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New 1099-K rule delayed
- Thread starter 712drummer
- Start date
If you had use of that drum set for x amount of years, it's not a loss.
If you ever sell stuff, what you buy is an expense and when you sell it it's income.
The only part of it that is taxable income is a gain though. And that's the whole discussion, essentially. How to document and report it. Very few people have really done this before, so there are lots of questions that us non expert tax filers have.
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mydadisjr
DFO Veteran
OK... hypothetical question...
February 2023 rolls around and I get a 1099 from REVERB (yes, I know I won't get one for 2022, but just askin' for future reference).
1099 is for $2282 of various guitars, drums, cymbals, mics, PA gear.
I am a hobbyist, I do not go out and gig any more but still have lots of drums, guitars etc.
I just sold my house, I am getting older and am downsizing so I am selling off some of my stuff.
I have a nice spread sheet showing all my sales and how much I paid for each item sold on Reverb. Got my ducks in a row.
My total PROFIT from 2022 is $178
Do I use SCHEDULE C or SCHEDULE D to show my INCOME of $178?
February 2023 rolls around and I get a 1099 from REVERB (yes, I know I won't get one for 2022, but just askin' for future reference).
1099 is for $2282 of various guitars, drums, cymbals, mics, PA gear.
I am a hobbyist, I do not go out and gig any more but still have lots of drums, guitars etc.
I just sold my house, I am getting older and am downsizing so I am selling off some of my stuff.
I have a nice spread sheet showing all my sales and how much I paid for each item sold on Reverb. Got my ducks in a row.
My total PROFIT from 2022 is $178
Do I use SCHEDULE C or SCHEDULE D to show my INCOME of $178?
Thats a good and real world example, Schedule C shows profit and loss as business not too familiar with D this is where accountants come in. Found this about form D
When Is Schedule D Not Required?
Schedule D is only required when a taxpayer reports capital gains or losses from investments or as the result of a business venture or partnership
dcrigger
DFO Star
Yes - Schedule C - though you'd have to ask your tax preparer to be sure. I have no experience with claim "expenses" after the fact (buy stuff over years, then sell it and claim the expense). As a freelancer with an ongoing Schedule C business, I would always deduct those expenses (purchases) as I made them - offsetting over income at that time. Then later declare the money from the sale as new revenue.
dcrigger
DFO Star
Please - No Politics and No Religion.... I have zero problems with engaging in that discussion, but it likely won't be pretty - and no one wants to be reading it on the drum forum.
Thus the rule - No Politics, No Religion.
Thanks and Happy Holidays!!!
Tama CW
DFO Master
If your purchase and sale is properly listed it will show you had a $500 loss. And ideally, you kept a receipt or invoice for the purchase of the kit. When buying or selling on Reverb you have
that proof as long as they are active. On EBay the page goes away after 90 days....so photocopy your purchase or sale as proof. It's not required to have an exact day
for something purchased years and years ago....an estimate is often acceptable. If you put down that $2000/$1500 entry on your schedule D....odds are 99% it won't be questioned.
If you have documented records there's nothing the IRS can do but acknowledge you lost $500. This is the way capital assets have been bought and sold for decades. It's very routine. And quite easy to do.
The paperwork is not that challenging.
1040 Schedule D - capital gains forms. On that form you put down the dates of purchase and sale. Also purchase price and sale price. That's it.
Then add the columns of short and long term gains....and go through the rest of the form. Here's the form. And it's LESS complicated than it looks.
But plugging it into Turbo Tax should kick out a result w/o much effort. Schedule D is used for the sale of assets that aren't earned income. This is also where your
stock or bond sales would go if you do it outside a 401K plan.
https://www.irs.gov/pub/irs-pdf/f1040sd.pdf
While you probably can't off set other income with that $500 drum kit loss.....it also isn't a profit to be taxed. And by reporting on schedule D the IRS knows that...even if your paperwork has some
errors on it. I don't think they're ready for the deluge of such returns from tens of millions of people who just sold $600+ of stuff at a loss. And all the errors in the paperwork that will require follow-up
from the IRS for no gain on their end. They'd probably just let the error stand and ignore it.
https://www.belfint.com/collectibles-and-taxes-be-prepared-for-the-consequences/
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Tama CW
DFO Master
If it was a strictly a hobby venture, for fun, and not a dedicated profit center for investment.......then schedule D....purchase and sale of assets not documented elsewhere on your 1040 form.
The vast majority of drum hobbyists and those on DFO, should probably be doing a schedule D. But if you want to go for schedule C business just be prepared for a lot more paperwork and tracking.
You only use schedule C if you've made the determination that you want to operate as a sole proprietorship business and deduct expenses.
This is probably something that should have been determined in the tax year that it is being applied to. Normally such single owners obtain a sales tax waiver for purchases (re-sale certificate) from their home state
or states they will be working out of. If you sell stuff on CL/FB you are responsible for collecting the sales tax from the buyer. If they don't want to comply, add it in to the sale price. Keeping these records can be
tedious....and your state may want to audit you at some point. Having a schedule C business requires quarterly estimated tax payments....assuming profits in each quarter....it can get complicated.
As a sole owner you cannot pay yourself a salary or deduct for your labor when out of on the road, cleaning kits, etc. All you can deduct is the cost of the original goods, their improvement
or if additions were made to them, travel expenses or a vehicle purchased solely for use in this business, use of storage units or rented spaces, sales taxes incorrectly applied to your sales, etc. If you try to claim a
partial home deduction that's often a red flag to the IRS....and it really complicates the depreciation value of your home. If you use such a dedicated drum business area at home....nothing else should
be done in that area. Schedule C businesses are responsible for all required social security taxes. Last I checked that was about a 7.5% rate on your profits but it varies as you go up in business income.
A schedule C business should show a profit in 3 of the first 5 yrs. So anyone thinking this is free money....and file losses every year....that ain't gonna fly after you declare a loss for your 3rd year
in a row. The IRS can audit you and un-declare you a "for profit business" and remove the first 3 yrs of business deductions....essentially having you re-file those first 3 yrs under schedule D....plus penalties.
The annual profits under a schedule C business don't have to be "big,".....just + positive for the year. So technically a $100 annual net profit would be "adequate." Though it also tends to raise a yellow flag. If you're
really doing this as a business making $500-$1000 or more per year net is a worthy goal. If you're really in a schedule C business, your records should detail ALL your efforts to maximize sales and minimize costs.
If it looks like a hobby venture to the IRS....they just might disallow your "schedule C business" declaration. You must also keep a running inventory and it's value all year round....down to the smallest items (unless you box
or bag those separately as a single unit....ie "box of misc parts."). Label those them and track them at year's end every year. This can be quite tedious if you have hundreds of items. You can declare you inventory to be at "cost of market" or "actual value" at year's end. You almost must choose either cash or accrual methods for reporting. Your annual inventory should be accurate. Anything not found is assumed to have been sold or lost....and accounted for. All this stuff is auditable. Without an accurate price inventory at year's end there's no "proper" and verifiable/repeatable way you can properly track the business. All these things can make the entire venture quite tedious and a nuisance if your goal is really to be just a hobbyist.
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I am with you there… I never recoup full purchase price on anything I sell online for sure.
Tama CW
DFO Master
Normally, you'd have to have bought something cool or in limited production 20-40 years earlier. All those who bought pro quality Ludwig, Rogers, Gretsch, Slingerland kits in 60's and 70's
and still have them in good condition would be in a strong profit position when they finally sell. Same goes for anyone buying K Istanbul or EAK cymbals back in the 1980's or earlier.
IRS issues standard mileage rates for 2023; business use increases 3 cents per mile
IR-2022-234, December 29, 2022
WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Notice 2023-03PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.
s1212z
Well-Known Member
Sounds like state laws still have their own threshold.
- Alabama: $1,500
- Arkansas: $2,500
- California: $600
- District of Columbia: $600
- Illinois: $1,000 and 4 transactions
- Maryland: $600
- Massachusetts: $600
- Mississippi: $600
- Missouri: $600
- New Jersey: $1,000
- Vermont: $600
- Virginia: $600
levelpebble
Very well Known Member
Not that I'm going to take Reverb's word on a tax issue, but the link states:
"If you meet both the federal IRS and a state-specific threshold, that info will be reported to both the IRS and the tax authorities for your state."
which would imply that the state third-party reporting thresholds are moot, given that the $600 limit federal 2022 provision was rescinded and pushed back to $20k/200 transaction. Now who knows how 2023 will pan out?
s1212z
Well-Known Member
Ok, that is interesting, thx! Sounds like they have to provide the 1099K no matter what if the state threshold is met. Last year was my first time using Reverb and definitely met that limit in my state, I'll have to see how it pans out.
Just got my 1099 from Reverb. I’m in California, and above $600 but (way) below $20K. One data point.
Frank Godiva
DFO Master
Did you have to download that from Reverb or did they send it to you in the mail?
Download. Not sure if there’s a printed one coming as well - I usually assume not these days.
premierplayer
DFO Master
Yes, just got mine also.
Download
Download
