Paying for Guitars in 2022 (New IRS Rules)

[mivaldes]

Originally Posted by Thunder22

the $600 transaction rule isn't law yet, and let's hope it never is.

Incorrect. It IS law. Passed with the stimulus bill back in March or April.
https://www.cnbc.com/2021/03/26/its-...ine-sales.html

[mivaldes]

Originally Posted by TiffanyGuitar

The law is only a proposal. Hopefully it does not pass. My understanding is that it looks to any deposit greater than $600 - I am assuming that this post is being facetious, but it wouldn't work to avoid it.

I have never made money selling a guitar, and I think technically losses on selling things like guitars would be personal losses, which aren't deductible, unless you are truly in the business of buying and selling, or perhaps a serious guitar collector. So, this potential law presents a problem for selling personal items for more than $600 because the IRS would get deposit info from your bank and we would get a 1099 from Reverb, Paypal, etc.

I suppose you might be able to argue that any loss is a loss on the sale of a collectable - but it is not a strong argument. Again, this presents a problem if it passes. It will make it exceedingly difficult to sell things like guitars.

If this law passes, I think it potentially kills things like Venmo, Paypal, Reverb, Etsy, etc.

I think Reverb has been very bad for my GAS, so maybe the silver lining if it passes would be that I could rid myself of GAS virtually permanently.

It has ALREADY passed. https://www.cnbc.com/2021/03/26/its-...ine-sales.html

[Leftoutside]

IRS rules require Paypal to send a 1099-K if the total for the year is over $20,000. However a number of states require that now if it goes over $600.
I got a 1099-K last year for items sold on auction sites. What a hassle to have to file it and figure out what my basis was.

[mivaldes]

Originally Posted by Leftoutside

IRS rules require Paypal to send a 1099-K if the total for the year is over $20,000. However a number of states require that now if it goes over $600.
I got a 1099-K last year for items sold on auction sites. What a hassle to have to file it and figure out what my basis was.

That's the whole point of my post. That's the way it is THIS year. NEXT year that $20k goes down to $600. EVERYONE will get a 1099 that sells over $600. It's a HUGE change. Get more than $600 in Venmo or Paypal? You're getting a 1099. Part of me wonders how the IRS will even manage it.

[PassingThru]

Originally Posted by mivaldes

That's the whole point of my post. That's the way it is THIS year. NEXT year that $20k goes down to $600. EVERYONE will get a 1099 that sells over $600. It's a HUGE change. Get more than $600 in Venmo or Paypal? You're getting a 1099. Part of me wonders how the IRS will even manage it.

Poorly at best.

[imwjl]

I'm not in the guitar selling business but am in one where I get and also generate 1099s. I just do an as best as possible accounting of what I do.

The audits and accounting in my day job and personal life have me knowing we've had tax cuts, and a lot of people try to cheat. All I do with sub-contractors and my own has me knowing there's a lot of cheating going on. Thus, I'll accept efforts to enforce and hope my efforts to record and be honest keep working.

[TomB'sox]

Nebraska just passes a state law preventing this law in their state somehow. I expect other states to follow.

[RP]

IRS makes a distinction between those whose hobby is buying/selling guitars and those who are in the business of doing so. The difference is the intent to actually make a profit doing so. If you're like me and lose money on every transaction while trying to make up for it in volume, we're probably in the clear despite being issued the 1099-K...

[rllink]

Originally Posted by TiffanyGuitar

I have never made money selling a guitar, and I think technically losses on selling things like guitars would be personal losses, which aren't deductible, unless you are truly in the business of buying and selling, or perhaps a serious guitar collector. So, this potential law presents a problem for selling personal items for more than $600 because the IRS would get deposit info from your bank and we would get a 1099 from Reverb, Paypal, etc.
.

I think this is true, you can't deduct everything you lose money on. I deduct a lot of expenses and losses, but they have to be related in some way to my business. I don't think I could lose a couple hundred on a guitar that I sold and say that it was related to writing and selling books. But if you are gigging and getting paid, there's another story.

But you would have to declare your income to declare your losses. I can say that there are a lot of people a lot smarter than me who could keep track of everything and do their own taxes as a business, but I have to hire an accountant to keep mine all sorted and properly filed. I make a little money here and there busking and doing some festivals, but I sure don't make enough to pay my accountant to factor that in. It is a hobby and hobbies are not deductible.

[Mr. Jelly]

I've dealt with 1099s in the past and all I can remember about it is that I have dealt with it. It's really a non-thing.

[Guilty Spark]

Originally Posted by TomB'sox

Nebraska just passes a state law preventing this law in their state somehow. I expect other states to follow.

See: Supremacy Clause of the United States Constitution.

[Paleolith54]

Originally Posted by mivaldes

Part of me wonders how the IRS will even manage it.

Because if the $3.5T spending bill passes, there is an enormous increase in IRS funding for enforcement.

BTW, there are an awful lot of pronouncements in this thread being stated as fact where it is obvious the person making the statement hasn't looked up the rules. It doesn't matter what you think should be true, only what the rules actually say.

[TomB'sox]

Originally Posted by Guilty Spark

See: Supremacy Clause of the United States Constitution.

Thank you, I was just reporting what I have read, I am not a constitutional lawyer although I would assume Nebraska consulted with theirs?

[raysachs]

For those of you in the finance and/or tax world (yeah, I know we're ALL in the tax world, but some folks deal with them professionally), I need some clarifications on 1099s. I get them based on some investment income and for what little interest my bank accounts generate. But I was under the impression that these are reported as common income, NOT CAPITAL GAINS... Is this right or wrong.

Guitar sales are rarely generating income unless you're a shop like Guitar Center that pays wholesale and tries to sell at retail. For most of us who aren't looking to make money flipping instruments, it tends to be a losing proposition. So if I bought a guitar for $2000 and sold it for $1800, I'm assuming I'm not gonna be taxed on that $1800 as income, when in fact I lost $200 on that guitar. Do I just have to report the $1800, document that I paid more than that for it, and be done with it? Or is there more to it?

-Ray

[slewis]

Originally Posted by Mr. Jelly

I've dealt with 1099s in the past and all I can remember about it is that I have dealt with it. It's really a non-thing.

I've dealt with them too, as many of us have.