Friends & Family, and their PayPal accounts are being locked and funds held because they're inaccurately doing business through "gift" transactions. This will likely increase the amount of people asking for Friends & Family on here for call sales as well.

Thank you, appreciate the info. I wonder if we sell something at a loss, can we right it off? It has to work both ways....lol

[WisHunter]

I am a CPA and just retired.  Had my own practice for over 25 years (over 40 as a CPA), did over 500 returns per year.  DON'T overthink that $600 limit.  If you had receipts (not net income) of over $600, you were always suppose to report the income and expenses.  You would simply fill out a  Schedule "C-EZ" that shows gross receipts and total expenses.  Two lines.  You are not going to get audited for small amounts, as its not worth the limited IRS resources to even take a look at your return.  They don't have enough resources presently to even go after much larger taxpayers.  The government always had a requirement to report income, even if its a tiny amount and/or not on a 1099.  If you have a hobby, you can't take a loss against your other income, but can "zero" the income out.  People don't report things like garage sale income.  The stuff being sold used never exceeds original costs.  But if you have as "side hustle" and have income, use the C-EZ

[Tom007]

Your "profit" would be taxable. Sales tax doesn't come into play with income tax unless the sales tax is included in your gross income on the 1099 from Ebay. Which I do believe it will be. I'll try to explain.

Example (using round figures)...you buy something for $100 and it appreciates in value and sell it for $200. your made $100 bucks...but not really because Ebay charges you a fee, say $10. But there was also  shipping which you got reimbursed for from the buyer $5, and sales tax $5.

So you received the $200, + $5 shipping and $5 sales tax from the buyer. Your gross amount from the sale would be $210. Your taxable profit would be the $210 minus all the expenses of the sale and the purchase price of the item.

$210 minus $100 purchase price, $5 sales tax, $5 shipping AND the $10 Ebay fee. That equals $210 minus $120 and equals a taxable profit of $80.

If you sell for an equal or less amount than you bought the item for, it is doubtful you will have a taxable profit. However if you sell more than $600 gross sales (that includes purchase price AND the shipping & sales tax fees you get reimbursed for) you WILL get a 1099 and have to account for the expenses or end up paying tax on whatever is on the 1099. With Ebay sales it should all be accounted for in your Ebay account. Any real profit would be considered a capital gains tax reported on sch D of the 1040.

Probably clear as mud...eh? 

AND FWIW...This is how it has always been. At least since 1981 when I got into preparing tax returns. In the past the IRS just didn't mess with small private sales of things. Pretty hard to track it back then. But now with all the internet sales, both state and federal government is losing out on all these internet transactions and they want their share. Both from local sales tax and income tax. The IRS is just now starting to crack down on these type of sales for income tax. The IRS are the ones requiring Ebay to submit 1099's on sales greater than $600.

AND Another FWIW (and I am really an Apolitical person). All this was coming about well before the current administration. It started years ago with the state and local govt's wanting their share of sales tax from internet sales. I remember not having to pay sales tax from the big internet stores like Amazon and Walmart. Not anymore.

Thanks for the info, appreciate it....

[Tail Feathers]

I am a CPA and just retired.  Had my own practice for over 25 years (over 40 as a CPA), did over 500 returns per year.  DON'T overthink that $600 limit.  If you had receipts (not net income) of over $600, you were always suppose to report the income and expenses.  You would simply fill out a  Schedule "C-EZ" that shows gross receipts and total expenses.  Two lines.  You are not going to get audited for small amounts, as its not worth the limited IRS resources to even take a look at your return.  They don't have enough resources presently to even go after much larger taxpayers.  The government always had a requirement to report income, even if its a tiny amount and/or not on a 1099.  If you have a hobby, you can't take a loss against your other income, but can "zero" the income out.  People don't report things like garage sale income.  The stuff being sold used never exceeds original costs.  But if you have as "side hustle" and have income, use the C-EZ

Thank you for that good information.  And welcome to OG!

[Tom007]

I am a CPA and just retired.  Had my own practice for over 25 years (over 40 as a CPA), did over 500 returns per year.  DON'T overthink that $600 limit.  If you had receipts (not net income) of over $600, you were always suppose to report the income and expenses.  You would simply fill out a  Schedule "C-EZ" that shows gross receipts and total expenses.  Two lines.  You are not going to get audited for small amounts, as its not worth the limited IRS resources to even take a look at your return.  They don't have enough resources presently to even go after much larger taxpayers.  The government always had a requirement to report income, even if its a tiny amount and/or not on a 1099.  If you have a hobby, you can't take a loss against your other income, but can "zero" the income out.  People don't report things like garage sale income.  The stuff being sold used never exceeds original costs.  But if you have as "side hustle" and have income, use the C-EZ

Thank you for that good information.  And welcome to OG!

X2, thanks for the info, very appreciated...

[Treerooster]

I am a CPA and just retired.  Had my own practice for over 25 years (over 40 as a CPA), did over 500 returns per year.  DON'T overthink that $600 limit.  If you had receipts (not net income) of over $600, you were always suppose to report the income and expenses.  You would simply fill out a  Schedule "C-EZ" that shows gross receipts and total expenses.  Two lines.  You are not going to get audited for small amounts, as its not worth the limited IRS resources to even take a look at your return.  They don't have enough resources presently to even go after much larger taxpayers.  The government always had a requirement to report income, even if its a tiny amount and/or not on a 1099.  If you have a hobby, you can't take a loss against your other income, but can "zero" the income out.  People don't report things like garage sale income.  The stuff being sold used never exceeds original costs.  But if you have as "side hustle" and have income, use the C-EZ

Not sure I agree with this entirely. A sch C (EZ or not) states you are in business selling whatever the items are. A person just casually selling an item is not really in business. Like say you bought a clunker car, fixed it up and made a little profit on it. Or you sell some land you owned. You are supposed to declare that income but I don't believe it is business income, more like capital gains income since you do not do that regularly and don't really advertise your services and skills like a mechanics shop or a land investor would.

The main difference is on business income you are subject to social security tax (with a profit over $400) plus the income tax. On capital gain income there is no SS tax and, at least for now, the tax rates are usually less then regular income tax.

I do agree that the IRS isn't going to bother too much with the small amounts of income, just too much work for them.

But if you get a 1099, that is on their computer and they will be looking for it's accounting on your tax return, just like a 1099 from interest you earned on a bank account. If you don't account for the income from that 1099 from Ebay (or whatever) you will likely get a letter form the IRS. And it may be a year or 2 after you filed your return...and forgot what the whole thing was about.

[ChesterCopperpot]

It's a 1099K form. Here's all the information on it. But, yes, Tom, if you bought ten vests at $100 apiece and sold them for $90 apiece you'd get a 1099K form on that $900. I'd assume if you'd kept receipts on those purchases then you could then take those as deductions.

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html


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[Tom007]

It's a 1099K form. Here's all the information on it. But, yes, Tom, if you bought ten vests at $100 apiece and sold them for $90 apiece you'd get a 1099K form on that $900. I'd assume if you'd kept receipts on those purchases then you could then take those as deductions.

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html


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It's unreal that they are targeting the little guys selling used stuff when there are bigger fish to fry......

[SumToy]

From a business.   You make of a set amount I was thinking 699 you should get a 1099.  Now that comes from PayPal, credit card or payment processor not ebay.   

I had drag cars and would get 1099 from drag strip if you won over x number of $$$$.