Seeking guidance on the New 1099-K horse-puckey (re: gear sales)...

[shredd]

OK. I'mma sure there's info out there on this. But I've been floundering on this for going on 2 years, and I'd love some advice/guidance.

As my fellow gear-hounds know, there's been a meltdown in the rules that enable private/individual sales on places like ebay, reverb, et al. Where once an individual could make online sales of up to $20,000 or 200 items/sales a year (PLENTY for the ordinary person, even a gear-hawr like me!), that has been cut to $600/yr, and you're issued a 1099-K and reported to the IRS, who threatens audit if such sales aren't accounted for (and taxed) on your tax returns.

As a lifelong gear-hound/G.A.S.-hawr, I've routinely used these online outlets to transact my gear purchases/sales.
Now - since this bullsquirt went down - I sell maaaaaybe one or two pieces of gear a year, in order to avoid going through the tax-documentation shredder. This is MAJOR-ly inhibiting my ongoing evolution of gear/studio equipment.

Here's what I'm asking:
Can ANYone who's dealt with this give me an idea - or even guidance on where to get simple, straight-forward answers - on how this is done? For the countless hours of online research I've done, all I've ever seen is tax-form documentation that's so complex it makes the schematic for my DP-32 look like Snoopy-and-Linus doodles.

I can vaguely grasp that your sales/proceeds are reported to the IRS (that's the 1099-K); and you have to report that as income on your taxes; but - presumably - you "write off" the COST of the good/s, thus coming out at zero-sum gain (or something near it)?
WHERE in your taxes do you do this? WHAT form? HOW do you file when you've sold a guitar you paid $1000 for at $900, or $1000, or $1100?

I couldn't possibly BE more frustrated, pieced-off, or disillusioned about the used-gear process, which I've been an enthustic participant in for DECADES - but is now so complicated that I've completely stepped off. So if you have ANY experience/knowledge in this, I am ALL EARS!!!
THNX!

 

[Mark Richards]

@shredd this is from the website of a tax attorney. Scroll back up to the top for the full discussion of the issue.

Based on what I read (noting the caveat that what's on that site, and what I'm interpreting based on what I've read, does not constitute legal advice) the gist of it seems to be that the IRS requires third-party market places to 1099 you for the sale; and you are required to report that information when filing your tax return if you made a profit on the sale, i.e. you sold the item for more than you paid for it.

It also seems that there's no tax liability if you can prove that whatever you sold was sold at a loss, so long as what you sold was purchased by you originally; noting that IRS rules proscribe applying that loss against other earned or unearned income that you're reporting.

If you can't prove the original cost basis and thus the loss on sale; or if you've sold something gifted to you; or if you have a gain from the sale in excess of cost of the item sold, it seems you're on the hook for the tax liability.

In a broad sense, that seems to be the same basic principal used to determine short/long term capital gains/losses on investments.

The best course, IMO, is contact a local tax attorney. Many attorneys won't charge, or charge only a small fee, for an initial consultation.

 

[shredd]

Thanks @Mark Richards - I'll have a look. Am hoping it's less confusing than most of the info I've found online about this issue.

I'm not sure there's anything like a "local tax attorney" where I live - it's mostly livestock & gun-nutz that you cross the street to avoid. But that'd be a good avenue to explore fer sher.
And - considering I bought & sold freely for DECADES up to a coupla years ago, it KILLS me to have to go through this bullsquirt, let alone have to PAY someone to help me figure it out!!!

In any case - thnx for the input!!!

 

[-mjk-]

You can call the IRS and ask them to explain it to you. Their advice won't be optimized to save you money but at least they can explain what the law means.

 

[shredd]

You can call the IRS

Thnx MJ…but I thought of that a couple of years ago, when this boolsquirt was imposed. Got me nowhere.

Frankly: I have a better chance of Taylor Swift knocking on my door wearing nothing but a smile than of getting answers/help from the IRS. And it’s only gotten worse since. And the worst is yet to come!

EDIT:
The other issue I'm havin' is that I always do my taxes with one of the usual tax-prep s/wares...and I can find nowhere in it that addresses/accomodates this. I'mma too stewpyd to do it 'by hand' (the ol'-fashioned way, calculating on paper forms, etc). The s/ware user-help/customer support can't/won't answer this, and the IRS would sooner pay my taxes for me than offer any assistance with 3rd-party s/ware...

Basically, it comes down to this:
I'm OK with hitting/exceeding this absurdly low plateau that's been imposed; I'm not really concerned about it drastically altering my 'income' by generating a lot of "capital gains". 94% of the gear I sell goes for about what I paid for it, sometime a hair more, often a bit less. It's unlikely that it'd actually impact my income level or tax bracket/responsibility or anything.
What I DON'T understand is: how the hail do you DO it? How does the IRS want you to document/declare/list/detail/specify the $ amounts that gear was bought for and sold for? The forms most often pointed to (8949 and Schedule D), like most IRS paperwork, are so convoluted and confusing, the language of the instructions so obscure and incomprehensible, that it's completely inhibiting my interest in doing it.
Yet I'll HAVE to, if I want to sell gear. And I'll be damned to an eternity of nothing but K-pop and gangsta-rap if I'll pay some CPA $1500 to do my taxes, which are normally so simple I do them in a couple/few hours (at least until this horse-puckey came along...).

 

[-mjk-]

I lived in Boston at one point. Boston was big enough to have a local office. I went there several times and was able to get answer to my questions on the spot. Perhaps there is an office there.

I hope things get worse for them. Honestly there is no reason for the USA's IRS to even exist. Well, there is but it has nothing to do with the US Treasury.

 

[shredd]

Hey @-mjk- -
Unfortunately, there's nothing like a 'local office' anywhere near where I live (note my signature)...

Don't worry...things ARE getting worse for the IRS. And FAST.
Sadly, it doesn't change their mandate to collect taxes; it only impacts their ability to do so, especially as it relates to chasing down the numberless tax cheats here (costing the Treasury BILLIONS), and of course the ability to serve/help people like me. It's the people of the US that are paying the consequences, NOT the Treasury. I think you can grasp why I so often bitterly/snarkily make "scumbag politician" references.

Hopefully they do it better in Taiwan!!!

 

[Mark Richards]

I always do my taxes with one of the usual tax-prep s/wares...and I can find nowhere in it that addresses/accomodates this

@shredd, I use TurboTax Deluxe. I made a simple test and it handles 1099-K reporting easily. Very straight forward, confusion free. Answer the interview questions and it computes the tax liability, if any, as described in the information found in the tax attorney link above.