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Selling records and the new tax law


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15 hours ago, aopps42 said:

I tend to sell records I haven’t listened to in a few years, and theoretically would have bought those years before that. 

Same. And I'm guessing this applies to the large majority here that sell on Discogs. We're essentially selling to support the Hobby many times 😅

So I just ran my PayPal transaction history for all of 2021. For whatever reason it's cutting off the history prior to July 2021 (and I double checked Discogs and had orders between January - June). Any way, I'm in the $2,000-$2,500 total received range (not excluding taxes, fees and shipping costs obviously).

But when I go to my PayPal account > Statements and Taxes > Tax Documents, it shows that I dont have any tax documents that apply to me... ??????

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Sadly this whole thing has actually made me stop buying a lot of records that I would have previously bought. So I am no longer supporting my local record stores or favorite labels webshops anywhere near as much as I used to, which sucks. But ever since I had kids and actual bills to worry about I've pretty much had to sell records to buy records. As I really don't sell much anymore due to this so I'm now getting 1 record a month vs 5-10. 

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1 hour ago, ethanpricington said:

Same. And I'm guessing this applies to the large majority here that sell on Discogs. We're essentially selling to support the Hobby many times 😅

So I just ran my PayPal transaction history for all of 2021. For whatever reason it's cutting off the history prior to July 2021 (and I double checked Discogs and had orders between January - June). Any way, I'm in the $2,000-$2,500 total received range (not excluding taxes, fees and shipping costs obviously).

But when I go to my PayPal account > Statements and Taxes > Tax Documents, it shows that I dont have any tax documents that apply to me... ??????

Only a few states enacted laws that require 1099-k reporting for 2020 tax year. But because the state requires it, paypal (and sites like venmo, ebay, etc) are required to send the 1099-k to IRS which means you have to file it on federal as well. For tax year 2021, the federal government will require it for everyone. And it'll be a real shit show. 

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On 4/12/2022 at 12:47 PM, dreamover said:

it looks like i sold about $3200 worth of records on discogs in 2021. After I subtract the sales tax, discogs fees, paypal fees, shipping fees, and costs of goods, i made maybe $1200 profit. Since I'm not a business and hobby costs can no longer be deducted, my tax liability on the $3200 is about $1400. So I would've saved money throwing those $3200 worth of records in the trash. 

Fuck this "American Rescue Package" it only fucks the little guy. 

I'm confused on the "cost of goods" part of this. I've seen numerous places act like you only pay tax on profits. But is that really only true if you file as a business? It seems crazy that if you bought something for $100 and then sold it for $200 that you'd pay the 28% tax on the entire $200 and on the tax/shipping costs.

 

Ebay's 1099-K FAQ page still says this:

 

"No need to worry— you only pay taxes on profits. You won’t owe any taxes on something you sell for less than what you paid for it. For example, if you bought a bike for $1,000 last year and then sold it on eBay today for $700, that $700 you made would generally not be subject to income tax."

 

I'm also finding different tax advice online for what is considered a "hobby" sale vs just selling random things at garage sales or on Ebay. Those are somehow different?

 

This all appears to be way more confusing that initially advertised, and seems like there will be a giant mess next year at tax time. Which is why I mostly stopped selling.

 

Edited by fish
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11 minutes ago, ntslash said:

Just lunch a free Wix site, give yourself a name like Joe Blow Records, link to your ebay store, and then you can submit it all as business income and subtract the COGs. Easy peasy. 

And you can also set up a Sep IRA to help cut down on what you owe to the man and grow some retirement savings.

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On 4/12/2022 at 12:27 PM, dreamover said:

Yes and no. That assumes you're making a profit. A lot of people don't make any profit selling records. After fees, shipping, state taxes, selling some records for less than they paid, etc., the 20,000 threshold is designed to assume people aren't trying to make a profit and aren't hiring tax professionals and accounts to do their books. Of course, if you do $50k in annual sales, like yourself, that is in business territory and you need to keep records and pay appropriate taxes.

The way the new threshold works, it assumes all revenue is profit and the IRS is basically saying, you're not allowed to sell anything unless you're a business. 

I'd say 98% of the people on this board sell considerably less than 20k every year and this shit is going to hurt a lot of people. Everyone will suddenly be requiring for friends & family payments only which will give way to a lot more scammers to move in and take advantage of people. 

You can argue that I should've been paying taxes on all the extra income I make off selling records (which is probably $500-1500 a year in profit). The state sales tax gets paid automatically now, which is different. 

Are you paying the taxes on the whole amount that 50k+ in revenue you're taking in, or are you deducting expenses (the cost of the records, computer, label printer, packing supplies, storage, etc). Or do you classify every record you buy as a business expense and deduct it, lowering your overall tax burden? If so, I think that's WAY MORE bullshit than not paying tax on $1000 of extra hobby income. 

you can file as a sole proprietorship

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  • 2 months later...

So, tangentially related to the thread… but did anyone else see the PayPal changes going into effect on 7/28?

– No More Friends & Family Payments

Rationale: “This is safer in case any personal transactions take a bad turn and need disputing!”

Actual Intent: “Lmao you really thought you could evade some of your tax fees after those IRS changes, huh?  Get fucked. 😂

– Transaction Fees Now 2.99%

Rationale: “Previously 2.89% + $0.49, the numbers are just cleaner and simplified now.  This means lower fees for like, 90% of the transactions out there.  Don’t worry about it, you’re saving money.”

Actual Intent: “[More] money please. 🤗💰

 

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38 minutes ago, Derek™ said:

So, tangentially related to the thread… but did anyone else see the PayPal changes going into effect on 7/28?

– No More Friends & Family Payments

Rationale: “This is safer in case any personal transactions take a bad turn and need disputing!”

Actual Intent: “Lmao you really thought you could evade some of your tax fees after those IRS changes, huh?  Get fucked. 😂

– Transaction Fees Now 2.99%

Rationale: “Previously 2.89% + $0.49, the numbers are just cleaner and simplified now.  This means lower fees for like, 90% of the transactions out there.  Don’t worry about it, you’re saving money.”

Actual Intent: “[More] money please. 🤗💰

 

It only impacts business accounts. So either switch your PayPal account to a personal account or create a new PayPal account for personal use. 

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1 minute ago, ntslash said:

It only impacts business accounts. So either switch your PayPal account to a personal account or create a new PayPal account for personal use. 

Good call.  I honestly don’t know when or how my account was converted to a “business” one, considering my sales are chump change compared to a lot of people that post on here.  I really ought to look into swapping it – I see zero reason to keep it Business unless I someday decide to just sell everything I own.

Still kinda’ sucks for legitimate Business accounts who may want to use F&F for whatever reason though.

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  • 5 months later...
5 hours ago, skycriesmary said:

So now this $600 rule won't kick in until next year, to give out K-1's in '24?

https://www.cnn.com/2022/12/23/investing/irs-delays-threshold-increase-for-business-transactions/index.html

Happy it happened. I definitely didn’t sell as much this year bc I didn’t want to deal with this tax shit. So that’s annoying. But I’m assuming since they balked at the 600, the threshold will be higher so in the new year I should sell again. Not getting rich here Uncle Sam, just trying to keep my hobby funded!

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11 hours ago, turk99 said:

Happy it happened. I definitely didn’t sell as much this year bc I didn’t want to deal with this tax shit. So that’s annoying. But I’m assuming since they balked at the 600, the threshold will be higher so in the new year I should sell again. Not getting rich here Uncle Sam, just trying to keep my hobby funded!

mood! a small xmas gift at least but if the threshold isn't negotiated upwards that will be a terrible letdown haha.

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8 hours ago, floyd_z said:

I'm so happy about this!  I thought I was going to have to pay out the ass, now I might even get a return 

I mean, you're still supposed to pay taxes on any earnings whether you receive a 1099 form or not. The new tax law wasn't setting new limits for taxpayers - just new minimums for tax forms to be provided to taxpayers. You're still supposed to report everything you earn. But I won't tell anyone if you don't. 

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