Reverb.com issues 1099-K

[MrVegas]

This is embarrassing.  I have been a CPA for a very long time.  I'm not a tax expert but I'm somewhat familiar with basic tax law.  I was dumbfounded today when I received a Form 1099-K from Reverb.  I sold a keyboard for a few thousand and viola, a 1099-K.  At first I was totally pissed to have to pay tax on selling a personal item from my hobby collection.  I am not a pro, I am a hobbyist.

 

But then I started thinking about how I paid more for the keyboard than I sold it for.  So, technically, I sold it at a loss.  If there's a place on the 1040 to report the purchase price AND the sale price, then it will calculate a loss and I won't have to pay any tax.

 

Anybody else had to deal with this?

 

[Docbop]

I never heard of a 1099-K before, but I don't tend to sell stuff.   But for those like me who never heard of such a thing here's the IRS page on it.    Seems stupid that if I sell something that it is considered income,  I'm not a business I'm just someone sells off some old stuff I don't need anymore.    Do I have to get a 1099-k from the recycling place to the cans I recycle.   This is stupid. 

 

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

[ElmerJFudd]

16 minutes ago, MrVegas said:

This is embarrassing.  I have been a CPA for a very long time.  I'm not a tax expert but I'm somewhat familiar with basic tax law.  I was dumbfounded today when I received a Form 1099-K from Reverb.  I sold a keyboard for a few thousand and viola, a 1099-K.  At first I was totally pissed to have to pay tax on selling a personal item from my hobby collection.  I am not a pro, I am a hobbyist.

 

But then I started thinking about how I paid more for the keyboard than I sold it for.  So, technically, I sold it at a loss.  If there's a place on the 1040 to report the purchase price AND the sale price, then it will calculate a loss and I won't have to pay any tax.

 

Anybody else had to deal with this?

 

Well, as a purchase for business I would depreciate it over a number of years.  Reducing the income I made from business and therefore the tax burden. If I sell it off at some point, can I declare a loss?  I don’t think so.  I think I’ve already depreciated it.  The sale price would be income. So, I’d go out and buy its replacement to start the process all over again.   

[Polkahero]

I thought the IRS delayed the whole $600 threshold for triggering these for another year?  The threshold is supposed to be $20k AND at least 200 online transactions.

[Docbop]

12 minutes ago, Polkahero said:

I thought the IRS delayed the whole $600 threshold for triggering these for another year?  The threshold is supposed to be $20k AND at least 200 online transactions.

That IRS page I posted has a link to a page that says that.     

 

Click to see IRS page about the delayed implementation and reporting levels.

[o0Ampy0o]

If I paid sales tax to own something I should not have to pay more tax if I sell it. That is not income. That is recovered money. The IRS should owe me money 🙂 based on the sell price.

 

If it appreciates they only pay back the amount I paid them, no more. Sure, some people might do that as a business but there should be a check box saying so. If you lie you go to jail and pay a fine.

 

Now if I use something and that use generates income I understand that the generated money from using something like a money generating tool is income and taxable.

[KuruPrionz]

I always try local craigslist first. So far, that has worked well. 

 

I've got an eBay rating of 991 at 100% positive but I don't use the account, haven't for years. 

I sold a thing or 2 on Reverb but if they are going to issue tax forms I'm probably done with them too. 

[Docbop]

Going to bring on a new trend in selling used gear....   I'm Mr DX meet me in the ally behind Guitar Center at midnight and bring cash.  I'm YC lets see the gear,  oh looks good.  Lights, scirens, helicopters with night sun lights all abuzz.   Your busted Mr DX selling used gear and not reporting it to the IRS.   

[Paul Woodward]

This is now a thing in the UK, the tax office are targeting sales on Reverb, eBay, Etsy etc as sidelines. I can understand if you are selling goods you make or buy to profit but christ, you paid tax on your earnings to buy your gear and now they want tax when you sell it (probably at a loss). It's dispicable. 

[Reezekeys]

I found this web page that breaks the concepts down, though the exact amounts v.a.v. reporting requirements may not be accurate as it's a few years old:  https://www.1040.com/blog/2019/7/12/selling-stuff-online-taxes-for-etsy-ebay-letgo-and-more/

[Stokely]

Great, another reason to dislike selling gear.  I have 3, maybe 4 if you count one that needs a (hopefully simple) fix, keyboards that are sitting in cases and after some hard thought I doubt they'll see use (especially if I continue on my visionquest to play some guitar in the band, that would keep my keys rig small).  I hate selling locally, and hate shipping    

[AnotherScott]

Yeah, if you're selling stuff for less than you paid for it, you shouldn't have to pay tax on it... but there some big caveats there. One, you need to have evidence that you paid more for it. So I hope you kept and can locate your receipt for that keyboard you bought 5 or 10 or 15+ years ago. Two, if you depreciated your original cost of the keyboard as a business expense, well on one hand, that basically might mean you essentially have the receipt (i.e. some definite record of what you paid, from your old tax returns... but even then, only if you've ket tax returns that go back that many years), but it also means that you already "got back what you paid" (at least to some extent) in tax credits, so then what you get for the board may indeed be seen as profit/taxable income. Lastly, I have a concern that, if you get a 1099 like this, and decide you do NOT have to declare it as income because it was stuff you sold at a loss, I wonder if there will be a way to specifically document that on the return? Otherwise, it seems to me that NOT declaring income that has been reported to the IRS on a 1099 is practically begging for an audit of some kind. But... IANAA. (I am not an accountant.)

[Paul Woodward]

Stick to Facebook Marketplace for selling... 

[ElmerJFudd]

It sounds to me like they are hot to target sellers who deal mainly in second hand items and use sites like Reverb, Etsy, eBay, etc. for store front and transactions.  They should only be required to send 1099s for multiple sales per tax season or sales figures in excess of X that reflect a business operating. 

[AnotherScott]

18 minutes ago, ElmerJFudd said:

 They should only be required to send 1099s for multiple sales per tax season or sales figures in excess of X that reflect a business operating. 

Yes, that's what they do. From docbop's link at the top of the thread:

 

Quote

For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for personal or business accounts that receive over $20,000 in payments from over 200 transactions for goods or services.

That was supposed to drop from $20k to $600, but that change has been delayed, probably by a year.

 

Still, someone who sold less than that could still receive the 1099k, even though the IRS is not (yet) requiring it. The linked page goes on to say:

 

Quote

Although the Form 1099-K reporting threshold for 2023 is $20,000, companies could still send the form for totals over $600.

I assume it's likely to happen if the companies were all set up in their systems for the $600 threshold, before the IRS made the last-minute change to delay the requirement by a year. Regardless, IRS says you're supposed to report that income whether you got the 1099 or not (naturally).

[Docbop]

The whole issue for me is why is an individual selling used personal property not a business considered taxable income????   If I sell a car privately instead of trading it in is that taxable income????    They need to establish when is an individual selling used personal property considered a business.   They need to set a number of transactions within a year and under that number your a individual.   

 

Like when relatives want to give a car or other high ticket item to a family member they instead sell it to the person for one dollar.   Then they are selling the car not gifting the car and avoid the gift tax. People will find way around this they alway do.    

[Polkahero]

4 hours ago, Docbop said:

The whole issue for me is why is an individual selling used personal property not a business considered taxable income????   If I sell a car privately instead of trading it in is that taxable income????    They need to establish when is an individual selling used personal property considered a business.   They need to set a number of transactions within a year and under that number your a individual.   

 

Like when relatives want to give a car or other high ticket item to a family member they instead sell it to the person for one dollar.   Then they are selling the car not gifting the car and avoid the gift tax. People will find way around this they alway do.    

 

They did before when it was 200 transactions per year, starting next year it's only one.  Not sure about this year but supposedly the dollar amount threshold is $5k.  This is going to get political really fast.

[Polkahero]

8 hours ago, Reezekeys said:

I found this web page that breaks the concepts down, though the exact amounts v.a.v. reporting requirements may not be accurate as it's a few years old:  https://www.1040.com/blog/2019/7/12/selling-stuff-online-taxes-for-etsy-ebay-letgo-and-more/

 

That article isn't relevant anymore, the laws have changed even since the last update in 2022.

[Mark Schmieder]

They shouldn't have sent you anything THIS year, as, unlike the PREVIOUS two years, Congress acted on the issue soon enough, before eBay and others had sent out the 1099-K forms.

 

Yes, it is ridiculous, to pay "income" taxes on losses! Of course, you can file capital gains and losses form, but what a PITA, and for stuff like books, comics, other small items, you likely don't have the original receipts for amortization etc. It's an incredible hardship and I have no idea what the intent was, as the limit before declaration used to be $20,000. Let's hope they kill it for good this time.

[Stokely]

I didn't realize the $600 thing wasn't in effect yet (though apparently for some it is).  

So $20K down to $600.  Ridiculous.  Well, at least we know it'll only be the little guy affected, we wouldn't want the rich to be unable to trickle down on us.   That's a real silver lining, a happy takeaway.
 

[MathOfInsects]

Hmmm. I most definitely deduct my purchases from my taxes. So that reduces the amount of income I pay tax on. Selling it restores some or all (or more) of that income. I hate to say it, but I can understand needing to pay on that. 

I just sure as hell don't wanna.

I wonder if it also has to do with Reverb's business model. I wonder if somehow their sales are reflected as income for them as a business, and they need to show the outgo to avoid paying tax on their entire inventory's worth of items for a year. 

Did we agree to be W9 workers for them in some small print somewhere?

Speaking of, how did they 1099 you with getting the required information from a W9?

[zxcvbnm098]

I wonder if the new Sweetwater gear marketplace will be doing the same? If not, that's a big reason to go over there....

[Docbop]

My whole thing is they are calling it Income tax it's not income in any way.   If they said you're acting like a business so you have to collect and pay government sales tax that would still suck but be named correctly.  They need to define what a individual is and what limits there are for an individual to sell personal property before being considered a business.   

 

So what if I donate my old gear to a charity then I get a tax deduction are they going to say that is income????    Seems like the same BS when they started forcing all online sales to collect sales tax.   That was just a scam wanted by big corporation to try and kill off little kitchen table businesses.   They make the tax requirements so hard to follow that it over burdened the little business or they had to use a tax service that was too expensive.   It's alway screw the little guy and help the big businesses by eliminating little businesses.   

 

 

[AnotherScott]

9 hours ago, Docbop said:

My whole thing is they are calling it Income tax it's not income in any way. 

 

If you sell something for more than you paid for it, you have generated income. Of course, if you made a profit on the sale, you were always supposed to declare it as income, that really hasn't changed. What's changed is that now, when it comes to these online sales, when filing your return, the IRS assumes it is all countable as income, and you must document why it is not. Presumably because lots of people were making profit from their online sales and not declaring it.

[Stokely]

Well, it means a halt to any upcoming sales I was planning to make on Reverb, which was up to three (depending on my energy level for the whole ordeal).   I dislike local sales even more than shipping stuff but that's what I'll be doing from now on.   And if SW gear exchange has the same issue I won't be using it either.

[ProfD]

5 hours ago, Stokely said:

I dislike local sales even more than shipping stuff but that's what I'll be doing from now on.

Selling locally to include driving up to X miles is the best way to go except that it shrinks potential customer base. 

 

The KC Classifieds is even better especially if it's a fellow forumite.  Potentially makes shipping less of a hassle too. 😉😎

[zxcvbnm098]

I wonder if GC will be doing the same for their purchases of used gear?

[Mark Schmieder]

9 hours ago, Stokely said:

Well, it means a halt to any upcoming sales I was planning to make on Reverb, which was up to three (depending on my energy level for the whole ordeal).   I dislike local sales even more than shipping stuff but that's what I'll be doing from now on.   And if SW gear exchange has the same issue I won't be using it either.

 

They don't have a choice; it's the law. So, of course Sweetwater Gear Exchange also follows these rules. Luckily, they didn't have to send out 1099-K's this year to average people WHO ARE NOT TAX CHEATS, as the new laws have been deferred for one more year.

 

It's equivalent to charging income tax, atop sales tax, to taking your stuff to a  bargain store to unload it.

[Polkahero]

I'm still trying to figure out how the OP received that 1099 in the first place.  Do you recall providing Reverb with your SS#?  I sell a lot of stuff on Ebay and still haven't gotten mine yet.

[jason88]

I just checked my account and yes, they have my SS#, believe I had to provide it for them this past year.  Found it on this subpage when I was logged in to my account:

 

https://reverb.com/my/selling/tax_id

 

However, they do clarify on the page below that regarding the thresholds for the 2023 year, screenshot attached.