1099K threshold changes for 2022 - drastically

[AbsolutEnduser]

Sorry. I misunderstood.

Separate Banks too.

You can transfer money between different banks on the regular especially for such purposes, .. too.

No fees, but may vary between banks or types of accounts, not sure. Bottom line, no PayPal.

 

[ctwo]

Did a lot of housecleaning last year and received a 1099-k letter from eBay. I'm sure I was negative overall, but some items were things I've had for years, bought on CL or whatever, of which I have no proof of purchase. Either way, they were definitely not transactions for any type of business purpose. I assume the below means...ignore it?

https://www.irs.gov/businesses/understanding-your-form-1099-k

If you got the 1099 then I assume they've already concluded that you're running a business.

 

[byke]

If you got the 1099 then I assume they've already concluded that you're running a business.

Obviously not a conclusion of anything, it's more of a shotgun approach to scoop up some that are, but at the expense of the vast majority that aren't. The threshold is only $600 for the entire year. Pretty much every person that sold a single camera or single camera lens are going to get a 1099 and 99.9% of them aren't profiting and aren't running a business. I'm sure they'll adjust the threshold next year, because $20k/yr to $600/yr doesn't seem to be well thought out, unless you're a paper manufacturer, then those two billion transactions on eBay everyday and 1099's would have you salivating.

 

[ctwo]

Obviously not a conclusion of anything, it's more of a shotgun approach to scoop up some that are, but at the expense of the vast majority that aren't. The threshold is only $600 for the entire year. Pretty much every person that sold a single camera or single camera lens are going to get a 1099 and 99.9% of them aren't profiting and aren't running a business. I'm sure they'll adjust the threshold next year, because $20k/yr to $600/yr doesn't seem to be well thought out, unless you're a paper manufacturer, then those two billion transactions on eBay everyday and 1099's would have you salivating.

Well, I mean, if you want to explain it to them in person, that's always an option

 

[byke]

Lol, what I mean is, they haven't concluded anything as part of the process. Millions of 1099's are sent out to people in non-applicable business/profit situations. I think you get one even if you've made $10 in interest and I've never filed any of those over a good two decades. Even if you've sold a stock you get one, because they count any stock sold as pure profit, even when they know you've bought a stock that offsets it. Unfortunately, it's all part of the "we get to make any claims we want and it's your burden to disprove it" strategy. They have nothing to lose by being wrong all the time. Anyway, I don't think I'll file it. Worst case is they come after me for a few hundred bucks.

 

[berth]

Even if you've sold a stock you get one, because they count any stock sold as pure profit, even when they know you've bought a stock that offsets it.

But they don't know how much you paid for the stock.

All of these things track income, the IRS doesn't track your expenses -- you do. You are motivated to properly track your expenses so that you can pay the proper tax (if any), rather than the one side view that the IRS has (i.e. the income statements).

I don't have an answer for someone selling off a bunch of stuff on eBay. But, in the end, it IS income. In theory, if you have a garage sale you're supposed to report all of that as income. Obviously, most people don't.

Why eBay sent the forms out, I can't say. Was it activity, was it simply raw volume? At one point the IRS considered having EVERYONE send 1099s for EVERYTHING. It was an insane requirement.

But here's a system that Just So Happens to offer accurate accounting of income, and they do it "for free". It's also representing a large enough nut that the IRS has deigned for eBay to report it.

Are they actually going to do anything about it? In most cases, unlikely.

But did you sell $20,000 worth of "collectables" or "vintage camera gear" or whatever? That's enough to be worth putting an investigator on the case to get their cut.

Arguably, today, $600 is too low. $600 has been the reporting limit forever. At least 20 years. It should be bumped up to take inflation in to account (especially today). But that will likely take an Act of Congress to get changed.

Undoubtedly, They(tm) are looking for patterns. If you "clean out your house" each year to the net of several $1000's of dollars in sales, then, perhaps, you're cleaning other folks houses out as well.

But in the end, talk to a tax attorney. The IRS auditing folks are pretty backed up so I've heard, but no reason to walk in to their crosshairs if you can avoid it.

 

[byke]

The general rule is that selling our used stuff is not considered taxable income and does not need to be reported. That's why the DMV doesn't issue 1099's every time someone sells their car, or CL, or pretty much half of every forum out there, because that's the default position. But, it seems like that position is changing. Normally, the legal system is such that the entity making the claims, bear the burden of proving the claim. With the IRS, they get to make any claim the want and it's up to you to prove otherwise. I think they're testing out how far they can flex that.

 

[berth]

That's why the DMV doesn't issue 1099's every time someone sells their car, or CL, or pretty much half of every forum out there, because that's the default position.

But as I understand it, the DMV does take notice if they discover someone has been moving several cars, then they'll change their position. This is why its routine to hear about folks on CL etc. buying cars and not actually transferring the title, leaving that to the new buyer after they've fixed it up, or whatever.

The point being that eBay et al has been a great avenue for not just getting rid of garage sale stuff, but also for folks starting actual businesses, as well as an avenue for fencing stolen merchandise.

IANAL, but I don't expect the IRS (or the State) to take notice of someone getting a 1099 and not declaring it. But if they see that happening regularly, and moving some actual money, then, yes, they're going to take notice. Automated exchanges like eBay makes it easy for them to do that. This is no longer a cash business done behind a tree.

We can now take this conversation over to the bitcoin topics for the next generation of this.

 

[Killroy1999]

I was told by a bookkeeper yesterday that banks, Venmo, PayPal, ect. will be sending 1099s for money transfers for us by the new requirement.

They don't need to fill out a W9 because banks already have social security numbers / EIN.

Sounds easier than it use to be.

 

[byke]

Boom, suck it.

 

[ejv]

Boom, suck it.

So they sent you one a year early by mistake?

You do realize the reporting threshold changes for the ARPA took effect this year so those 1099-K forms will be showing up beginning of 2023 based on activity in 2022.

 

[byke]

Yes, but now I can deal with it on the front end, instead of the tail end. I just won't sell anything on eBay this year, easy peasy.

 

[ejv]

Ah I see. Or at least don't sell anything you can't provide your basis for if it was questioned later.

What the heck is going on at Ebay that they got ahead of themselves by a whole year I wonder.

 

[byke]

I want to know how much paper was involved.