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Made in us
Longtime Dakkanaut






Given the cost of selling armies, I guess this would be applicable for Dakka Discussions.

USA tax law stuff... yay...

I just became aware of something that will probably impact a lot of us who frequent Dakka Swap Shop and I'm starting to look into the ramifications, but I'm wondering if anyone else has already done some research or has experience with 1099 forms and hobby expenses.

Currently for companies like ebay or paypal to generate a form 1099-K someone would have to do $20,000+ in transactions AND 200+ transactions in the year. Starting in 2022 those numbers will change to $600+ in gross sales for any number of transactions.

So if you get over $600 in 2022 from paypal or ebay, they will send you a form 1099-K that needs to be addressed when filing taxes for 2022. It won't necessarily mean you'll have to pay taxes on that amount, but you need to explain it somehow.
   
Made in us
Nimble Ellyrian Reaver



York, PA USA

1099 is the standard "gig" tax process.

A lot of sub contractors are paid this way. You just claim it as income and it is added to your overall gross for the year. It may reduce your income tax return or make you have to pay in a small amount.

With a standard wage payment you and the payer each pay half of the social security and medicare taxes. That totals around 12-15%. The 1099 is not subject to social security tax and saves the payer from paying it.

Dropping the limit to $600 is really going to hit a lot of people. What about people who sell a car on ebay? This is not a good idea in my opinion, but it seems governments are always looking for new sources of revenue. There are a couple of places in my area where the speed limit drops to 25 for no apparent reason and it seems police always hang out there...........................

   
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Longtime Dakkanaut






kenofyork wrote:
Dropping the limit to $600 is really going to hit a lot of people. What about people who sell a car on ebay?


If they could have dropped it to $5,000 that would have saved a lot of headaches, but now if you're clearing out old armies online you'll find yourself with an extra tax form to deal with and it could be a big headache for people dealing with unemployment or Medicare. If you've been hoarding miniatures for years (decades) and liquidate some unused stuff it's usually at a loss compared to what you purchased it for, but I don't know how you'd address that on your taxes. "Yes my 1099-k from ebay says I made $1,000, but I bought all that stuff for $1,500 five years ago and I have no receipts to prove it."

I'm at least glad I realized it now so I can start to plan in advance.
   
Made in us
Most Glorious Grey Seer





Everett, WA

This section of tax law seems to be concerned with businesses using agents like PayPal to do their bill collection/payment processing. I wonder if people selling their stuff second-hand will be included.

 
   
Made in us
Longtime Dakkanaut






Yes. The reporting requirements have changed from $20,000+ and 200 transactions to $600+ and any number of transactions.

If you sell 601 miniatures online for $1 each then you get a 1099-K. If you sell 1 army online for $601 then you get a 1099-K.

   
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Pragmatic Primus Commanding Cult Forces






Southeastern PA, USA

So unload stuff now. Got it.

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Fixture of Dakka






No,

Just pay attention to your deductions and donations...



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 Grot 6 wrote:
No,

Just pay attention to your deductions and donations...


It's just something new that most people have never had to deal with and it's going to catch a lot of people off guard. Between what I've collected and buying the occasional collection, over the last 15 years I've probably hit over $3k every year on ebay with some years going over $10k. Now I have to think about how to manage that in light of getting a 1099-k with those amounts. I always "reinvest" whatever profit I get (it's my hobby budget), but now I have to learn how to explain that so I don't end up owing an extra $500-$1,500 in taxes.
   
Made in us
Rogue Daemonhunter fueled by Chaos






Toledo, OH

So this will be a hassle, but for all but serious resellers it shouldn’t affect your tax liability.

If selling your own goods, you only pay tax on profits, so selling used product at a loss would wash out.

If you are buying and reselling, you still get to deduct the cost of goods sold, plus the fees and shipping paid. In addition, you can deduct any other bona fide business expenses, such as high speed Internet, packaging supplies, etc.

what’s great about that is that as a business, you can deduct expenses In excess of revenue, allowing you to, at least for a year or two, deduct your business losses from any other income. The IRS won’t let you run a aside or “hobby business” at a loss indefinitely, but it’s good tool to have.
   
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Stalwart Dark Angels Space Marine




Plains World

 Polonius wrote:
So this will be a hassle, but for all but serious resellers it shouldn’t affect your tax liability.

If selling your own goods, you only pay tax on profits, so selling used product at a loss would wash out.

If you are buying and reselling, you still get to deduct the cost of goods sold, plus the fees and shipping paid. In addition, you can deduct any other bona fide business expenses, such as high speed Internet, packaging supplies, etc.

what’s great about that is that as a business, you can deduct expenses In excess of revenue, allowing you to, at least for a year or two, deduct your business losses from any other income. The IRS won’t let you run a aside or “hobby business” at a loss indefinitely, but it’s good tool to have.


So the pile of shame is now a tax break. Thanks, IRS!
   
Made in us
Longtime Dakkanaut






 phandaal wrote:
 Polonius wrote:
So this will be a hassle, but for all but serious resellers it shouldn’t affect your tax liability.

If selling your own goods, you only pay tax on profits, so selling used product at a loss would wash out.

If you are buying and reselling, you still get to deduct the cost of goods sold, plus the fees and shipping paid. In addition, you can deduct any other bona fide business expenses, such as high speed Internet, packaging supplies, etc.

what’s great about that is that as a business, you can deduct expenses In excess of revenue, allowing you to, at least for a year or two, deduct your business losses from any other income. The IRS won’t let you run a aside or “hobby business” at a loss indefinitely, but it’s good tool to have.


So the pile of shame is now a tax break. Thanks, IRS!


I'm not slow at hobbying, I'm just bad at business.
   
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Throw it on a schedule C. List what you have and show how much you paid for it. You can show how much it was when you bought it, you can deduct the earnings from the sale (cost of goods sold). The IRS will limit your losses though.

[/sarcasm] 
   
Made in us
Armored Iron Breaker




Charlotte, NC

Former tax preparer here, but it has been a while since I was employed at that job so I may be rusty on the tax law. There is a difference between a "business" and a "hobby" but where the hobby comes in for the IRS with us is if you are selling the miniatures after you paint them for a profit, as the actual miniature is more of a Cost of Good Sold or a supply. People who are artists as their hobby that sell their art is the prime example that the IRS uses to define what a hobby is. That miniature to them is basically the canvass. The business side is if you are basically a dealer of miniatures and is something that you declare to the IRS more or less. If this is not a business or an official hobby, then the sale of miniatures is considered to be a "Collectable" and thus subject to taxes based on capital gains if held for more than one year and on the same schedule that you would include your stock portfolio. Good news is that you can sell for a loss up to 3K worth of miniatures and get a current deduction for the losses and carryover the rest, but if you are selling for a gain then it matters what you bought them at.

The one thing that I learned about taxes is that the more money involved the more that the IRS will take interest, especially when they are writing the checks to you. What do I mean by that with us? If you sell $10,000 worth of miniatures, then you better have the receipts still to show how much you paid for them, as that is a lot of tax money that you are not forking over to the IRS. Likewise if you sell $500 worth of Miniatures you better have the receipts to prove that you bought it for $3500 if you are trying to get the capital gains loss deduction from it. Having said that, a $100 capital gain loss will likely not get a second look as the letter to you questioning it would cost more to produce than the taxes that they would get from you. No guarantee, but I would ask to see if you have an ex who now works at the IRS if they are hitting you with a letter questioning a $100 dollar deduction.

This message was edited 3 times. Last update was at 2021/09/21 00:25:42


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If it's a hobby, you cannot deduct more losses than income. I was wrong as it's not on a schedule C but instead a scedhule A.

https://www.irs.gov/newsroom/five-things-to-remember-about-hobby-income-and-expenses

[/sarcasm] 
   
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Daemonic Dreadnought





Eye of Terror

TinyLegions wrote:
Former tax preparer here, but it has been a while since I was employed at that job so I may be rusty on the tax law. There is a difference between a "business" and a "hobby" but where the hobby comes in for the IRS with us is if you are selling the miniatures after you paint them for a profit, as the actual miniature is more of a Cost of Good Sold or a supply. People who are artists as their hobby that sell their art is the prime example that the IRS uses to define what a hobby is. That miniature to them is basically the canvass. The business side is if you are basically a dealer of miniatures and is something that you declare to the IRS more or less. If this is not a business or an official hobby, then the sale of miniatures is considered to be a "Collectable" and thus subject to taxes based on capital gains if held for more than one year and on the same schedule that you would include your stock portfolio. Good news is that you can sell for a loss up to 3K worth of miniatures and get a current deduction for the losses and carryover the rest, but if you are selling for a gain then it matters what you bought them at.


Had the same conversation with my accountant last year, the difference between "work of art" and "collectible" seems to be where they draw the line.

One thing to remember about 1099s - this is the same form you get if you work for someone as a contractor, it just means you were paid for a good or service without becoming an employee of the company.

If you are selling in a volume that would really affect the amount you owe in taxes, it might be good to look at getting an EIN and maybe even setting up an LLC. The advantage to treating your hobby as a business is expenses. Paint, brushes, miniatures, etc become business expenses if you have a business that sells painted miniatures.

   
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 techsoldaten wrote:
TinyLegions wrote:
Former tax preparer here, but it has been a while since I was employed at that job so I may be rusty on the tax law. There is a difference between a "business" and a "hobby" but where the hobby comes in for the IRS with us is if you are selling the miniatures after you paint them for a profit, as the actual miniature is more of a Cost of Good Sold or a supply. People who are artists as their hobby that sell their art is the prime example that the IRS uses to define what a hobby is. That miniature to them is basically the canvass. The business side is if you are basically a dealer of miniatures and is something that you declare to the IRS more or less. If this is not a business or an official hobby, then the sale of miniatures is considered to be a "Collectable" and thus subject to taxes based on capital gains if held for more than one year and on the same schedule that you would include your stock portfolio. Good news is that you can sell for a loss up to 3K worth of miniatures and get a current deduction for the losses and carryover the rest, but if you are selling for a gain then it matters what you bought them at.


Had the same conversation with my accountant last year, the difference between "work of art" and "collectible" seems to be where they draw the line.

One thing to remember about 1099s - this is the same form you get if you work for someone as a contractor, it just means you were paid for a good or service without becoming an employee of the company.

If you are selling in a volume that would really affect the amount you owe in taxes, it might be good to look at getting an EIN and maybe even setting up an LLC. The advantage to treating your hobby as a business is expenses. Paint, brushes, miniatures, etc become business expenses if you have a business that sells painted miniatures.


I need to figure out what's the best way to handle this for next year's taxes. I generally do a few thousand on ebay every year between selling stuff I've had since I was a kid and stuff I've picked up over the years as well as occasionally buying a collection and selling the duplicates/extras I don't need to hopefully break even. I've sold terrain I've made in the past two. I don't really "make a profit" as I just put the money back into more hobby stuff.
   
Made in us
Armored Iron Breaker




Charlotte, NC

 techsoldaten wrote:
TinyLegions wrote:
Former tax preparer here, but it has been a while since I was employed at that job so I may be rusty on the tax law. There is a difference between a "business" and a "hobby" but where the hobby comes in for the IRS with us is if you are selling the miniatures after you paint them for a profit, as the actual miniature is more of a Cost of Good Sold or a supply. People who are artists as their hobby that sell their art is the prime example that the IRS uses to define what a hobby is. That miniature to them is basically the canvass. The business side is if you are basically a dealer of miniatures and is something that you declare to the IRS more or less. If this is not a business or an official hobby, then the sale of miniatures is considered to be a "Collectable" and thus subject to taxes based on capital gains if held for more than one year and on the same schedule that you would include your stock portfolio. Good news is that you can sell for a loss up to 3K worth of miniatures and get a current deduction for the losses and carryover the rest, but if you are selling for a gain then it matters what you bought them at.


Had the same conversation with my accountant last year, the difference between "work of art" and "collectible" seems to be where they draw the line.

One thing to remember about 1099s - this is the same form you get if you work for someone as a contractor, it just means you were paid for a good or service without becoming an employee of the company.

If you are selling in a volume that would really affect the amount you owe in taxes, it might be good to look at getting an EIN and maybe even setting up an LLC. The advantage to treating your hobby as a business is expenses. Paint, brushes, miniatures, etc become business expenses if you have a business that sells painted miniatures.


Yep, if you are a volume seller you can likely be considered to be a business, but setting up an LLC, and a TIN, not an EIN as that is for employers which is not in effect until you have someone else to pay wages to.


Automatically Appended Next Post:
 bbb wrote:
 techsoldaten wrote:
TinyLegions wrote:
Former tax preparer here, but it has been a while since I was employed at that job so I may be rusty on the tax law. There is a difference between a "business" and a "hobby" but where the hobby comes in for the IRS with us is if you are selling the miniatures after you paint them for a profit, as the actual miniature is more of a Cost of Good Sold or a supply. People who are artists as their hobby that sell their art is the prime example that the IRS uses to define what a hobby is. That miniature to them is basically the canvass. The business side is if you are basically a dealer of miniatures and is something that you declare to the IRS more or less. If this is not a business or an official hobby, then the sale of miniatures is considered to be a "Collectable" and thus subject to taxes based on capital gains if held for more than one year and on the same schedule that you would include your stock portfolio. Good news is that you can sell for a loss up to 3K worth of miniatures and get a current deduction for the losses and carryover the rest, but if you are selling for a gain then it matters what you bought them at.


Had the same conversation with my accountant last year, the difference between "work of art" and "collectible" seems to be where they draw the line.

One thing to remember about 1099s - this is the same form you get if you work for someone as a contractor, it just means you were paid for a good or service without becoming an employee of the company.

If you are selling in a volume that would really affect the amount you owe in taxes, it might be good to look at getting an EIN and maybe even setting up an LLC. The advantage to treating your hobby as a business is expenses. Paint, brushes, miniatures, etc become business expenses if you have a business that sells painted miniatures.


I need to figure out what's the best way to handle this for next year's taxes. I generally do a few thousand on ebay every year between selling stuff I've had since I was a kid and stuff I've picked up over the years as well as occasionally buying a collection and selling the duplicates/extras I don't need to hopefully break even. I've sold terrain I've made in the past two. I don't really "make a profit" as I just put the money back into more hobby stuff.


Best advice is to talk to an accountant some time next year if you are really doing that amount of transactions. Bottom line I would start keeping at least a log of what you buy and sell and for how much. If you have receipts and things like eBay ads, then I would keep them.

This message was edited 2 times. Last update was at 2021/09/21 17:08:30


My Hobby Blog: https://tinylegions.blogspot.com/

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I keep a spreadsheet so I can try to keep dibs on when I've broken even, but when buying stuff it's all on ebay, or via paypal, and it's for a pile of random stuff usually, so not sure how easily that will be to document legally.

Ugh. I'm just so annoyed at the tedium this will cause.
   
Made in us
Incorporating Wet-Blending






 bbb wrote:
Ugh. I'm just so annoyed at the tedium this will cause.


Get used to it. Looks like individual states are also finally taxing online businesses, meaning that a small business would have to check if they owe sales tax to EACH state they do business in for their "nexus sales taxes". The upcoming Build Better Act will change the tax code yet again, after changes made in the previous two administrations. Well, I'm sure shipping rates are going to go up again, so with higher shipping costs, increased taxes, and more paperwork, we'll have fewer small companies bothering to deal with it all. With our health issues, higher tax rates, the additional work, and CoVid in the background, we may close up our own small business.

This message was edited 5 times. Last update was at 2021/10/12 08:47:53


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Made in es
Inquisitorial Keeper of the Xenobanks






your mind

The net effect will be to drive most small scale sellers out of the market, and into private cash transactions or trades for other things e.g. crypto. The people in the middle will take the biggest hit, as has been the trend for some time now (see recent analyses documenting the transfer of wealth from the middle to the top 1% during the last two years, and the past ten, and the last twenty, then back to the reverse fifty years ago, and the idea that this is intentional and a matter of top-down corporate lobbyist driven policy should become obvious).
Thankfully, I am a buyer, and if I do sell it is in person and typically at a loss as I tend to gift things to newer players in order to help them get into the hobby, so selling at a loss, though how the Fed Gov might expect that anyone has receipts for mini purchases from 1992 is beyond sane reasoning.
Let's go Brandon!

   
Made in gb
Decrepit Dakkanaut




UK

In the USA it will impact buyers too. If people don't want to sell because of tax purposes they might well stop using ebay and use somewhere else even just locally so its cash in hand. This means online sales of secondhand items might well collapse save for those who deal in big volume.

As a result instead of lots of local people selling they might well end up selling to secondhand traders. So the prices might well go up on a lot of things as secondhand trading stores will rise to dominate the market and individual sellers (who might otherwise pull prices down) might well be pushed out.

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I'm sure the inconvenience of shipping itself, and the existing high shipping costs (relative to retail) already dissuade many gamers from shipping games (eg. trading games over mail). Myself, I used to sell the occasional unloved game through snail mail. Pre-Covid, a FLGS ran a periodic flea market, and these were well-attended, meaning that gamers were quite willing to sell games, even at a deep discount, but not go through shipping.

And all business taxes and regulations do is help big businesses, since they already have dedicated resources (eg. departments) for government rules and regulations. Small businesses need to hire outside resources (eg. tax attorney) and spend more internal resources for this non-revenue overhead (ie. filling out paperwork). Because of tax hikes, CoVid, and our own failing health (retired), we're no longer renting our rentals and slowly shutting down our business. Pretty obviously, we're not generating the tax revenue these tax hikes were meant to create.

This message was edited 1 time. Last update was at 2021/10/19 18:06:04


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