1099 tax rules

[BroccoliFarmer]

I'm still unsure of any time limit. Hypothetical: I once almost bought an apartment building. I was going to have it professionally managed. I would have deducted operational expenses for that, even though I might only spend a hundred hours a year managing it...

I also had a tax advisor tell me that there is an unwritten rule out question - is the activity something people do for fun? That will make it a hobby. That's why comic book collectors, photographers and reef aquarists all may have a challenge showing that what they do isn't a hobby. Snow plow operators have an easier time of it, few people do that for fun (grin).

Jay

Agreed on your hypothetical. Hence why the time spent is one of the rules. In your hypothetical situation, it is obviously a business because you have hired someone that will spend the time and it has a clear profit motive. This is why there are a number of tests and it is a preponderance of the evidence approach, whereas time spent is one of them. The situation that your hypothetical situation would be a problem would be the passive activity loss rules...since you personally did not spend a reasonable amount of time (as defined as 500 hours under the PAL rules), you would not be able to take losses until such a time that you either had passive activity gains or exited the business.

To your second point..is someone doing it for fun...that goes to the profit motive. Is the primary purpose of the venture for fun and the secondary is you make income or is the primary motive profit.

The big point about these rules are the fact that irs doesnt want people writing off their fish tank, salt, electrity, etc because they happened to sell a piece of coral for $10 but get to write off a few thousand off their taxes. As such, they wrote some guidelines that are generalities. As I stated above, hard and fast rules are easier to get around whereas guidelines give IRS auditors to step back and try to determine actual situation.

 

[workhz]

Wonder how many people reported gains on car sales the last couple of years when used car prices skyrocketed.

 

[MarsReefer]

People in this thread make it sound like they hired 87,000 agents all this year to go after hobbyists. That 87,000 figure is over 10 years and is to replace 67,000 retirees and restore the agents removed by the previous administration to try and recover the $3,000,000,0000,000 deficit they made.

 

[mfinn]

Looks like everyone gets a 1 year reprieve on the 600 threshhold for Venmo and paypal payments.

IRS delays new tax-reporting rule on Venmo, PayPal payments over $600

A controversial new tax-reporting policy involving payments over $600 on e-commerce platforms like eBay and Etsy will be delayed by one year, the IRS said.

www.foxbusiness.com

So starting next year, if I sell any used equipment here ( using PayPal) on R2R, and at the end of the year the total money paid to me exceeds $600 it gets reported to the IRS, and they will view that as taxable income, and I will be taxed on that money?
Even if the sales would be at a loss of the original cost of the items?
I don't suppose state sales tax plays into account?

 

[BroccoliFarmer]

So starting next year, if I sell any used equipment here ( using PayPal) on R2R, and at the end of the year the total money paid to me exceeds $600 it gets reported to the IRS, and they will view that as taxable income, and I will be taxed on that money?
Even if the sales would be at a loss of the original cost of the items?
I don't suppose state sales tax plays into account?

No. Not automatically. You have to make a tax adjustment for your cost of good sold and subtract that from line 8 (i think that is the line). So 1099-k minus cost of good sold not reported on 1099-k would be how much to include in income.

I actually think this right here is why it got pushed back. Too many people would have simply recorded the gross sales amount and got scrooged.

 

[mfinn]

No. Not automatically. You have to make a tax adjustment for your cost of good sold and subtract that from line 8 (i think that is the line). So 1099-k minus cost of good sold not reported on 1099-k would be how much to include in income.

I actually think this right here is why it got pushed back. Too many people would have simply recorded the gross sales amount and got scrooged.

Part of my specific situation is since I retired and only have SS and a union pension, I no longer have the itemized deductions to do anything other than short form. ( Taxact)

 

[BroccoliFarmer]

Part of my specific situation is since I retired and only have SS and a union pension, I no longer have the itemized deductions to do anything other than short form. ( Taxact)

For cost of good sold..you dont have to itemize. Line 8 equals gross sales - cost of goods sold for these situations.

 

[amygetsalife]

Don't forget that if you want to make $$ with your hobby....

You'll need to run it as a business, track expenses and income even if it's just too prove your Financials if they come calling.

Running it like a true business can sap your hobby of the enjoyment of said hobby.

Start trying to make real money with it as a business and it could be time to learn what the sales tax laws are for each state, in case you sell enough to exceed their minimums. It's no longer about what state you have nexus in (business Location).

Thank God for quick books, scanning apps for receipts, a great virtual bookkeeper, and a fabulous cpa.

There's a reason for that gap in pricing from a business versus a hobbyist. Excluding all the extra pricing for rare super ultra unicorn rainbow lava whatever. But that's a different thread.

 

[Jmp998]

Start trying to make real money with it as a business and it could be time to learn what the sales tax laws are for each state, in case you sell enough to exceed their minimums. It's no longer about what state you have nexus in (business Location).

You bring up the good point of sales tax, which probably varies a lot state to state.

What if you are only selling to a retailer (who then collects sales tax on their sales), essentially acting as a 'manufacturer'? In that case you would not need to collect sales tax, correct? For instance, say you are growing frags, sell them to BigNameCorals.com, which then sells those frags to consumers. As I understand you would not collect/pay sales tax, because an item should only be subject to sales tax one time.

 

[BroccoliFarmer]

Looks like the 600 1099 threshhold got pushed back another year. Tax cheats rejoice!!

Tax Update: IRS Delays $600 Reporting Threshold for Venmo, PayPal and Third-Party Payment Apps

In what will be great news before the end of the year for small business owners and millions of Americans, the Internal Revenue Service (IRS) announced it would delay the implementation of the tax...

finance.yahoo.com

 

[billyocean]

So not this year either?

 

[zoomonster]

Fortunately, in the new budget deal the IRS is also losing around 20 billion of the 80 billion from the inflation reduction act. That should put the brakes on the 80k+ new agents snooping through Grandma's penny jar

 

[harrylarry]

Don't forget that if you want to make $$ with your hobby....

You'll need to run it as a business, track expenses and income even if it's just too prove your Financials if they come calling.

Running it like a true business can sap your hobby of the enjoyment of said hobby.

Start trying to make real money with it as a business and it could be time to learn what the sales tax laws are for each state, in case you sell enough to exceed their minimums. It's no longer about what state you have nexus in (business Location).

Thank God for quick books, scanning apps for receipts, a great virtual bookkeeper, and a fabulous cpa.

There's a reason for that gap in pricing from a business versus a hobbyist. Excluding all the extra pricing for rare super ultra unicorn rainbow lava whatever. But that's a different thread.

Ppl actually report their hobby sales?? Suckers!

 

[zoomonster]

Ppl actually report their hobby sales?? Suckers!

Cash is king until they try to take that away and go all digital currency.

 

[harrylarry]

Cash is king until they try to take that away and go all digital currency.

Cash? I use apps

 

[zoomonster]

Cash? I use apps

And those apps will be reporting your income to the IRS near future. It was only delayed for now. It will be just like today when you don't report a 1099 on taxes. You'll be getting a letter asking for a revised return along with penalties and interest. Been there, done that.

 

[CubsFan]

Fortunately, in the new budget deal the IRS is also losing around 20 billion of the 80 billion from the inflation reduction act. That should put the brakes on the 80k+ new agents snooping through Grandma's penny jar

They’re not after grandma’s penny jar. They’re not all coming at once. Death and taxes.

 

[harrylarry]

And those apps will be reporting your income to the IRS near future. It was only delayed for now. It will be just like today when you don't report a 1099 on taxes. You'll be getting a letter asking for a revised return along with penalties and interest. Been there, done that.

crapppp

 

[workhz]

Dunno, got stuff from ebay for last years taxes but Virginia has always been on the forefront of tax collection.

 

[nereefpat]

crapppp

You said it, buddy.