I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 1:01 am
by honyock
Wonder if the new rule will prevent people from selling on Reverb? Especially if your significant other is the one who does the taxes and you have to show what you actually paid for a guitar
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 9:36 am
by RockYoWorld
In case others are like me and don't know what Section 9674 entails...
Tucked inside the American Rescue Act is a tax change that has big implications for tax revenue and the gig economy. Starting for tax year 2022, many contractors with gig economy companies like Uber UBER +2.4%, DoorDash and Lyft LYFT +5.8% will be getting 1099 forms when they previously wouldn't have.
The end result is that many more gig workers can accurately report their income — which, in turn, means that federal and state governments will collect billions more in income tax revenue.
New Income Reporting Threshold for Gig Workers
The new requirement is in Section 9674 of the federal bill and dramatically lowers the annual 1099-K reporting threshold from $20,000 and 200 transactions to just $600 and eliminates the transaction minimum.
The 1099-K form is used for all third party network transactions and payment card transactions. The change means that starting with tax season in 2023, contractors for app-based companies and entrepreneurs who sell goods at places like Etsy and eBay EBAY -0.8% will receive a 1099-K for any income they received via credit card or other third party payment services when that annual income totals at least $600.
Transactions that aren’t for goods or services (such as earnings on Bitcoin) are exempted from the change.
This could be a bit of a bummer. $600 can easily cover all sorts of digital payments. When a friend stayed with me for a few months, they used PayPal or Venmo to send me money for "rent." Payment to friends/family probably isn't actually taxable, but where does that line end? I'd guess that PayPal might not report payments under "Friends & Family" towards that number, but who knows?
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 10:59 am
by Flatline
If so they have effectively killed eBay, Reverb, etsy, etc... for normal folks that just want to sell the occasional used item.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 5:14 pm
by Chocol8
Don’t worry. No one will get a 1099 until after the next election cycle, so hopefully no one will notice.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 8:08 pm
by mighty_duck
I wouldn't worry too much about this. 1099-k's have cost basis. So if you buy a guitar for $400 and sell it for $400, you wouldn't owe any tax.
Heck, you'd probably be able to get a tax credit for your losses on guitar sales.
I Imagine this will become a huge headache for the IRS, and eventually dropped.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 15, 2021 10:12 pm
by tlarson58
This is very interesting. Thanks for the post.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Tue Mar 16, 2021 8:49 pm
by nomadh
I though the old limit was over $2k gets reported on ebay. I may be just a year away from being restricted to local trades for grandmas gold tooth an a fat calf to be named in the spring.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Tue Mar 16, 2021 10:24 pm
by Buddha Pickups
This has already changed in about 6 states.
While you only have to pay tax on your profit its still a pain as you have to keep receipts and keep track of any expenses involved in selling that item. It's a documentation nightmare that isn't worth the reward. Keep in mind that uncle Sam is going to scrutinize more if you try to claim on your taxes that you lost money. The tax rate is 15% + your income tax rate. Also keep in mind that this "income" can possibly put you in a different tax bracket.
Needless to say, I'm no longer an online seller. It was fun while it lasted. I've done the 1099 thing a couple times now and I'm done giving back half my profit to the government.
Next thing they'll do is find a way to track local and garage sales to tax those too.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Tue Mar 16, 2021 10:32 pm
by Buddha Pickups
Chocol8 wrote: ↑Mon Mar 15, 2021 5:14 pm
Don’t worry. No one will get a 1099 until after the next election cycle, so hopefully no one will notice.
Unless you live in a lovely state like Virginia, Massachusetts, Maryland, Illinois, DC, and a couple more New England area states...our lovely state legislatures have already made our requirement $600.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Wed Mar 17, 2021 12:37 am
by honyock
mighty_duck wrote: ↑Mon Mar 15, 2021 8:08 pm
I wouldn't worry too much about this. 1099-k's have cost basis. So if you buy a guitar for $400 and sell it for $400, you wouldn't owe any tax.
Heck, you'd probably be able to get a tax credit for your losses on guitar sales.
I Imagine this will become a huge headache for the IRS, and eventually dropped.
How do you document a purchase from Craigslist for cash that you sell on Reverb a couple years later? What about guitars that you fix and then sell? Would you have to document your time, materials, overhead? What about the tools you bought to do a fret job or something similar to make a guitar worth more than you paid? This basically will end my use of any online payment methods, back to cash and waiting out the local lefties...I do this for fun, not a business. If I have to start tracking everything just a lose money for nothing it is going to take the joy out of the game.
Next thing will be every state adopting this crap like they did with the Wayfair tax...
Re: I wonder if Stimulus section 9674 will affect Reverb
mighty_duck wrote: ↑Mon Mar 15, 2021 8:08 pm
I wouldn't worry too much about this. 1099-k's have cost basis. So if you buy a guitar for $400 and sell it for $400, you wouldn't owe any tax.
Heck, you'd probably be able to get a tax credit for your losses on guitar sales.
I Imagine this will become a huge headache for the IRS, and eventually dropped.
How do you document a purchase from Craigslist for cash that you sell on Reverb a couple years later? What about guitars that you fix and then sell? Would you have to document your time, materials, overhead? What about the tools you bought to do a fret job or something similar to make a guitar worth more than you paid? This basically will end my use of any online payment methods, back to cash and waiting out the local lefties...I do this for fun, not a business. If I have to start tracking everything just a lose money for nothing it is going to take the joy out of the game.
Next thing will be every state adopting this crap like they did with the Wayfair tax...
Exactly. You can do a written receipt but who knows if the govt would accept that if you were audited.
As far as tools, supplies, shipping fees, etc, you have to fill out a "schedule C" form to track your expenses, fees, etc. Luckily I do everything guitar related through PayPal so all my receipts are saved in my PayPal history but it's still a headache...i spent a total of about 20 hours this past month going through my history and calculating everything.
The question for many folks though is who knows when or if the govt is going to come knocking.
If they deem none of your receipts or records worthy, a ~40% tax on your online activity isn't an easy pill to swallow.
Re: I wonder if Stimulus section 9674 will affect Reverb
mighty_duck wrote: ↑Mon Mar 15, 2021 8:08 pm
I wouldn't worry too much about this. 1099-k's have cost basis. So if you buy a guitar for $400 and sell it for $400, you wouldn't owe any tax.
Heck, you'd probably be able to get a tax credit for your losses on guitar sales.
I Imagine this will become a huge headache for the IRS, and eventually dropped.
How do you document a purchase from Craigslist for cash that you sell on Reverb a couple years later? What about guitars that you fix and then sell? Would you have to document your time, materials, overhead? What about the tools you bought to do a fret job or something similar to make a guitar worth more than you paid? This basically will end my use of any online payment methods, back to cash and waiting out the local lefties...I do this for fun, not a business. If I have to start tracking everything just a lose money for nothing it is going to take the joy out of the game.
Next thing will be every state adopting this crap like they did with the Wayfair tax...
And if it sucks the joy out of your life then modern government has done its job. Persuit of happiness is being squashed and earning money is being outlawed.
Ca AB5 law has virtually outlawed gig working except the special uber carve out. Businesses here are afraid to hire contract labor now. And that law is going national.
Re: I wonder if Stimulus section 9674 will affect Reverb
mighty_duck wrote: ↑Mon Mar 15, 2021 8:08 pm
I wouldn't worry too much about this. 1099-k's have cost basis. So if you buy a guitar for $400 and sell it for $400, you wouldn't owe any tax.
Heck, you'd probably be able to get a tax credit for your losses on guitar sales.
I Imagine this will become a huge headache for the IRS, and eventually dropped.
How do you document a purchase from Craigslist for cash that you sell on Reverb a couple years later? What about guitars that you fix and then sell? Would you have to document your time, materials, overhead? What about the tools you bought to do a fret job or something similar to make a guitar worth more than you paid? This basically will end my use of any online payment methods, back to cash and waiting out the local lefties...I do this for fun, not a business. If I have to start tracking everything just a lose money for nothing it is going to take the joy out of the game.
Next thing will be every state adopting this crap like they did with the Wayfair tax...
And if it sucks the joy out of your life then modern government has done its job. Persuit of happiness is being squashed and earning money is being outlawed.
Ca AB5 law has virtually outlawed gig working except the special uber carve out. Businesses here are afraid to hire contract labor now. And that law is going national.
"We're not happy until you're not happy."
I really understand it though. All this free money isn't free.
When we weren't paying sales tax for on-line purchases it was bonus money and contributed to local brick and mortar stores closing, I believe.
Anymore will sound like I'm going political and that is not were I'm headed.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Wed Mar 17, 2021 11:20 am
by RockYoWorld
I guess if you think about it, I'm already dealing with 1099 stuff for all the money I make playing gigs, and that's only $4-6k on a non-COVID year. I get paid in cash as a contractor, but our band manager has enough money going through the band that he has to report it and I get an official tax document from him.
Yeah, there are write-offs, but you've got to be careful about reporting losses too many times.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 22, 2021 3:09 pm
by nomadh
RockYoWorld wrote: ↑Wed Mar 17, 2021 11:20 am
I guess if you think about it, I'm already dealing with 1099 stuff for all the money I make playing gigs, and that's only $4-6k on a non-COVID year. I get paid in cash as a contractor, but our band manager has enough money going through the band that he has to report it and I get an official tax document from him.
Yeah, there are write-offs, but you've got to be careful about reporting losses too many times.
I got 1099 1 time and that just happened to be the year I bought a les paul. I think its still on my taxes as a long term depreciation and will be writing it off for years.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 22, 2021 8:21 pm
by golem
What @mighty_duck says. If I buy something locally and sell on Reverb or PayPal how would they even know if I made a profit? Since that's pretty much the only thing I ever do, I'm not worried all that much. Plus it's a hobby at best for me just so I can try new things without going broke. At the scale where it becomes difficult to manage a 1099-K and an occasional white lie about what you paid would make a difference you're basically a business anyhow (in which case doing everything above board is what one ought to do).
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Mon Mar 22, 2021 10:17 pm
by Buddha Pickups
golem wrote: ↑Mon Mar 22, 2021 8:21 pm
What @mighty_duck says. If I buy something locally and sell on Reverb or PayPal how would they even know if I made a profit? Since that's pretty much the only thing I ever do, I'm not worried all that much. Plus it's a hobby at best for me just so I can try new things without going broke. At the scale where it becomes difficult to manage a 1099-K and an occasional white lie about what you paid would make a difference you're basically a business anyhow (in which case doing everything above board is what one ought to do).
If you don't have documentation of what you paid for the guitar, you would be taxed on whatever you sold it for.
Income tax rate +15%.
It would be debatable if they would accept a handwritten receipt from a local purchase, but that would be your only option.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Tue Mar 23, 2021 7:32 am
by golem
@Buddha Pickups in case of an audit? I doubt one would submit receipts every year.
Re: I wonder if Stimulus section 9674 will affect Reverb
Posted: Tue Mar 23, 2021 10:05 am
by Buddha Pickups
golem wrote: ↑Tue Mar 23, 2021 7:32 am
@Buddha Pickups in case of an audit? I doubt one would submit receipts every year.
Yes.
There's certainly going to be a huge surge of people getting 1099s but I would just say be prepared to have documentation, especially if you are trying to claim a loss.
