Viewing a single comment thread. View all comments

Deceptiveideas t1_j1fnwo5 wrote

Reply to comment by KapahuluBiz in IRS delays rule change for people who get paid on Venmo, Etsy, Airbnb and other apps by TerpFlacco

That wasn’t why people were upset with the rule change. $600 is such a low number that having a garage sale is enough to raise red flags. If you get flagged, you need to prove you made less than $600 in profits which is difficult.

I just sold 150+ items on eBay this past year as I’m moving. My total sales amount to $3000+. This will definitely raise a red flag but nothing I sold was for profit. Thus the $600 cut off doesn’t actually apply to me but I do have to provide documentation for every item.

40

FrostyFoss t1_j1fqno5 wrote

I bet they're banking on people in your situation and other small sellers to just pay up instead of trying to account for every item.

It's a headache either way, you either give in to H&R block who probably lobbied for this rule change to generate more business or you spend more time trying to do it your self hoping you don't fuck up and get audited.

21

Taysir385 t1_j1gedjs wrote

> If you get flagged, you need to prove you made less than $600 in profits which is difficult.

There are a lot of tools, many free, that automatically or mostly automatically keep track of income and expenses and spit out a formatted spreadsheet at the end of the year with all the documentation that the IRS needs. If you use any most any mobile POS software, that's included. You could also use a personal finance manager and have it tag line items on your account.

It's not difficult provided that you start off doing it right and don't try to back fill at the end of the year.

3

vix86 t1_j1ghdtl wrote

> There are a lot of tools, many free, that automatically or mostly automatically keep track of income and expenses and spit out a formatted spreadsheet at the end of the year with all the documentation that the IRS needs.

This is pointless for the guy you replied to though. They said they were moving and ebayed stuff, that means they were probably clearing out old stuff they didn't need any more or want to take with them.

They're saying they made no profit because they most definitely sold it for less than they bought it for, but I doubt the IRS cares about this point -- they'll want to see receipts of the original purchase. You might be able to get away with showing historic records, like an ad or archived page for say a 7-10 year old fridge you got from Best Buy or Sears, but what if its a 15-20 year old dresser or bed frame that you can't even recall where the fuck you got it? This is the problem.

20

Taysir385 t1_j1gi5de wrote

> They said they were moving and ebayed stuff, that means they were probably clearing out old stuff they didn't need any more or want to take with them.

Regardless of what the guy I replied to believes his tax burden is, eBaying old knick knacks because of a move is (usually) considered income, and taxes are due on those sales.

>They're saying they made no profit because they most definitely sold it for less than they bought it for,

That's not how this works. If someone buys a TV for personal use, uses it for five years, and then sells it on eBay, they don't get to claim a loss on the item because it sold as less than retail. That TV wasn't a stocked product, and trying to write it off as a loss against profits will rightfully get you audited.

−15

vix86 t1_j1gvmjg wrote

Okay. Hypothetically speaking if you are right (I'm not a CPA), then the old system that the IRS looked past, let people treat it this way because it worked and didn't fuck people over.

Pre-$600 BS, you could sell some of your used stuff (a TV, stereo system, etc) and wouldn't have to file it for taxes again. Example with new system that likely hits more people: When you bought that TV/Stereo/etc you used your income which they was taxed. Then when you sell it off used, they want to tax you again. You're being double taxed on your income. And this ignores sales/use tax as well.

4

EmperorArthur t1_j1gwawb wrote

Umm, let's change things around a little, and you'll see why what you said is insane.

Say I set up an LLC. It's whole purpose is to own q TV for me.

Now that LLC then immediately goes into debt. I loan it $500 in cash. It then uses that money to purchase the TV I want for $500. So, far were still good at net $0 for the company.

Five years pass, and I don't do anything else with that LLC. Depreciation means that the Company's balance sheet is technically negative. Depending on what carryover loss rules are, the company might still be able to sell the TV and still not pay any taxes.

If anything I described is illegal I'd love to hear it. My guess would be loaning my own company money, but that sort of thing seems to happen all the time.

0

Taysir385 t1_j1h6sgy wrote

> If anything I described is illegal I'd love to hear it.

Strictly, there are limits on how much and how often you can claim a loss or zero for a tax year sequentially, but that’s not picking.

The difference here is in how the item is categorized at its purchase. Although corporations, including LLCs, are legally considered individuals, the law and the tax code recognize that a person who exists only as a legal non corporeal entity doesn’t do things like watch TV for fun, and that assets purchased by an LLC are therefore generally treated as stock or tools or money making equipment and not as discretionary spending.

You could, as an individual, purchase this TV specifically as an asset, and then deprecate its value over time and modify the taxes due thereby. You would technically be required to quantify the Monterrey value extracted via use, but it’s hard to put a cash value on you watching a show (it’s much easier for something like a car, where value and deprecation are given very specific values.) Ypu would still have some restrictions though, as you’re only acting as one legal entity. Making an LLC does get around this, as would having a roommate (or even a child who files taxes) do the same thing.

You’re treating this situation as though it’s the same, but it’s not because that tax code is literally different for this specific example you’re using. Which is crazy, I’ll grant your but there it is. The garage sale guy though did not set up an LLC, so your theoretical situation does not apply to him. Not did he (presumably) file taxes with an itemized deduction and deduct against business costs, and so he owes taxes on those sales. It’s possible that he would have less of a tax burden if he did file itemized, but even if that’s that case he would still owe taxes on those sales (it’s just that the amount of those taxes would potentially be offset by prior costs).

But you shouldn’t take any advice about taxes on the internet at face value. If you have questions about taxes, you should always consult a licensed tax specialist.

0

UncleMeat11 t1_j1hiwjq wrote

> If you get flagged, you need to prove you made less than $600 in profits which is difficult.

That's not true. The $600 boundary is meaningless when it comes to computing the taxes you owe. All you do is write the cost basis of the items you sold. This is easily done. If you donate clothes to goodwill or whatever you already do something similar to this when computing the value of your charitable deduction.

> My total sales amount to $3000+. This will definitely raise a red flag but nothing I sold was for profit

Why would it raise a red flag? You just fill out the basis on a 1099.

1