Paypal Changes for 2022

jl1ny

157 posts

01-11-2022 6:44am

@secretguy @jond 

Ok Mr. Do Right, give me a friggin’ break…paying taxes is one thing, this nonsense is a blatant overreach by the govt. I get destroyed in taxes, I’d like to know what snow globe you two are living in. 

I live in a strange thing called society. You should try it sometime..

One, two, three, four
One, two (one, two, three, four)

Let me tell you how it will be
There’s one for you, nineteen for me
’Cause I’m the taxman
Yeah, I’m the taxman

Should five percent appear too small
Be thankful I don’t take it all
’Cause I’m the taxman
Yeah, I’m the taxman

I’ll tax the street
(If you try to sit, sit) I’ll tax your seat
(If you get too cold, cold) I’ll tax the heat
(If you take a walk, walk) I’ll tax your feet
(Taxman)

’Cause I’m the taxman
Yeah, I’m the taxman

Don’t ask me what I want it for
(Ah, ah, Mr. Wilson)
If you don’t want to pay some more
(Ah, ah, Mr. Heath)
’Cause I’m the taxman
Yeah, I’m the taxman

Now my advice for those who die (taxman)
Declare the pennies on your eyes (taxman)
’Cause I’m the taxman
Yeah, I’m the taxman
And you’re working for no one but me (taxman)

Songwriter: George Harrison

We need an "Amplified Politics" or "Political Speakers" or "Vintage Views" forum/Topic out here. All political commentary would have to go into that forum, and violators would be suspended for a week. There's no reason for so many of these threads to turn toxic. (It probably doesn't help for me to point out that it's almost always one "side" that starts it.) 

As for many, music and audiophile culture is a refuge for me during these difficult times. It's so depressing to see the same hostile, angry, and too often uninformed nonsense dragging down so many threads.

As I understand the rule is straight and simple: no profit with in a sale - no tax has to be paid… just provide all the forms to your account or if you prepare your taxes personally, make all necessary calculations, if you have any profit - pay your taxes and you done. 

I agree with ghasley that this is a nothingburger. Here' why. The following assumes that you buy and sell gear as a hobby and that you do not have a business buying and selling things like amps and DACs.

For 99% of the gear you sell you will take a loss. When you report your taxes you will fill out your form and show that you took a loss on the items you sold. Therefore, no taxes due. If you sold 10 pieces of gear and took a loss on 9 of them you can use the total loss amount to offset the gain you made on one piece. No tax due again.

You do not need the receipt. This is because you do not send copies of your receipts when you file your taxes. The only time you might possibly need a receipt is if you get a TCMP audit (Taxpayer Compliance Measurement Program) where an IRS agent will go through your return line by line. This is very rare but if it happens you can show the agent that the retail price of the item is higher than the price you sold it for.. Any documentation will do - i.e. magazine review, internet review, audio buyer's guide, etc. If you bought it used you can probably locate a record of the transaction (email confirmation for example) to show that you sold it for less than you bought it for. Even if you have no records there's a miniscule chance that the agent will sweat you about it. They've got much bigger fish to fry. Just treat them with respect and don't piss them off.

I've had a TCMP audit and it's no fun but I can tell you that the agent is way too busy to be concerned about a few pieces of audio gear. They also operate by using common sense. Everybody knows that audio gear depreciates over time and trying to charge you income tax on something that obviously depreciated would never stand up if you contest the audit..

In other words, relax. When you file your 1040 for 2022 and you have a few 1099s for audio gear, just show that you sold each item at a loss. It's really that simple. Nobody will pay taxes on hobby items that they bought and subsequently sold at a loss.

Have a beer. Listen to some Trip Hop. It's going to be OK.

@northman

A G R E E

I have yet to make a single penny of profit form selling audio gear.

AudioGone is an apt descriptor  

@wsrrsw 

Lots of high end discontinued gear getting more expensive with time. The proofs are all around: vintage phono carts and NOS tubes, rare discontinued cables, OPPO Players…. For example discontinued Cambridge CXU price got almost twice more expensive than original price 5 years ago. 

So, if you buy a piece of gear for $1,000 and sell it for $1,500 you have a $500 profit. Depending on your tax bracket you would owe between zero and $185 (37%) in income tax. You might owe some state income tax as well depending on where you live. Would anyone here find this offensive? Paying around $200 in income tax because a statistical outlier of a piece of gear appreciated?

This is a nothing cheeseburger...its not a big deal to pay income tax as a hobbyist if you get lucky and something appreciates. If its a big deal, start a business, pay the fees necessary and set up shop. It looks easy and is hard as heck to make money in the audio business.

OR

You can pay a few dollars in income tax on the absolutely rare occurrence that a couple of items here or there MIGHT have appreciated enough to generate a profit. Senseless handwringing.

So, in that rare case like selling an oppo 205 we can say “buyer to pay shipping, PayPal fees and estimated income tax due”. 

I love all country that have woman and I no buy or sell gear. I buy Maggie from dealer Wilson and Rockport buy trade in and dealer have to deal with government. 

@snapsc 

So, in that rare case like selling an oppo 205 we can say “buyer to pay shipping, PayPal fees and estimated income tax due”. 

OR

You could ask for interesting trades of "X, Y or Z" or you could ask for your basis and ask that the buyer donate $X to a charity (of your choice) and include the charity receipt with their payment prior to shipping. OTHERWISE, someone would be trying to EVADE income taxes rather than to AVOID or DEFER income tax. Quite a different matter.

@grannyring I see your position. Many may not be aware but you often do favors for fellow hobbyists and mod their gear...best I can tell you barely cover your costs for doing so.

@grannyring I also recognize that I am an outlier. I probably bought and sold a combined six figures worth of gear during 2021 BUT, I keep meticulous records out of habit. In the past, if something was less than a few thousand dollars, I haven't kept up with it. Going forward, I will. Paypal is still pretty darn convenient but I see your point.

Let’s talk about non-audio. You downsize and sell you home. Now it’s time to sell all the extra stuff you have. Some of it is really great furniture, rugs etc…We did this recently.

Your lucky to get 10-15 cents on the dollar, but you end up selling some $2500-$5000 worth of stuff. You use Venmo and a 1099K form is issued. Now you have to go back as much as 10 or more years to determine what you paid for this stuff. If you can’t find the receipts, then I suppose you just pay the tax if you no longer have “precise” records. Again, don’t want the hassle.

The $600 hurdle is far to low in my humble option. Make it closer to $2500-$5000.

@8th-note : very informative! Question: what schedule would you file this under?

Also, I believe for hobby transactions, losses are disregarded, but gains are recognized. They cannot be offset with each other. I may be wrong

 Correct on gains and losses.

This wont be much different than what we now do when we donate goods to a certified charity. You can guesstimate with some backup, receipts are best but guesstimates with backup work and passed the smell test with a recent audit. It also depends a great deal on materiality of the aggregate tax return...$50,000 on a paypal 1099 on a return showing $1million of AGI isn’t a thing. $50,000 on a $50,000 AGI is a side business unless its a one off year.

By the way, everyone is aware that this isn't a new thing, its just that some of the vendors like Paypal must report the transactions. Technically, you must be able to determine basis for every transaction to determine if there was income or not.

Makes sense Ghasley. Very rarely do we make money on an audio sale or selling our used furniture. Keeping records of all these purchases going back 3,5,10 or 15 years is another matter.

Fines are a penalty for doing wrong.

Taxes are a penalty for doing right.

@thyname : Here is some further explanation. The following is my understanding but I'm not an accountant and I'm welcome to be corrected if I get any of this wrong. Overall, I'm speaking from a practical standpoint as opposed to a strict legal standpoint. Another point is that the IRS publishes rules regarding any change in the tax code and this issue will be no exception. Some time this year we will be able to see specific rules on how to handle this.

The first thing to realize is that this law was not intended for us. It's aimed at people who are acting like a business (making money in other words) and not reporting their income. If you have a handmade jewelry store on Etsy and you never formed a business and never got a tax ID then the IRS is coming after you.

A 1099 from an entity like Paypal will have only one line that represents the total amount you received. It will not be itemized. When you do your taxes you will show a combined cost basis for the money received.on your 1099. I do not believe that you will be required to list each transaction and note the cost basis for each individual item. The government does not want to make things any more complicated than necessary.

The above is why I said that you can offset any gains by losses. It will all be combined into one line. Technically the IRS could argue that if you made $500 on one phono cartridge but lost $5000 on other audio gear then you should pay tax on the $500. However, there is an allowance for grouping transactions for an "Activity." Gambling is the best example. If you win a $10,000 jackpot but you can show that you lost $15,000 gambling in the same year then you don't have to pay tax on your winnings. In our case I think it could be shown that someone who buys and sells a lot of stereo gear could have that considered an Activity and pay taxes on the net profit for the year - likely zero.

Lastly, I can't emphasize enough, this only matters if you get audited which for most of us will never happen. Even then I guarantee that the IRS agent isn't worried about the slim possibility that you made a little bit of money selling an obscure phono cartridge. If you go into the audit and show the agent a picture of your stereo and describe how many components, records, and CDs you own, and explain that you buy and sell a lot of gear, almost entirely at a loss, he's going to roll his eyes and move on. Your little stereo hobby is a total waste of his time and resources.

I think it's going to be hard to abandon Paypal over this. Every payment service like Paypal is going to have to conform to the same rules which means that you will have to go outside of the normal transactional system. I would not buy or sell anything from anyone who would not accept Paypal because that's the first sign of a scammer. The thought of sending a money order to a complete stranger is laughable. Cryptocurrency? I don't think so. In my case I'll just put up with the minor hassle of adding a line to my tax return and go about my life.

@grannyring I certainly respect your position. I don't sell much anymore but curious what alternative payments you would take that wouldn't generate a 1099? I assume most Paypal, Venmo, Zelle, would does that mean we're back to waiting for checks to clear. That's how we did it here back in the 90s. 😁

+1 @nonoise and @8th-note 

@8thnote , Lots of folks don’t accept PayPal that are great sellers. Its becoming more “normal”. Look at the feedback first. However, I hope you are right about the other stuff in your post! Good post.

@jond, you are correct. Wait for a check to clear or bank transfer. I like bank transfers. Only deal with proven sellers however.

@8th-note : They do get itemized. I received already a PayPal 1099-k for 2020 last year. I am in one of those 9 states I mentioned above (see reference below) that already had and have the PayPal reporting requirements for much lower amounts. The 1099-k form had each transaction listed separately with dollar amount and date of transaction.

Are you saying we just ignore the form if we know we did not make any profit?

Say for example, I sold something for $1,000, that I bought a few years back for $2,000. Clearly a loss. It’s reported in that 1099-K form that also gets sent to IRS. What do I do with the form? Do I ignore it? Or do I have to report it in my return, and if so, how? Which schedule? Again, not a business, just an audio enthusiast upgrading.

_————-

• Maryland, Massachusetts, Mississippi, Vermont, and Virginia require a 1099-K to be filed if a TPSO pays a state resident $600 or more during the year.
• Illinois and New Jersey have a $1,000 1099-K threshold (plus, for Illinois, a requirement of at least four transactions).
• Arkansas has a $2,500 threshold.
• Missouri has a $1,200 threshold.

https://ifunny.co/picture/if-you-hit-a-grand-slam-it-s-only-fair-W1xEIVdZ6?s=cl

@tubebuffer : what do you exactly know about US tax system AND baseball?

Please…. Let the adults take this thread on, and tackle the real issue at hand. Please 

@thyname Well, I've about reached the end of my knowledge on this issue. I didn't realize that Paypal itemized all of the transactions.

At this point I'm sort of guessing but here goes. You would normally list any income and account for a 1099 on Schedule C. On this schedule you have the opportunity to deduct expenses. In our case we would deduct the original cost of the item(s).

I'll look forward to the IRS publishing the rules around this change (I live in Washington) but you will have to file before that happens. It's obvious to me that the current rules (I looked them up) were not put together with this type of situation in mind.  Without knowing any more than I know now, here's how I think I will handle it when the time comes.

If my Paypal 1099 only represented audio gear I would lump it all together on one line on Schedule C and show that I had a loss. If the 1099 had more than audio gear then I would break it into categories and put down the profit or loss for each category. You don' need receipts - if the original cost is in the ballpark that is close enough. The main thing would be to account for the total of the 1099 on Schedule C so that your return matches IRS records. Again, I'm speculating, but I think the IRS doesn't want to worry about selling household items at a loss. I just can't believe that the IRS wants to get into the weeds regarding the sale of amps, turntables, used books, old computers, and gramma's dishes. As long as your schedule C matches your 1099's you should be fine. But I've been wrong before......

Well, I've about reached the end of my knowledge on this issue. I didn't realize that Paypal itemized all of the transactions.

That’s OK. I appreciate the effort

You would normally list any income and account for a 1099 on Schedule C. On this schedule you have the opportunity to deduct expenses. In our case we would deduct the original cost of the item(s).

Schedule C is for self employed people. Business. I ran no business. This is my audio hobby. 

Any CPAs here? Let’s put this out there. Example:

———-

Say for example, I sold something for $1,000, that I bought a few years back for $2,000. Clearly a loss. It’s reported in that 1099-K form that also gets sent to IRS. What do I do with the form? Do I ignore it? Or do I have to report it in my return, and if so, how? Which schedule? Again, not a business, just an audio enthusiast upgrading.

———-

I appreciate it.

Ok. Loud and clear? How about a little love for the government. They are simply looking to redistribute wealth from those who have earned it to those who have not. Pretty simple, I give my money from my stash to those who have done nothing to merit such a receipt. I work hard, accumulate assets with post tax dollars and then sell such assets at a profit or loss and then pay a tax on those sales. Yup, makes sense to me. Moving closer towards a socialist state with every passing day. 

       Combine The & IRS, for the way your loving gov'ment views what you've worked for, all your lives.

                                      (hint: it ain't YOURS)

@rodman99999 may I humbly suggest you establish a militia?
 

Don’t you have other internet sites for this kind of stuff?

                              Oh, look: It's snowing!

Breaking news! redistribution of wealth is the foundation of a modern society. Otherwise you would have the vast majority of not wealthy people take up on tools to take the wealth off the vast minority of wealthy people. Why is this so hard to comprehend.

Funny thing is these folks calling foul are more often than not, in the receiving end of the government handouts.

@rodman99999 just pay your taxes. Its a privilege to live in this country and Im certain ther are plenty of people who pay alot more than both of is who never gripe. Thankfully.

@thyname redistribution of wealth is another way of saying theft at the force of federal government.  I hear the oft repeated phrase, "what do they need all that money for!" I don't have any idea how much money you make and I don't give a rip. It isn't my business. I want you to consider this though, to someone you are rich beyond their wildest dreams. Why is it right you should have what you have? Shouldn't you divest yourself of your possessions to make it "fair" or does that only apply to people you think are richer than you?
You didn't go as far as advocating violence, but you hinted at it as a remedy. Will you be comfortable when they come for you? The majority of rich people have come by what they have honestly and it's not any more fair to take it from them than it is from you. We don't have a too little taxation problem in this country; we have a spending problem in this country. Can you name any government agency that was created to solve a problem that has ever solved the problem then gone away because the job was done?  You can't tax your way to prosperity. Even Jesus said 'the poor you will always have with you'. 

One of you, I believe it was @nonoise inferred that rich people hoarded their money and that's why people were poor. Do you honestly think that way? People that have money are putting it to work, not stuffing it in a mattress. They are investing, growing, building, spending, donating. Putting people to work. I have never gotten a job from a poor man and neither has anyone here. 

The amount of confusion that has been displayed by what I would consider intelligent people about this IRS reporting issue is evidence of the reason it shouldn't be taking place. Do the majority of people have the savvy to comprehend it? At last count I believe our tax code was over 80k pages. It's too easy to end up on the wrong side of a very powerful federal entity who have the power to either take away your house, your livelihood or your freedom. 

Do you think you own your house if you aren't renting? Even if it's been paid off for twenty years, thirty years or a hundred try to stop paying taxes on it and see how long it's yours.

I'm ticked at PayPal for taking a sizable hunk of the buyer's payment to me then sitting on MY money, first promising to give it to me the day after delivery, then sitting on it for two more weeks because "I hadn't used PayPal for awhile" (sounds like extortion). When they finally released the funds they wanted another $15 to wire the money immediately and avoid another "one to three day delay."  Seems like just another money-grubbing corporation putting up unnecessary hurdles to squeeze the customer and make added interest on the money "in transition."

Nonoise, I've got to wonder why no one read your comment about Brainwashed Infowars.  More ado about nothing.  I am not a sovereign citizen, heck, I am not a sovereign bot.  Thank you for post and some truth.

@dadork : other than the righteous speech, do you have any solutions to the PayPal reporting issue this thread was initiated? Read the OP. Or this does not pertain to you as you never bought or sold anything here? There are plenty of other sites for your kind of thing. Why is it so hard to stay on topic 

     For some reason: my reference to fiat money, who actually owns the Federal Reserve, the economy and how they all relate, got cancelled (pathetic).

                                       I expect: this will as well.

       Before it does: anyone interested in the facts regarding the above (and more), should copy/paste this in their search bar, obtain and read the book.

https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212

@thyname:

     Don't know if you got my answer to your query (01-11-2022  7:36 PM), before it was so rudely cancelled.

                                              Once again:

          https://www.investopedia.com/terms/c/capitalloss.asp

Some people have a really skewed and fact free notion of how things work. Most of it sounds like a grade school level rationalization of a desire to gaslight people. Good luck with that. Maybe a career writing for right wing news is in order as they have a willing and uncritical following that will eat that crap up.

All the best,
Nonoise

Thanks @rodman99999, I wish these qualify as capital loss, but I am afraid this is too good to be true. More likely a personal item kinda thing, that you cannot take a tax loss for, or a hobby classification. Hopefully a CPA can chime in here. Thank you though 

I thought Rush was (thankfully) dead.

@thyname-

     "More likely a personal item kinda thing, that you cannot take a tax loss for, or a hobby classification." 

     Read the second paragraph under, "Who Will Receive Form 1099-K in the Future?", of the article below*.

     If you are 1099ed: you're being considered in business, to one degree or another.

     If you're being taxed on the sale of ANY asset, the initial cost of the asset (as well as sales fees, shipping, etc) should be deducted to determine your tax liability, unless you just like paying something you don't owe.

     Any business I've ever conducted, has been taxed account to profit/loss statements (Schedule C).

     * https://news.bloombergtax.com/tax-insights-and-commentary/new-form-1099-reporting-coming-in-2022

       Here's what the current administration would LIKE to do:

        https://crsreports.congress.gov/product/pdf/IN/IN11772