Reverb-1099

[chimi42]

So because I live in the magical state of New Jersey I got a 1099 from reverb for 2021. A couple of big sales pushed me to almost 9k.

Planning to get my taxes done soon and was curious if anyone had any experience with this?

Looks like I’ll have to do a schedule c form to show how much I paid for the guitars originally to see if I made a profit or not. Given that most of my deals are in person/ cash I guess Uncle Sam will just need to take my word for it? A few were through guitar center so luckily I’ll have receipts for that.

Do I really need to start going down the road of getting hand written receipts from people who sell me gear?

Also not sure if I’ll want to continue using reverb now

Ps- sorry if this was discussed before

[mickey]

Well, I guess if you don't have receipts it was all profit?
At least that it how the IRS looks at things like that.
Yes, there was a longish thread on a very similar subject recently (about Reverb 1099'ing folks.)

EDIT: Would you like for me to delete your duplicate thread of this?

[Partscaster]

Its you Fatcat residence based reverb vendors that have been exempt from the tax system for long enough!
Maybe if you sold through a Caiman Island account they'd leave you alone.

[Buddha Pickups]

You can put whatever you want as far as profit vs loss on your taxes but keep in mind if you get audited they will need to see proof of what you paid. I don't think a handwritten Craigslist receipt will suffice.
I've done the 1099/schedule C thing a few times and I have all my receipts through PayPal and eBay.

Cracking down on those big reverb sellers like us is why the government wants to hire 75k more IRS agents..
Everyone in every state that crosses $600 will get one next year thanks to the last stimulus passed in 2021.

[chimi42]

Agree Tim!

Ps- I may have a need for more pickups. I will be in touch

[andrewsrea]

I agree with Tim.

Yes a Schedule C. You can deduct all expenses against the $9K+. Your price to buy the items, your costs to improve the items, selling expenses, shipping expenses and even the cost per mile to drive the item to the shipper.

Start keeping receipts or PDF copies of online transactions.

IRS statute of limitations is three years beginning with your latest submitted return. They choose to actively audit in two ways (in order of probability):
1.) Issuing a notice of error on your return with a new calculation, which you can dispute. Very common and based mostly on mechanical & rule interpretation errors. You'll need receipts to dispute and most people just go along with the IRS recommendation.

2.) Big $ + high probability of the IRS case paying off. Yep - before they commit to an audit they do a cost benefit analysis. Even if the IRS bolsters up, they are unlikely to spend $20K to send an agent (salary, travel expenses, analyst team back at the IRS and lawyers on retainer, etc.) to recover < $4K of possibly owed taxes from used guitar sales.

[thepezident]

Wife's friend is IRS agent. I floated this by her in text.

Her reply:

Hi-I just saw your message. I am not sure what they are expecting people in your situation to do. They are really looking for people running small businesses that get paid through these sites, not the average Joe selling old stuff around their house. Let me look into it and see if I can find anything. The IRS doesn’t have enough people to be looking at everyone that is going to get a 1099 like this.
Worse case, you attach a schedule to your return and show the cost of the stuff you sell and show that you actually had a loss.
You don’t have to show proof of the cost of stuff you sold when you file your return. Only if you are under audit and that is very unlikely in your situation. I can’t believe I am getting a tax question from you!


She exclusively goes after businesses and I think that holds true for most if not all of her co-workers.

[chimi42]

Wife's friend is IRS agent. I floated this by her in text.

Her reply:

Hi-I just saw your message. I am not sure what they are expecting people in your situation to do. They are really looking for people running small businesses that get paid through these sites, not the average Joe selling old stuff around their house. Let me look into it and see if I can find anything. The IRS doesn’t have enough people to be looking at everyone that is going to get a 1099 like this.
Worse case, you attach a schedule to your return and show the cost of the stuff you sell and show that you actually had a loss.
You don’t have to show proof of the cost of stuff you sold when you file your return. Only if you are under audit and that is very unlikely in your situation. I can’t believe I am getting a tax question from you!


She exclusively goes after businesses and I think that holds true for most if not all of her co-workers.

Cool! Thanks for posting this. Makes sense. Still kinda crummy to have to go through the process.

I just did my taxes online and now I have to wait for a nj specific form that will be available in two weeks to compete my return. 99.9999% sure it’s Bc I got the 1099k for the first time, so now I’m waiting two weeks to make two clicks and finalize my return.

[tonebender]

I had a company file a 1099 on me because they paid me $600 to play a corporate gig. By the time I deducted the subcontractors in the band and the expenses to put on the show, the IRS owed me $7,000. That is when I realized there is no money in the music business for me. LOL

[Buddha Pickups]

I agree with Tim.

Yes a Schedule C. You can deduct all expenses against the $9K+. Your price to buy the items, your costs to improve the items, selling expenses, shipping expenses and even the cost per mile to drive the item to the shipper.

Start keeping receipts or PDF copies of online transactions.

IRS statute of limitations is three years beginning with your latest submitted return. They choose to actively audit in two ways (in order of probability):
1.) Issuing a notice of error on your return with a new calculation, which you can dispute. Very common and based mostly on mechanical & rule interpretation errors. You'll need receipts to dispute and most people just go along with the IRS recommendation.

2.) Big $ + high probability of the IRS case paying off. Yep - before they commit to an audit they do a cost benefit analysis. Even if the IRS bolsters up, they are unlikely to spend $20K to send an agent (salary, travel expenses, analyst team back at the IRS and lawyers on retainer, etc.) to recover < $4K of possibly owed taxes from used guitar sales.

Yep, the schedule C will walk you through things and fees you can write off. If its going to be a permanent endeavor, you can even write off a small percentage of your home to use as a work space as well.
I think shipping, seller fees, PayPal fees, and supplies/cost of items will comprise the bulk of what you can write off.

I agree the likeliness of getting audited on this under 20k umbrella is small but it definitely happens. Happened to me 8 years ago when I withdrew ~5k from an old 401k but didn't count it as income, which ended up throwing me into a higher tax bracket as well and basically ended up nullifying the 5k I got when I got audited.

I dont think they'll send an agent to your house to check your reverb sales, but they can certainly ask for documentation through the mail/etc.
I know we're small potatoes but there must be a motive behind enlarging the number of small businesses to anyone that crosses $600.


Your tax responsibility is your income tax rate plus 15% small business tax on anything you consider profit.

[Buddha Pickups]

Wife's friend is IRS agent. I floated this by her in text.

Her reply:

Hi-I just saw your message. I am not sure what they are expecting people in your situation to do. They are really looking for people running small businesses that get paid through these sites, not the average Joe selling old stuff around their house. Let me look into it and see if I can find anything. The IRS doesn’t have enough people to be looking at everyone that is going to get a 1099 like this.
Worse case, you attach a schedule to your return and show the cost of the stuff you sell and show that you actually had a loss.
You don’t have to show proof of the cost of stuff you sold when you file your return. Only if you are under audit and that is very unlikely in your situation. I can’t believe I am getting a tax question from you!


She exclusively goes after businesses and I think that holds true for most if not all of her co-workers.

Most guitar related sales for us is probably considered a loss, however I'd assume claiming a loss is probably going to increase the likelihood you get audited. Maybe I'm making a large assumption there but it makes sense they're going to scrutinize harder on money they have to pay vs money you have to pay.
I would recommend you gather your documentation and receipts when you file either way. You don't want to have to scramble in the unlikely event they do audit you.

[golem]

What people have said here is about what I expected for 2022 for most of us. Most of us don't sell things on Reverb as a business. I buy/sell/trade a good bit, but had planned to cool it off with the no rules and a new job keeping me busier. Last few years I was hitting 30K-40K in sales there but I'm sure that profit was in the thousands at most (I don't keep track of the profit as money isn't my goal doing it). It's the paperwork that bothers me more than anything. I tend to buy local and in cash. IRS can't prove I'm making a lot of profit, but I also can't prove that I'm not.

[honyock]

Something I just stumbled upon and why I have not been selling much of anything on Reverb.

Be careful thinking you can write off any losses you incurred in the hobby of buying/selling guitars/gear. That gear you sold for a net loss after shipping/fees/etc. will likely still get taxed as income thanks to this BS.

https://www.ustaxaid.com/blog/breaking- ... et-seller/

American Rescue Plan Act Changes Form 1099-K 

Effective 1/1/2018, hobby businesses could not take deductions against hobby income. So if you sell an afghan you crocheted, it’s 100% income. No deductions for the yarns, the pattern, the hooks, etc. 
In the past, though, most people kind of skipped this step. Now with the new reporting, a lot of hobbyists will suddenly be looking at paying tax.



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[redman]

I just checked and I had about $7500 in sales on Reverb in 2021 but didn't get a 1099.

[Partscaster]

If it seems confusing, I'ld go to an H&R Block rep. They may well save you tons of money before the plusses and minuses are all tallied.
They may well know about related deductibles that could save you far more than their services cost.

[honyock]

I just checked and I had about $7500 in sales on Reverb in 2021 but didn't get a 1099.

Did you have more than 200 sales? if not you did not hit the previous threshold.

The new limit only went into effect after 12/31/2021

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[redman]

Did you have more than 200 sales? if not you did not hit the previous threshold.
The new limit only went into effect after 12/31/2021

No i just had about 10 or so but I'm going to list some stuff before long that will definitely be over $600 but it's still better than ebay and since I can't walk and I sure can't chase one of these grab and snatch guys down so I just don't trust people enough for Craig's List. GC only pays around 50% of what they will list it for. So you end up with is half or less of its value. I don't know of a better place to sell so I keep going back.

[Flatline]

This is why I'm done with Reverb/eBay/online sales. I'll just keep my stuff or do an occasional in-person sale via FB Marketplace or CL. I have a few things I could move, but this BS is why I haven't and won't bother unless I absolutely have to. I used to average 4-5 sales a month flipping or trading gear to then acquire more gear, but now it just isn't worth the time and hassle. I guess now that makes me more of a gear hoarder.

[Buddha Pickups]

The government has been relentless for years in trying to crack down on these big time incomes.

[Tonray's Ghost]

The government has been relentless for years in trying to crack down on these big time incomes.

The IRS is relentless...I recently won some cash in the Thai lottery (no not enough for a '59 burst)....a bit of research showed me that I actually had to report this as income on my US return if I were to cash the ticket ! However, if GF cashed the ticket (no tax on lottery winnings to Thai ciotizens) and made a gift to me of the proceeds, no US tax due. Even with sharing some of the proceeds with GF...come out ahead. The long arm of the taxing authorities...absurd.

I just wanted to add that when American citizens open a bank account here in Thailand, we must fill out IRS W-4 withholding form...and sign a dizzying amount of forms related to money laundering, no other nationality to my knowledge has these requirements. This all makes it difficult as many Thai bank branches don't want to deal with American accounts due to the amount of BS they must process (thanks to IRS strong-arming the foreign banks with implied threats of sanctions). Amazing what you learn...