Are you selling items goods and services or friends and family? Friends and family implies it was a gift, so that’s not income. Not taxable.

If you’re selling lots of stuff on eBay, track the expenses associated with all the sales and take those as deductions. Tons of stuff you can claim to offset those sales including the cost of the item you sold.

There’s no headache if you just do your homework and understand what this new rule is meant to do.

LMFAO

Then don’t. Do your tiny business transactions with Friends and Family or Venmo. But if you want the protections, you’re going to have to operate as a legit business. But that tiny stuff doesn’t matter. Don’t overcomplicate things. The IRS doesn’t care about anyone that is worried about this new rule.

If you think you’re going to owe more tax from this new rule, contact a professional immediately because you’re probably mistaken.

I vaguely remember a story like this from the old RGP days where a seller was angry that a buyer did something similar. Is this what you are referencing? If so, please provide a link as Id like to read it again. Lol!

I have a buddy in California that occasionally picks up machines for me and in the past I PayPal him the money to grab them for me
As a joke I always put things in the note field like “payment for rim jobs”, or “dildo of the month subscription fee”.

I’m gonna laugh my ass off if PayPal sends the FEDs an itemized listing of what the funds are for.

Nah, it's pretty simple. We have to tell people to not eat tide pods...i mean...

So let me see if I got this right. Somebody makes 50k a year at their day job, files their tax return, and pays their federal, state and local taxes. Then they buy a 5k pinball with their after tax money. Low and behold, a year later, the game gets popular and they sell the machine to someone for 6k. So now they owe the Gov taxes on 1k "income"??? What exactly did the gov do to earn this tax revenue?? Did a gov agent offer to help you pick up the machine? Did they help drag it up a flight of stairs? Did they give you a hand waxing and re-rubbering it? Were they there to help when you delivered it? Did they front money to help with the risk of the purchase? So then how exactly did they earn their cut?? Asking for a friend!

They absolutely do, it happens all the time. In the gaming world in developing markets (such as Texas at the moment) those slot houses that are operating without a statewide license absolutely pay federal taxes on their earnings. Sports book setters in states where it was historically illegal to take sports book betting also usually pay their federal taxes on (at least some) of their illegal winnings. They’d all rather pay the tax than be accused of tax fraud, the IRS accepts the taxes from them and tend to not care if the underlying activity is a violation of state law somewhere. The IRS are not looking to enforce state gaming laws…they just want to their cut of your hard work.

This tax isn’t new. They just changed the threshold from $20,000 to $600. Nothing to see here folks just move along. Just pay a professional more money then you actually make on your sales to keep you from paying more taxes. It’s simple. Now you can spend hours on hours trying to keep records and receipts on every thing you ever buy use or drive for your pinball hobby. I’m sure this is easy for those of you that run businesses but for the average Joe pinball hobbyist this is going to be a nightmare.

Not necessarily. But unless you have some other expenses to the sale to help offset that gain you incurred, yes. It’s no different than buying and selling a stock for the same amounts. You earned a profit. That gets taxed just like your work wages.

By the way, you should’ve done that all along. This new rule changes nothing in that regard.

I suggest TurboTax. It’s very user friendly and will handle this new rule perfectly.

Never said I didnt. Just trying to understand the logic behind the law, or the lack thereof. Maybe it makes more sense for the person running a business and bringing in thousands of dollars of profits per year. But for the little schmoes buying or selling a couple of machines once in a while, doesn't the gov have bigger fish to fry? What-they cant get Bezos' phone number?? They can get more tax revenue from his couch cushions than from any pinballs I or any guys I know have sold!

A book of 50 invoices from office depot is $6.50 ... get creative.

https://www.officedepot.com/a/products/194456/Adams-Carbonless-Invoice-Books-2-Part/

Yes. So deal in cash or friends and family and be done with it. Or make up expenses to make it a net zero. They don’t care about your couple pinball deals a year. They have bigger fish to fry.

At this hypothetical garage sale, all sales would be to strangers using Paypal or Venmo. If that total is over $600, it'd be taxed as income according to this new rule. That is ridiculous. Expecting me to have receipts or be able to prove somehow that an item I've had since before the internet was a thing had a price higher than what I sold it for, is also ridiculous. Doing all cash transactions at said sale just to skirt the reporting of said income is inherently illegal. Expecting the average joe to start a business for the explicit intent of exploiting loopholes to avoid paying these new taxes is also ridiculous.

That's just it, the headache is having to do ANY extra homework. There is a vast majority of us out there that aren't accountants or tax pros and never wanted to be and should never have to be. This lowered threshold is clearly meant to cause pain and anguish for the little guy and hobbyists of all types. At this point, I'd rather throw that stuff away than sell it on eBay if there's going to be income tax involved. Ebay is already less fun that there's sales tax on everything. I still don't know how it's legal for states to charge sales tax on the same item twice, regardless of time lapsed between original sale and current sale. I thought there was something in the code against that...

Why would you do goods and services for these garage sales? Just do friends and family or use non business Venmo. Or do cash. This only applies to business accounts. A garage sale is not a business.

I understand this seems awful, but it’s the same it’s always been. If you’re not operating a business or selling big ticket items for large profits, you’re fine.

True, a garage sale is not a business, but sales from it would be considered income. Doing anything other than goods or services is lying and technically illegal. I keep my law breaking to speed limits only. I don't want to give the IRS any reason to come sniffing my way.

No they aren’t. It’s extremely rare that any item sold in a garage sale is sold for profit. Profit is taxable, not gross receipts. The IRS doesn’t care about garage sales.

Do what you want, but garage sales have never been reportable to the IRS, and never will be. Remember, you have to make profits to pay tax. Having a garage sale gives the IRS zero reason to thinks profits were made.

One thing the IRS will always do is take any money you’re willing to give them whether they should be getting it or not. Haha

So don’t want to have to explain to the IRS that you’re receipts were from a garage sale and no profits were made? Just deal in cash and friends and family. You’re not doing anything illegal.

(First of all, I have owned a small business for over 25 years, and I have used an accounting firm for all of those years).

But what I just quoted you about reminded me about a few months ago that I received a letter from the IRS that they had received my payment, but they had lost the other paperwork and did not know what the payment was for.

I called my accounting firm, and they laughed about it.

So it is not quite true that the IRS will just take any money, in my case I had to send paperwork 2 times to show what the payment was for.

Want to know what is very funny?

That payment with all of the extra paperwork on my part was for just $18.00.

True true. That does happen. What doesn’t happen is when you overpay the government, and it takes them over a year to get that overpayment back to you, they don’t (with rare exceptions) ever pay you penalties and interest for that late payment back to you. But if we’re late on paying?!? Look out.

Years ago, there was another time that I received a check from the IRS and a letter that I did not understand.

I took that stuff to my accounting firm, and they laughed.

They told me that basically the IRS had spent $1000.00 in man hours going through all of my stuff in an audit, thinking I would owe them more, and actually I had overpaid by like 30 bucks.

Lowering the threshold from $10,000 to $600 sure seems like they're heading to the all you can eat fish dinner.

It is so funny. For all of the years my Dad operated a business, he always took everything to the accounting firm in grocery bags for them to sort out, and he always filed for extensions.

When I first started my business, the accounting firm showed me what they had to do with all of that.

My accounting firm loves me, I have already faxed them all of my totals for 2021, on 2 sheets of paper, with everything broken down and in categories.

My business taxes are due 3/15 every year, and personal 4/15, and while I take care of all of that super early to give the accountants something to do before they get very busy with everyone else, it depends on how much I owe as to how early I pay the IRS, but I do pay early either way.

The biggest thing that ticks me off is all of this is more and more online, and not mailing.

More passwords to deal with, and I hate all that crap. (accountant does most of it, but still wants me to do some).

I always thought with the post office always needing help, why is the government taking more money away from them and going online? Makes no sense to me at all.

Also, if the IRS does ever get tough and wants to do audits for up to 7 years ago, who will be responsible for paying a forensics team, me or them? (because I have already looked at receipts that were only 2 years old, and they were already so faded I could not read them anymore).

They need to just do some flat tax or something different and be one and done with all the receipt saving and all of that. Or not, way too many loopholes are right in front of all of us, but you need a really good accounting firm, and not some turbo tax stuff.

A good accounting firm is priceless!

My first year in business I was all organized and I went in there with my 2 sheets of paper and I said this is how much money I made last year. They looked at it, started asking if I depreciated this and that, and I said no, and they started marking through my numbers and told me I lost money. PRICELESS!

Thanks for providing your information early every year. If only everyone was like you. Haha

If you get audited, please record your interview where you demand the IRS pay for a forensics team.

Top 3 lies ever told:

1) Your check is in the mail.
2) I promise not to come in your mouth.
3) I’m from the IRS and I’m here to help you.

I believe it was my 2020 tax return. They were behind processing times due to Covid. They actually did pay me penalties for having to delay my payment. Granted, I believe it was only about $100 but it was something.

So if they’re collecting tax on the profit you should be able to claim all expenses related to the game.

How many hours of your maintenance to keep it going? Mods? Parts? Hardware? Shipping? Unboxing/setup? Interest and finance costs? Packaging for sale? Time taken in negotiations for purchase and sale? Climate controlled Storage? Security hardware and monitoring? All travel costs related to the game? Time taken researching and troubleshooting on Pinside?

Won’t be much profit left - you might be able to even claim a loss against other income.

This is awesome!!!

I’m buying a new truck and now I have a way to write it off, the gas, insurance etc.

Hmm that trip to Florida to look at a machine now tax deductible awesome.

Lemons to lemonade

You’ve probably spent an hour on this thread alone just learning about the tax so you can be a responsible citizen. What’s that worth? $150 per hour? Claim that off your next game sale.

Yeah. The covid delays were especially insane and the only times I’ve seen them do that.

I think we got a little too sidetracked with the hypothetical garage sale. My point was that if I was paid for all those goods I sold at that garage sale though Venmo or Paypal, the IRS would just see a total of all the transactions over $600 for that day all classified under the goods and services moniker, since it would be reported to them by the payment processors(Venmo/Paypal) doing their due diligence, and I would therefore be sent a tax bill for that income under this new law. If I continue selling some of the higher valued items I've got on eBay this year, I'll for sure get a tax bill from the IRS.

I can't imagine how bad this is going to be for small time Etsy folks. I pulled this from the TurboTax website about this new lowered threshold:

"Beginning with tax year 2022 if someone receives payment for goods and services through a third-party payment network, their income will be reported on Form 1099-K if $600 or more was processed as opposed to the current Form 1099-K reporting requirement of 200 transactions and $20,000. This change could impact people working in the gig economy, online sellers, independent contractors, and other self-employed business owners."

Yes. If you’re a self employed business owner this affects you.

If you choose to use goods and services on PayPal and other online business payment processing services for garage sales, this affects you.

But if you were a small business owner before, you were already reporting these receipts even though you didn’t get a 1099k. So this new rule will change nothing for you. If you weren’t reporting those receipts (which is illegal), then you will have to change some things starting 1/1/2022.

Lots of comments about how this is nothing new.

What’s new is the criminalization that comes with this. Unless an individual keeps perfect records of money coming and going, one can be labeled a tax cheat and penalized.

What to deal in cash only?? Well, if it can be proven with reasonable doubt one only deals in cash, you can be considered a tax cheat. In other words, a cash sale that wasn’t reported was completed in an attempt to avoid paying taxes.

Several comments about how the IRS doesn’t have time to “catch” everyone…. Guess what, something like 80k IRS agents have been hired recently. Technology also exist to help these agent “catch” you.

Think you can explain an honest hiccup to the IRS? Good luck trying to navigate through that mess. IRS is nearly impossible to get ahold of, you will be placed on hold or get a recoding that says try back later. When/if you get ahold of someone, they likely will not be able to help you. All of this while you have been served a letter of debt from the IRS that they have figured you owe, plus penalties and fees, and a short deadline to pay. That deadline begins when a letter was sent out and may take up to two weeks before you receive it, leaving only two weeks to get settled up or more penalties get piled on. Ask me how I know.

Again. Get with a CPA or other qualified professional to see how this does or doesn’t affect you and you’re small business if you have one.

If you sell a game for a profit, get with a professional to see how to legally report it.

This is nothing new. This affects the payment processing companies more than anyone else. Their workload just exploded as of 1/1/2022.

That's just it, though. I don't own a business and am not self-employed. This new rule is designed to affect hobbyists and those that aren't self-employed or business owners. That's what the hypothetical garage sale example was all about, as well as my very real eBay example. If I sell more than $600 worth of items at either the fake garage sale, or on eBay over the course of 2022 and use an online payment processor(eBay has ditched Paypal for paying sellers in lieu of processing on their own behalf, but also counts shipping charges as income now), I'm going to be taxed on that "income" unless I can prove otherwise that I took a loss on those items(which I can't realistically do because the items are typically over 20 years old).

I'm well aware that this is nothing new. I've input those numbers on TaxCut every year, only to have it tell me that since it doesn't meet the thresholds, it'll left off of my return. The change is that those thresholds have been lowered to a ridiculously low amount. That's what I have the issue with. As a hobbyist/non-business owner, I shouldn't need to spend more money by having to consult a CPA or other tax professional.

That’s another big problem, in addition to the cost (can be written off). CPAs aren’t everywhere and common. They are going to be overwhelmed with existing customers. Do you thin a CPA is going to have time to “handle” the additional common taxpayer with additional resources? The answer is no, the tax payer is going to need to do most of the legwork and maybe some guidance from a CPA.

You are truly going to have to be your own advocate, IRS/CPA doesn’t have the time you might require to get your affairs in order. All the IRS has to do is accuse a taxpayer of what they owe with a deadline to pay it. Its up to the taxpayer to choose to take the easy route and pay the accusations or spend the time and money to prove they don’t owe, meanwhile time is ticking and penalties are stacking on to the bill.

If you are selling items with the intention of making a profit, you’re a business. Doesn’t matter if it’s 600 bucks or 6 million bucks.

If you do not intend to make profits, look into capital gains rules and hobby business rules.

Continue to use tax cut and you should be fine. There is no way you sold something that’s 20 years old and made a profit unless it’s a collectible. And if it’s a collectible you should have plenty of information to calculate the gain you incurred. If it’s your couch or household items then list the cost equal to the sale and be done with it. I understand this answer isn’t good enough. I’m sorry this causes so much heartburn. It’s hard enough to do this stuff on your own, let alone keep up with all the changes each year.

This is what forced me into making my reselling hobby a business 10 years ago. 20K in payments AND 200 or more transactions. Dont forget now the $600 threshold is gross payments received includes the item selling price, shipping and the tax amount collected by ebay/amazon, etc. Nowadays, shipping costs as much as the item you're selling in a lot of cases.

There was no way this threshold couldnt have easily been dropped to 10k and 100 transactions. This is a straight up money grab and this isnt a democrat thing vs republican. Both have been wanting to lower this for years from the when the original 20k and 200 trans. was passed 20 years ago. Instead of going after the people who have the funds to hire people to hide their money, they have to get it somewhere.

Lots of people are gonna be shocked and panicked when they get these 1099s right before tax time next year. All i can say is dont live life under the fear of an audit and just keep receipts and track of what you spent and are spending on stuff and vote for people that care about people more than corporations.

Hopefully I can prove a profit to keep from being penalized after a couple years of selling off our rubbish at garage sales.

I guess my kiddos lemonade stand has a hard life lesson ahead and I should just give all my stuff away because I don’t want to deal the BS involved with the government trying collect literally every nickel they can.

Not everyone is a criminal/tax cheat. Its a BS loophole giving an already over reaching entity more reach.

Can you share anywhere that states this only applies to business accounts, and not personal venmo or PayPal friends & family transactions?

I’ve read multiple places suggest that personal digital accounts would be subject to this threshold as well, with the onus of proof of “non taxable” transaction falling on the individual at tax time..

This could be such a nightmare to navigate if the later is true. Imagine having to keep receipts and records for every little transaction. Just off the top of my head thinking of things that people venmo me for: their portion of rent/ utility bills, their share of a dinner or bar bill, splitting groceries, event tickets, gas for trips..

Imagine being taxed on that stuff, and having to prove with records that they were all non taxable payments, while also proving your losses with receipts of any pins or other items you sold, and any other payments that tax is actually due on.

I really hope your take is correct. I’ll delete my venmo and other cash apps if this is the case. Their convenience would be outweighed by the tax inconvenience.

Can you share anywhere that states this only applies to business accounts, and not personal venmo or PayPal friends & family transactions?

While this is not from the IRS (isn’t updated yet), but everything here looks right with IRC code references except for the thresholds. Those are prior 1/1/2022 thresholds.

https://www.zenledger.io/blog/does-paypal-report-to-irs-on-friends-and-family

Basically, friends and family transactions are gifts and fall under gift tax rules. These cannot be put on a 1099. Those are only for business transactions.

I can also see lots of people getting rid of these cash apps due to the new rules.

The crappy thing about new rules is nobody really knows what’s gonna happen with some things until they happen. PayPal shouldn’t be sending out 1099s for friends and family activity, but they may anyway. And that will indeed be a pain in the ass for us.

American Rescue plan. What a crock of shit.

Thanks for the info though.

Has anyone else had an Audit?

With an enormous toll on my health from the stress, I survived an Audit.

In short, after 9 months, and 7 years worth of records, I detailed around $200 I owed.
I went over all my records, and handed them, and my review.

They came back with a $13K Bill. WTF! I asked the auditor to "show me where".
The reply was, "its an algorithm, based on your sales volume, that we use"

9 months later, and a Tax Attorney, it was down to 1/10th, strictly on negotiations, not facts,
and the end solution.

I still have nightmares from my "Nurse Ratchet" Auditor.

You'll have to show proof that you paid more for it and then you can chalk it up as a loss on your taxes. you should be able to claim the mods as part of the original cost.

Such a pain. They tax every cryptocurrency transaction here in Canada and it makes it a nightmare to try and do anything with it.

Hell at that point why not claim the space it was in as part of the cost of maintaining it? It requires climate control and its own room, that should come out of the profit calculation. I'd speak to an accountant if you buy or sell these machines often enough that you think it will be an issue.

Thanks, I guess my request was more about venmo, (PayPal is a dying dinosaur, while venmo seems to be evolving into the next century) which facilitates payments for goods and services on the same account/ system that you would use to split your dinner bill.

My neighbor can kick me $200 for shoveling his sidewalk all winter (taxable) using the exact same service that my buddy can give me $100 for a dinner bill (non taxable), and that I can take a $500 deposit on a game I’m selling ( taxable but with potential to take a deduction against if receipts or proof of cost are available) and a $1000 payment feom a casual design client (taxable & invoiced, but tax paid previously during my business taxes). Now multiply those scenarios by 200+ over the course of the year.

At the end of the year, venmo will give me a 1099 for ALL transactions, and it would then be up to me to prove which of those is taxable and which is not when I file it with my taxes. Otherwise they are just going to tax me on everything.

I’m sure given these new rules venmo will need to implement a similar goods/services vs non taxable option when payments are sent in order to make this a little easier.

Having to keep track of and prove that every non-taxable dollar given to you was in-fact a non taxable transaction is definitely something new.

I think it may be irresponsible to suggest small fish won’t get audited for things like this. Included in the new bill is funding for thousands of new IRS vultures, who will circling above us for just that purpose.

The gov says this new plan is to pull lost tax revenue from major evaders, but a $600 cap is definitely more about the small fish than a major business..