What would qualify as a receipt for a 1099K for selling gear?

[golem]

Like, if I buy something on CL or Facebook, can I just write my own receipt to document that I bought an item and what price it was at? Sounds too simple but I do recall doing that with one transaction in the past when I was shipping an item abroad to my then Father in law

[tonebender]

I have never done it myself but I have those that I was selling or buying from come up with something for me to sign. It was always pretty straight forward and I have no idea why they wanted it. I know there are tax implications now and I have wondered what I would do if I were to sell something on Reverb that I have had for a long time like a guitar I paid $1000 and I sold it for $800. Wouldn't that trigger a 1099? If I no longer had the receipt to prove I took a loss I suppose I would have to fill out the info on the taxes accordingly and my signature would have to suffice. Further to I get to deduct the loss? Sorry I was no help and only clouded the issue. I am perplexed too.

[uwmcscott]

If you aren't selling an item that requires proof of sale for transfer of ownership ( like a car or a firearm or something along those lines ) then I'd think a copy of the transaction with the date/item/price signed by both parties should work. But I'm no tax attorney, and I didn't stay at a Holiday Inn last night so YMMV.

[redman]

If you aren't selling an item that requires proof of sale for transfer of ownership ( like a car or a firearm or something along those lines ) then I'd think a copy of the transaction with the date/item/price signed by both parties should work. But I'm no tax attorney, and I didn't stay at a Holiday Inn last night so YMMV.

Dude you ain't right that was funny.

[LightWingStudios]

Like, if I buy something on CL or Facebook, can I just write my own receipt to document that I bought an item and what price it was at? Sounds too simple but I do recall doing that with one transaction in the past when I was shipping an item abroad to my then Father in law

JUst ask them for a marked "Paid" Invoice. No big deal.

[Buddha Pickups]

You would only need the receipt if you get audited.
Is a handwritten receipt going to suffice? I doubt it but who knows.

[honyock]

Please everyone contact your representatives and senators and implore them to fix the 1099k reporting requirement from the asinine half-baked American Recovery Plan Act of 2021 before 2023 rolls around.

If you are a hobbyist and don't itemize, you can't deduct anything thanks to a 2018 law change. If you itemize I suppose this is a moot point, but still worth sharing.

One more BS thing about the threshhold change on the 1099k that will sting that much more. Refunds and fees/shipping are still reported as sales.

"The 1099-K form from Reverb reports the unadjusted gross sales you received through Reverb Payments during the last calendar year. This excludes only Marketplace Facilitator Taxes remitted by Reverb. Any Reverb fees and any refunded orders do not reduce your total sales for the year. Additionally, Reverb does have to report every sale, even if it was refunded, per state and federal tax reporting rules."

[andrewsrea]

Having dealt with government auditors for 35 years (I estimate between 400 and 700 accounting and process audits) and having survived an IRS audit in the late 80's when they had the marching army, like they will in months to come, I'll give you my ideas. While reading, keep in mind that the burden of proof is on you and government auditors' primary motivation is job security and oversimplifying (keeping it easy), which will work for or against you depending on these details:

1.) Keep all receipts for gear in an organized file, especially if you flip gear.
2.) For local pickup exchanges, create a receipt template with blanks to be filled out at point of sale: Item, Date, Price, Location, seller's initials. Phone number and address makes it more robust. Get used to saying, 'I need a receipt.'
3.) Keep a gear spreadsheet, showing how much you paid (including all taxes, fees for buying) and how much you netted in a sale, including fees and taxes paid.
4.) For items you bought new and no longer have the receipts, utilize the MSRP x (70% + Sales tax percentage) and have a music store buddy attest to that. It is common for them to buy at 50% MSRP + shipping and loan fees (typically 5% to 10% additional) and they shoot for 75% MSRP as a tag price and often sell for 70%. Auditors will accept the notion that you did not get the item for free but won't negotiate a value with you on the fly. They want documentation to show their review board.
5.) For used items with no receipts, the concept holds, however, you will document today's average sale price, devalued through an inflation model back to the year you purchased it.
6.) If the auditor states you do not have enough proof that you bought the item new, try and convince him to use the average of the last two methods out of fairness that neither one of you can prove if the item was bought new and the value is insignificant in your overall tax situation.
7.) In extreme cases, when else fails, have a music store valuate your sold gear. Or at least offer up that to the auditor to choose a music store he is comfortable with receiving a valuation.

If you do not have documentation of how much you have into your sold gear for the auditors to put in his case file, which he himself may be audited, auditors will go into simplify mode and assume your entire gross receipt to be taxable. Be ready for an inexperienced auditor to default to this as a reflex response. Remember, the more you take the offensive, the more they will go into 'defensive -oversimplified' mode. Don't threaten the field auditor with appeals and lawyers - that also has the opposite effect on the audit.

DO NOT rummage through files in the presence of an auditor, nor fall into leading speculative questions. Only answer questions, listen carefull, be concise and remember, you are not out to impress the auditor - just give them enough to go away and don't offer anything up you were not asked for. Don't answer trick questions like, 'How long you been selling gear and not reporting it on your taxes?' If he or she wants to chit-chat or tries to draw an opinion from you, pretend you have social difficulties and don't know how to respond. 'I don't know' is a perfect response, or even a blank stare, like they are speaking another language.

Your objective in an audit will be to provide the auditor just enough information to satisfy his case.

[Buddha Pickups]

"Congratulations to anyone who sells more than $600 worth of gear in a year, you're now a small business! You now have the privilege of paying a 15% small business tax and your income tax rate on your sales but don't worry, we promise we're going after the big guys!...as soon as they're done donating to our campaign "


After going through this process a few times, I'm glad I'm done.

[Buddha Pickups]

Having dealt with government auditors for 35 years (I estimate between 400 and 700 accounting and process audits) and having survived an IRS audit in the late 80's when they had the marching army, like they will in months to come, I'll give you my ideas. While reading, keep in mind that the burden of proof is on you and government auditors' primary motivation is job security and oversimplifying (keeping it easy), which will work for or against you depending on these details:

1.) Keep all receipts for gear in an organized file, especially if you flip gear.
2.) For local pickup exchanges, create a receipt template with blanks to be filled out at point of sale: Item, Date, Price, Location, seller's initials. Phone number and address makes it more robust. Get used to saying, 'I need a receipt.'
3.) Keep a gear spreadsheet, showing how much you paid (including all taxes, fees for buying) and how much you netted in a sale, including fees and taxes paid.
4.) For items you bought new and no longer have the receipts, utilize the MSRP x (70% + Sales tax percentage) and have a music store buddy attest to that. It is common for them to buy at 50% MSRP + shipping and loan fees (typically 5% to 10% additional) and they shoot for 75% MSRP as a tag price and often sell for 70%. Auditors will accept the notion that you did not get the item for free but won't negotiate a value with you on the fly. They want documentation to show their review board.
5.) For used items with no receipts, the concept holds, however, you will document today's average sale price, devalued through an inflation model back to the year you purchased it.
6.) If the auditor states you do not have enough proof that you bought the item new, try and convince him to use the average of the last two methods out of fairness that neither one of you can prove if the item was bought new and the value is insignificant in your overall tax situation.
7.) In extreme cases, when else fails, have a music store valuate your sold gear. Or at least offer up that to the auditor to choose a music store he is comfortable with receiving a valuation.

If you do not have documentation of how much you have into your sold gear for the auditors to put in his case file, which he himself may be audited, auditors will go into simplify mode and assume your entire gross receipt to be taxable. Be ready for an inexperienced auditor to default to this as a reflex response. Remember, the more you take the offensive, the more they will go into 'defensive -oversimplified' mode. Don't threaten the field auditor with appeals and lawyers - that also has the opposite effect on the audit.

DO NOT rummage through files in the presence of an auditor, nor fall into leading speculative questions. Only answer questions, listen carefull, be concise and remember, you are not out to impress the auditor - just give them enough to go away and don't offer anything up you were not asked for. Don't answer trick questions like, 'How long you been selling gear and not reporting it on your taxes?' If he or she wants to chit-chat or tries to draw an opinion from you, pretend you have social difficulties and don't know how to respond. 'I don't know' is a perfect response, or even a blank stare, like they are speaking another language.

Your objective in an audit will be to provide the auditor just enough information to satisfy his case.

Ton of good advice here.
I made sure to purchase all my shipping labels and supplies and etc through PayPal so I had receipts for everything when i was selling regularly. Still a pain in the ass to do all the math and whatnot but can be worth it if you have the time to do it and if you keep good records.