1099s for Selling Gear is not Straight-forward

[andrewsrea]

During the 4th quarter of each year, I start tax planning and am wondering if I'll get a 1099 for gear I sold.

It got me thinking that for purposed of declaring income tax is misleading, perhaps unethically so. The IRS definition of 'earned income' can be paraphrased as value-added or net of cost. The 1099 is gross proceeds and does not account for your costs.

I could see musicians accidentally declaring the total value of the 1099 as income without realizing they should be declaring their net gain or loss. Thinking about it further, this probably applies to other items people sell at auction. I am pretty sure there are no IRS flags to tell you that this type of mistake was made.

Is the IRS being sneaky or short-sighted?

[LightWingStudios]

Both.

[Buddha Pickups]

Yes, file your schedule C if you get a 1099.
This is where you can write off expenses, shipping, materials, etc to offset what the 1099 claims as income.

[Partscaster]

My annual 100+ bucks I spend at H&R Block is so worth it. The dude saves me way more than it costs because I have no idea what all can be fairly written off. And, I suspect that the IRS sees a professional HRB tax accountants stamp and figures they arent going to willingly make false statements. I feel good, I save money, and time.

[nomadh]

Even if you do the sched c who has all the receipts for old ear they bought, repaired and upgraded.
So you sell an amp for 2k. How does the irs know you bought it for 200. If you bought it for 1600 how do you prove it? What about the $200 in tubes, the 3 $200 repairs?
Maybe you really had a 400 loss on your 2k. But you can't prove it if audited.
I don't take well to bullying. Something like this could get real ugly.

[honyock]

Well, they put it off another year, right at the last minute, so fat lot of good that does for people who were preemptively not selling for fear of getting screwed over by the illogical $600 limit...



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[MichaelR]

Well, they put it off another year, right at the last minute, so fat lot of good that does for people who were preemptively not selling for fear of getting screwed over by the illogical $600 limit...

I really want to sell some of mine but this $600 and 1099 thing is scaring me off from doing it. Oh but wait this is all about taxing the rich...........yeah right.

[Buddha Pickups]

Well, they put it off another year, right at the last minute, so fat lot of good that does for people who were preemptively not selling for fear of getting screwed over by the illogical $600 limit...

I really want to sell some of mine but this $600 and 1099 thing is scaring me off from doing it. Oh but wait this is all about taxing the rich...........yeah right.

They aren't going after "the top 2%", they're going after the bottom 98%... cause most of them are in the top 2%.

the $600 thing is already in effect for many states. It didn't take me long to figure out 9/10 of those states have 1 thing in common.

[golem]

Taxes have always been confusing for people. I feel like tax prepares actively lobby against anything that would make taxes easier and simpler for the average person.

I don't feel like the IRS is the boogeyman.

[honyock]

Taxes have always been confusing for people. I feel like tax prepares actively lobby against anything that would make taxes easier and simpler for the average person.

I don't feel like the IRS is the boogeyman.

They actively do lobby. INTUIT (Turbo Tax) and HR Block spend millions in profits to maintain the status quo...

https://www.propublica.org/article/fili ... against-it

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[andrewsrea]

If you are like me and don't have enough items to itemize and are required to use the Standard Deduction, this 1099 is treated 100% as taxable income. If it were fair, you would net out your cost from the gross and that difference would be a taxable gain, or a credited loss.

[honyock]

If you are like me and don't have enough items to itemize and are required to use the Standard Deduction, this 1099 is treated 100% as taxable income. If it were fair, you would net out your cost from the gross and that difference would be a taxable gain, or a credited loss.

same boat, that is why I have been blowing up my representative's and senators' email railing against this, but fat lot of good it will do since they all voted for the law ...

[golem]

If you are like me and don't have enough items to itemize and are required to use the Standard Deduction, this 1099 is treated 100% as taxable income.

What's the limit for having a number to itemize?

[artandsoul]

well this is how the game is played from street bums to millionaires, i bought a guitar , bike, paint brush, anvil at a flea market, auction, goodwill, facebook, street corner, crack head no mattter what is was for 400 cash and ended up selling it at flea market, corner, facebook etc for 100 i took a loss . thats how it works sometimes if not all times in the real tax world known as gov and big business or your business or anyone selling anything. it cost me x.xx to fix the guitar ,bike, anvil etc it cost x.xx in gas, parts, repair cost, internet cost, wiring, pickups, soldering iron, solder, strings, string winder, fret tools, etc etc etc. esp if u sell online since we all do it cost u internet for a year, tape, packing, printer ink, boxes, gas, repair cost, repair parts, etc etc the lose goes on for miles and miles. how else do companya like amazon , trump etc not pay fed taxes its called losses aka write offs which we all have but dont really think about . whoops just stepped on that 1200 guitar its broke another loss to write down. darn i didnt make anything this year all loses in the end and they add up to a lot probably 1200.00 from the 600 u sold darn im a bad seller! mr cash is his name he always losses money

[andrewsrea]

[What's the limit for having a number to itemize?

With personal income tax, you must use the Standard Deduction or Itemized. You cannot use both. Therefore, your 'hurdle' is the Standard Deduction.

So the magic number would be one dollar or more and then itemizing benefits you and yuo can use your sold gear costs as 'deductible items':
* $13,851 if you are 'single'
* $20,801 if you are 'head of household'
* $27,701 if you are 'married filing jointly'

The most common personal itemization is mortgage payments + real estate taxes. If you rent or fully own your domicile, it is really hard to itemize.

[andrewsrea]

well this is how the game is played from street bums to millionaires, i bought a guitar , bike, paint brush, anvil at a flea market, auction, goodwill, facebook, street corner, crack head no mattter what is was for 400 cash and ended up selling it at flea market, corner, facebook etc for 100 i took a loss . thats how it works sometimes if not all times in the real tax world known as gov and big business or your business or anyone selling anything. it cost me x.xx to fix the guitar ,bike, anvil etc it cost x.xx in gas, parts, repair cost, internet cost, wiring, pickups, soldering iron, solder, strings, string winder, fret tools, etc etc etc. esp if u sell online since we all do it cost u internet for a year, tape, packing, printer ink, boxes, gas, repair cost, repair parts, etc etc the lose goes on for miles and miles. how else do companya like amazon , trump etc not pay fed taxes its called losses aka write offs which we all have but dont really think about . whoops just stepped on that 1200 guitar its broke another loss to write down. darn i didnt make anything this year all loses in the end and they add up to a lot probably 1200.00 from the 600 u sold darn im a bad seller! mr cash is his name he always losses money

@golem is the best gear flipper I know. He wins some and loses some and trends to a profit. That said, I can say his profit is a sub-fraction of his gross proceeds. IMHO, if he pays taxes based on his gross sales then he is overpaying his 'fair share' by 90% or more.

Most 'flippers' do it to try gear that is new to them (I equate it to catch and release fishing). The majority of folks I know in that category tend to lose money and is the cost of entertainment. Itemization would work greatly for them, if they can itemize.

I am not going to get into a discussion on the complexity of the wealthy and corporations' contributions to tax revenue, as I believe it is a verboten topic according to the forum rules. I'll just say, if you don't like it - contact your representative and senator and tell them what you prefer.

[andrewsrea]

If you are like me and don't have enough items to itemize and are required to use the Standard Deduction, this 1099 is treated 100% as taxable income. If it were fair, you would net out your cost from the gross and that difference would be a taxable gain, or a credited loss.

same boat, that is why I have been blowing up my representative's and senators' email railing against this, but fat lot of good it will do since they all voted for the law ...

I read an article recently that criticized legislation passed from 2021 to now as being too subjective and 'open,' either by haste of rushing the bill through, or by design. Having read most of those bills pretty thoroughly (I am retired and have the time), I'd agree that your point is one of those 'half-baked' laws that should have been deliberated and refined to be fair to the taxpayer.

[golem]

https://www.irs.gov/newsroom/irs-announ ... rms-1099-k

@andrewsrea

Reverb sent me an email with a link to this saying the IRS delayed on having the new rules take affect after the companies that would have to send out the 1099Ks complained. Honestly, it doesn't take that long to change the business rules in software to make that happen. But, if enough people require paper copies, I could see that being a constraint based on what I've heard.

[honyock]

hopefully congress will wise up before 2024 and fix this, not wait until the proverbial 11th hour again.

[golem]

@golem is the best gear flipper I know. He wins some and loses some and trends to a profit. That said, I can say his profit is a sub-fraction of his gross proceeds. IMHO, if he pays taxes based on his gross sales then he is overpaying his 'fair share' by 90% or more.

Most 'flippers' do it to try gear that is new to them (I equate it to catch and release fishing). The majority of folks I know in that category tend to lose money and is the cost of entertainment. Itemization would work greatly for them, if they can itemize.

I definitely only flip to try new things (and generally so I can own nicer gear) as Rob points out. I'd be ok (not happy) paying taxes on my actual profit. Unfortunately, buying used locally doesn't exactly get you receipts and some of these items I bought years ago. So it's kind of a catch 22 where if I tried to pay taxes but didn't have all the proper documentation I'd be concerned about opening myself up to additional liability. If I paid taxes on gross sales, I'd basically keep everything I buy going forward until I retire or only sell locally for cash. It would be a huge liability.

I think there's a bit of a caveat that I don't exactly keep a spreadsheet of what I buy and sell and how much profit I make. I reckon it is certainly less than 5% of what I make from my day job.

Edit: I don't know if I'm the best you know. Chad actually does it as his day job I believe. I think he'd beat me both on total profit and volume. I think maybe I might be able to take advantage of buying more expensive items than he does. I don't see him buying CS Gibsons, Knaggs, and the like.