Posted on 11/26/2022 2:32:48 PM PST by TigerClaws
The IRS on Tuesday shared tips for the upcoming tax season — including a reminder about the new $600 threshold for receiving Form 1099-K for third-party payments.
The change applies to payments from third-party networks, such as Venmo or PayPal, for transactions such as part-time work, side jobs or selling goods, according to the IRS.
Before 2022, the federal Form 1099-K reporting threshold was for taxpayers with more than 200 transactions worth an aggregate above $20,000. However, Congress slashed the limit as part of the American Rescue Plan Act of 2021, and a single transaction over $600 may now trigger the form.
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Aimed at closing the tax gap — a top priority of the Biden administration — the provision is estimated to bring in $8.4 billion from fiscal year 2021 to 2031, according to the Joint Committee on Taxation.
"It's going to be a new form for a lot of people," said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA, CPA in Windermere, Florida. "And the worst thing they can do is ignore it." Who may receive Form 1099-K for 2022
Companies file Form 1099-K, known as an "information return," annually to report credit card and third-party payments, with a copy going to taxpayers and the IRS.
Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, said the business income on your return must include what's reported on Form 1099-K. Otherwise, you may trigger an automatic IRS notice or even an audit, he said. The challenge with the new lower threshold amount of $600 for Form 1099-K is that personal payments and reimbursements could be incorrectly reported as taxable transactions. Justin Miller national director of wealth planning at Evercore Wealth Management
It's possible you'll receive Form 1099-K for transactions you don't expect, such as reselling Taylor Swift tickets at a profit, for example, warned Justin Miller, national director of wealth planning at Evercore Wealth Management in San Francisco.
But selling items at a loss, such as used furniture, may be less clear.
"Obviously, if you sell a $2,000 couch for $1,000, there's not taxable transaction there," Markowitz said. "You don't get a capital loss for it, and you don't have a gain." What happens if you get a 1099-K by mistake
Although the change aims to collect taxes on income, not personal transactions, experts say it's possible some filers may receive Form 1099-K by mistake.
"The challenge with the new lower threshold amount of $600 for Form 1099-K is that personal payments and reimbursements could be incorrectly reported as taxable transactions," Miller said.
A frequently asked questions page from the IRS says you shouldn't receive Form 1099-K for personal transfers, such as reimbursements for splitting meals, gifts or allowances.
However, if you receive the form for personal transactions, the agency says to contact the issuer for a correction. If the company doesn't fix the error, you can attach an explanation to your tax return while reporting your income correctly, the IRS says.
So the boomer who’s selling his used stuff on a one time basis in order to downsize is now a business??!!??
I’m pretty sure Schedule C has to be filed as part of a 1040, and the problem is, since I don’t have a mortgage there’s nothing else to deduct. So, it’s best for me to take the standard deduction and file short form. These 1099-K’s will just add to the income side.
Should have sold this crap last year!
Craigslist, yard sale, (what about Zelle method of money transfer ?)
Cash is king
Bottom line - keep receipts for everything (of value) that you buy.
The big unknown is how will this be documented on your income tax forms?
I wonder if having a Completed Listing printout from eBay of someone else’s recent item sale would suffice to show the value
and having a Completed Listing from eBay of your item that sold for less would show that you sold the item at a loss.
Could that go on the tax form as a loss?
Especially if the items were collectibles and only 500 to 1000 were made?
Property Tax is deductible, as are charitable/church contributions.
...
*guffaw!* Sorry, I couldn't keep a straight face.
He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.
“ I’ll bet The Biden Crime Family hides millions from taxation.”
—————
I’ll bet money that Hunter never paid tax on his “Director’s fees,” and that “The Big Guy” hasn’t paid a dime on the various interests and payoffs he gets in the enterprises set up by his son or his brother.
This will finally close the loophole that the mega rich have been using for all these years. I imagine that Jeff Bezos is quivering in his boots. /s
Whether you can take a loss or not is not clear. If you have a home business and buy things with the intention of selling them and making a profit, then you would be able to take a loss.
If you make a profit on a sale, then it is a capital gain, regardless if you are running a business or not.
I would recommend reviewing IRS rules on Home Businesses. Also, I am not a tax expert.
“Property Tax is deductible, as are charitable/church contributions.”
Yes, they are, but with the standard deduction at $12,950 this year (plus $1400 for us old coots), unless you’ve got a nice chunk of mortgage interest to claim you’ll be hard pressed to find enough. Over the years they’ve taken away deductions while raising the standard deduction. So, unless you’re self-employed, rich or in a special circumstance, you are better off going short form.
That’s why this is such a kick in the teeth. You’re going to have to jump through a lot of hoops and probably pay a tax preparer just to save a buck, maybe.
Better to just wince and pay.
“I wonder if having a Completed Listing printout from eBay of someone else’s recent item sale would suffice to show the value...”
Sure, and when you’re sitting across from the IRS agent at your audit, you can certainly bring this up.
How would the issuer know how much you bought the old couch for?
No way to know.
Nobody keeps receipts for everything they bought forever.
The point is that the government wants a percentage of all gross receipts in these type of sales. It will take a big chunk of the estate auctions done by your heirs.
I don't think that is true. If the assets are sold by the "estate" then the amounts will be totaled to determine the "value" of the estate. If the value of the estate is below $12.06 million, then there is no estate tax on it.
Now, if you wanted to do the sale and give the money to your heirs, then you would pay capital gains tax on any gains.
Either way, it would be prudent to consult a tax attorney.
Showing a loss on a sale isn’t allowed?
Not sure how far back the eBay, PayPal, and credit card records go back; I think eBay or PayPal can go back to say, 2007.
I don’t have a home business buying and selling on eBay.
If someone is in a high property tax state, and does the 10% tithe to church, it can add up, even without a mortgage.
But I agree, it’s kicking people in the teeth...
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