New tax laws regarding PayPal, VenMo and Zelle

[dcrigger]

Did they or did they not lower the reporting threshold? If they did (they did) how can you say no law has changed?

I said - no actual tax law has changed. With this reporting change, nobody is going to owe one ent of tax on anything that they didn't already owe before. No tax law has changed.

This kind of change effects no one - but those that were previously filing their taxes sloppily or outright trying to not pay the tax they owe.

So that's how I can say "no (tax) law has changed".... nobody's taxes have been raised because of this change.

 

[Ransan]

Did they or did they not lower the reporting threshold? If they did (they did) how can you say no law has changed?

Hi Darth what do you mean the reporting threshold?

The 1099 has been $600 since I can remember, I’ve been an accountant for almost a decade.

In short, this law is not affecting just drums as someone who has mentioned shoes, it’s any revenue generated from sales whether gain or loss of sale.

I’m not going to suggest anything but use your head folks, this is obviously a barrier for transactions longer than ‘arms length’.

@dcrigger I’m not a CPA but I’ve explained most of that as succinct as I could.
From post #3:
The IRS will then reconcile between the 1099 issuance from the company as they either will report your annual payout using your EIN or SSN as sole identifiers.

But it seems tax avoiding folks will tend to find loopholes.

 

[dcrigger]

Hi Darth what do you mean the reporting threshold?

I believe he is referring to this - http://www.taxjar.com/blog/2021-11-irs-brings-major-changes-to-1099-k-reporting-for-2022

 

[=]

I believe he is referring to this - http://www.taxjar.com/blog/2021-11-irs-brings-major-changes-to-1099-k-reporting-for-2022

Right. That's all I'm saying. It's a big change (20,000 down to 600) and it will affect people. That's all. I'm done here. Thank you.

 

[bud7h4]

. . . . . . If they don't, it will trigger an inquiry - usually an automatic electronic one looking for an explanation... "We see you received $600 from so and so and yet, we can't find that $600 dollars on your return. Please explain." And if he doesn't, he'll likely get a bill for the tax on $600 at least - at worst, it will trigger an audit. . . . . .

Receiving money from so and so is not the same generating a profit. You have no obligation to "report" money simply changing hands. In fact they might even get annoyed by it if you kept it up. If I had to keep track of everything I bought and sold, traded, was gifted, etc etc, to report to the IRS so they could determine whether or not it was taxable, I would spend all of my free time just doing that.

 

[=]

In the OP the intent was to bring the changes to the attention of the membership. If my interpretations of those changes or my editorializing about the IRS has confused anyone I apologize. I'm not an accountant therefore I'm not here to get all wrapped up in the semantics. That's one thing I don't like about forums sometimes in that in trying to help the masses you get all bogged down in this minutiae and pontification. The article is posted. Take heed if you need to.

 

[MrInsanePolack]

Do the feds monitor pawnshops? Is this a way to unload gear without being taxed for doing so? I can pawn something, then bail on the loan so it isnt technically a sale.

Just wondering out loud here. I'm not a financial schemer, and I pay my taxes.

 

[Frank Godiva]

Between this, seller fees from the platform, and increased shipping cost makes selling at places like Music go Round and Guitar Center more attractive. Less money for less hassle no problem.

 

[dcrigger]

Receiving money from so and so is not the same generating a profit. You have no obligation to "report" money simply changing hands. In fact they might even get annoyed by it if you kept it up. If I had to keep track of everything I bought and sold, traded, was gifted, etc etc, to report to the IRS so they could determine whether or not it was taxable, I would spend all of my free time just doing that.

I'm not an accountant, so I'm no kind of authority. But your understanding of US tax law is significantly different than mine.

 

[dcrigger]

Between this, seller fees from the platform, and increased shipping cost makes selling at places like Music go Round and Guitar Center more attractive. Less money for less hassle no problem.

I don't know how selling to Guitar Center works - but unless it is literally "here's a drum, here's some cash" - I wouldn't be surprised that if I received more than $600 from Guitar Center in a year for sales to or through them, to find a 1099 in my mailbox come the next Jan/Feb.

 

[Frank Godiva]

I don't know how selling to Guitar Center works - but unless it is literally "here's a drum, here's some cash" - I wouldn't be surprised that if I received more than $600 from Guitar Center in a year for sales to or through them, to find a 1099 in my mailbox come the next Jan/Feb.

It’s acts the same as a pawn shop. 30 day hold and all; not aware of any tax docs and the new law does not include pawn shops as far as I know

 

[someguy01]

The IRS was expanded in order to have the ability to investigate and prosecute the very to extremely wealthy who have been cheating the system for decades. The IRS has been so underfunded for decades that they lack resources to fight anyone of means in court. For this reason they have depended upon prosecuting the smaller offenders. You should all welcome the expansion.
The US Government is not a revenue generating business, contrary to popular belief. The taxes we all pay are there to fund all the things everyone takes for granted every day. All the complainers ever focus on are the the few standout over-exoenditures all the while ignoring everything else that is funded.
If the citizens made better choices about the people they put in charge of dispersing these funds, they might have better outcomes. Being on TV doesn't make one qualified. Being famous is definitely not a qualifier. Yet, the people think that's what will work.
We suck at HR on the whole.

 

[someguy01]

This is the part I have a problem with. I must pay a tax on the item when I purchase it. I have not made a profit here, rather acquired an item. Now if I sell said item, I must again pay a tax for getting rid of the item. Here I have made a profit, and profits (income) are taxable.

If a drum is not income because I paid for it with cash, I should not be taxed for it. If I receive it as payment for a service, then I should pay a tax on it.

The feds are (and have been) collecting 2 taxes on every single thing you buy and sell with few exceptions. That's 'd up.

When you buy a car, new or used, you pay SALES tax. Yet you made a purchase, not a sale. And that same car generates the same SALES tax (from the new buyer) each time it changes hands. So 1 car, multiple paydays for the feds from both parties.

I'm not okay with this. This is some 1920s Al Capone math.

The tax you pay on a purchase is solely local, there is no federal sales tax. Depending in the area, that may be state, county, and city all with a hand in. The only sale that gets the feds hand is a sale in which the luxury tax is applied.
The only time you pay the feds is on your income, and types of income vary. Wages and tips are the highest percentage of income taxed and its why the working stiff pays about 40% of their income and someone like Bezos, who's income is gains, pays about 8%.
It's overly complicated, on purpose.

 

[dcrigger]

It’s acts the same as a pawn shop. 30 day hold and all; not aware of any tax docs and the new law does not include pawn shops as far as I know

So it's like consignment - you give them drum, they sell drum to a customer, they collect sales tax for the state on the sale, use their payment system to receive and process the money and remove their "cut" of the sale, before giving you the remainder of the money?

Do they pay you your share in cash? If not, it's already trackable.

(In a nutshell - this is exactly what Ebay has become - consignment with drop shipping)

They might not need to report this yet - but clearly, if they are cutting you five checks a year, each for $250 for example. Well, that's a business giving an individual $1250 in the course of a year. They certainly deduct it - they always have. And you were always supposed to declare receiving the money.

All we're now discussing is too what degree or they needing to report these transaction to the degree that your name, credit card number, bank account or tax ID number is attached to them.

If this is still floating under-the-radar... cool. But don't be surprised that when it goes away. As getting any company to pay any individual anything in untraceable cash is rapidly disappearing - because when they do, they end up not being able to deduct it as an expense.

All of this reporting stuff is just shining light into all the remaining small dark corners.

 

[Frank Godiva]

So it's like consignment - you give them drum, they sell drum to a customer, they collect sales tax for the state on the sale, use their payment system to receive and process the money and remove their "cut" of the sale, before giving you the remainder of the money?

Do they pay you your share in cash? If not, it's already trackable.

(In a nutshell - this is exactly what Ebay has become - consignment with drop shipping)

They might not need to report this yet - but clearly, if they are cutting you five checks a year, each for $250 for example. Well, that's a business giving an individual $1250 in the course of a year. They certainly deduct it - they always have. And you were always supposed to declare receiving the money.

All we're now discussing is too what degree or they needing to report these transaction to the degree that your name, credit card number, bank account or tax ID number is attached to them.

If this is still floating under-the-radar... cool. But don't be surprised that when it goes away. As getting any company to pay any individual anything in untraceable cash is rapidly disappearing - because when they do, they end up not being able to deduct it as an expense.

All of this reporting stuff is just shining light into all the remaining small dark corners.

All you want know and no mention at this time of tax docs plus you get 10% off toward purchase of something new to help lessen the blow

Guitar Center Trade In Program: Preparation Guide

With the guitar center trade in program, you can unload used gear that is no longer used for something new or cash! Lets find out if it is worth it or not.

killerrig.com

 

[dcrigger]

All you want know and no mention at this time of tax docs plus you get 10% off toward purchase of something new to help lessen the blow

Guitar Center Trade In Program: Preparation Guide

With the guitar center trade in program, you can unload used gear that is no longer used for something new or cash! Lets find out if it is worth it or not.

killerrig.com

Cool - thanks for that link... So not at all consignment. So either a trade-in - where the drummer is the buyer of the new product using the old drum as partial payment in lieu of cash. Or a straight up sale - with GC being the buyer... and the drummer being seller... Generally the onus is on the seller to report and declare profits - but generally idea here makes profit for the drummer unlikely.

Of course, GC will declare their profit on the eventual sale of the drum - deducting the cash purchase price against it. Which they will of course keep track of - but which still sounds very anonymous. But considering the unlikelihood of there being any undeclared profit from selling gear to GC - it's easy to understand why they *the IRS" hasn't gotten to it yet - if they ever do.

Again Frank, thanks for posting that.

 

[Chris Whitten]

Receiving money from so and so is not the same generating a profit. You have no obligation to "report" money simply changing hands. In fact they might even get annoyed by it if you kept it up. If I had to keep track of everything I bought and sold, traded, was gifted, etc etc, to report to the IRS so they could determine whether or not it was taxable, I would spend all of my free time just doing that.

I do this every single year. Of course it is part of my job as a professional musician, so maybe that makes things different.
But I have to account for every equipment purchase, and I'm given a tax break usually. I also have to report every single cent of income - which includes performance fees, publishing royalties, bank interest AND equipment sales. If I sell something for less than I bought it for then I have't profited = no tax.
There are a lot of apps and accounting software products that do all this for you on a day to day basis. So they are designed to track and report everything you've 'bought, sold, traded, was gifted' etc.

 

[Chris Whitten]

So either a trade-in - where the drummer is the buyer of the new product using the old drum as partial payment in lieu of cash. Or a straight up sale - with GC being the buyer... and the drummer being seller... Generally the onus is on the seller to report and declare profits - but generally idea here makes profit for the drummer unlikely.

Yes, that's the point, highly unlikely. The music store has to profit from reselling your used item, so they always offer a trade in value (or purchase offer) well below market value. 99 times out of 100, people are trading in items they've owned for a couple of years in order to upgrade to something 'better'. So you buy a DW snare for $450 in 2017 and you are likely going to trade it in to GC for $200 (if you are lucky) in 2022. = no profit.