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Discussion in 'Fred's Barcalounge' started by englishman, Sep 24, 2021.
The best post I've seen in weeks . I'm sure @Synchro would agree
I can't be nice and play by the rules when discussing some of these things on a fundamental level, so I won't. But I do have one ongoing thought about the implementation of all these things I'll share. Why is is that every new requirement, reg, or law that goes on the books increases the complexity and burden and expense, whether they be a private citizen or a business? The US already has a ridiculously complex and burdensome tax code. It is getting so complex that it is untenable for many and discouraging for some who may want to start a small business. Things just keep getting piled on, and it is the individual or business responsibility to account for it.
"One of the great mistakes is to judge policies and programs by their intentions rather than their results." - Milton Friedman
Yikes. I can see applying a sales tax, but this... seems excessive.
Seems they're going after the high volume guys that run unregistered businesses out of their garage and only sell on line.
This is above and beyond the GST. It seems that what the US is doing is recording all your sales in a year as income. In Canadian terms, it would be a separate T4 at year's end, with the income subject to CPP, EI, federal and provincial taxes...
This seems messed up..I spent taxable income when I initially purchase the gear. Applying income tax if I sell the gear years later seems like double dipping.
Here in Ontario, it's called HST. It's a blended tax, part Provincial, part Federal, 13% in total. This is sales tax, which as a business man, you can apply to be refunded. What you're referring to above, is income tax.
A seller is a seller, is a seller.
If you're manufacturing anything for sale, you're liable to have to pay ''income tax'' on any ''profit made"
It's not that difficult...especially as a small builder. You're only paying tax on your ''profit''.
And...after you deduct, shipping costs, vehicle costs, shop/tools/equipment/material costs...you're actually paying tax on very little.
One ledger book is all you need, your spouse, who becomes your employee, and a tax deduction, maintains track of costs/profit/receipts/sales slips...etc.
What you're addressing is nothing new. Be careful who you sell to, stay away from Ebay/Reverb etc. They are not your friends, and they have their own tax liabilities as well.
Fair...does not enter into anything...but it's business! And, your profit margin should be high enough to make your efforts worth while...if not, you're wasting time and ''cost capital''. Take your wife on a nice vacation instead.
Not really, read my response to englishman.
You are a manufacturer of instruments...you have costs...and you have profit.
You are always responsible as a business person, to declare profit.
Agreed re business sales... but this seems to be ANY sale you make on line, including casual gear sales.
I think folks are getting confused by the thread title, “Big tax changes,” but the tax rule itself has not changed, what is changing is the threshold for reporting proceeds is being lowered, which will require more documentation and substantiation to declare what portion of the reported proceeds are actually taxable. The amount of tax owed is not being changed, rather they are collecting more information from online sales portals to make it more difficult to cheat or avoid paying currently established taxes under the existing and current tax codes for those who may produce smaller amounts of taxable income. While many larger and highly profitable corporations operate with substantial subsidies and pay effectively zero or even a negative tax, and who pay their employees below the threshold income for additional government assistance to be able to eat, so sure, go after the garage sales to boost the tax revenue.
That article from cnbc is a mess that I think just confuses people but the law has actually already passed and will come into effect next year.
Thus the reason accountants say you have to show a profit every 3-4 years to deduct your expenses and call it a business to avoid paying taxes on resale.
The whole thing is insane. They are trying to get money off private sales of used items between individuals that have been previously taxed.
Ebay asked for my SS number so I dont sell there anymore.
What this means is you need to be much more careful about purchasing things now, you can't just resell immediately if it's not a keeper! Think about that... I'd say I turn around and sell probably 90% of larger musical items I buy.... in the past. Not now.
We have sales tax in most states. It's the same thing as VAT. Except in Europe VAT is around 20% while sakes tax is under 10%.
Indiana is 7% unless you're near Indy. The 9 counties that make up the greater Indy area have another 5% sales tax just to cover Jim Irsay's NFL stadium that I can't afford to go to.
The only people who will get boned by this new automatic reporting threshold are the people who weren’t paying their taxes to begin with, you know, cheaters. You guys need to relax.
Maybe so, but this will affect us all because there is a huge market out there taking advantage of the current rules. That market will disappear or go even more underground and we'll have packets of cash in mail. This will make a lot of parts much harder to find at a decent price.
BTW, does this mean if I trade in old gear at GC, if value is over the threshold it becomes income?
Or if I buy a new car, my trade in value is taxable income?
What happens when you sell something used for say 500 dollars, that you bought new for 1000? Do you get to write off $500?
Copied from Henry's post above:
"If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive on Schedule 1, Form 1040, line 21."
That's confusing. Expenses to me would be things like Reverb fees, packing materials, shipping costs if you offer free shipping. But if you sell an item at lesser value than what you paid for it, is there income? That's a loss, not income. I think I need to see what is a definition of income and expense.
I think you are talking about net income (net loss) which is generally income minus expense. You can have income and still have a net loss, just as you can have an expense and still have net income.
I think, if passed, it will start Dec 31 2022.
Expect much higher bank fees and higher instances of audit if it passes... the customer will have to pay for the cost of the extra reporting ( from the current amount of $10,000 to $600 is going to be pricey!) and the IRS will increase the rate of audits when they get this info because this is an effort to increase tax revenues.
And, as always, when you get audited, the burden of proof that the aggregate is not income will be on you.
I think the only solution would be to treat all buying and selling as a business.
Get quikbooks and start a new company. You can use your SSN if you don't have anorher tax ID number.
Buy something, get a receipt and it's Cost Of Goods Sold. When it sells, it's Income. All fees whether PayPal, reverb, ect are Dues And Subscriptions. Shipping and bank fees are other expenses. I did this with my internet marketing business and it was simple... BUT... I have an expensive accou tant for my brick and mortar business (bottled water distributorship) and he did my online business too.
I bet this new law makes doing your own taxes much more difficult!