Got the letter from Reverb....

Frank_NH

Synchromatic
Mar 25, 2013
851
Lebanon, NH
It's actually not stuck in limbo and is not tied to the spending bill at all. It is part of the American Rescue Plan Act of 2021 that passed earlier this year and was signed into law. These changes are taking affect Jan 1 2022.

This is correct. So sell, sell, sell until New Year’s Eve! :) 2022 is officially the year of Craig’s List…:rolleyes:

On a related note, last year I lived in a neighborhood which had its own Facebook page. On the page was a place to post items for sale and most everyone would ask for payment using Venmo. Starting next year, once they’ve sold more than $600 worth of kids toys and appliances they’ll be receiving a 1099K too! o_O
 

gretscher09

Electromatic
Apr 18, 2009
76
USA
The 1099K reporting rule has been in affect for several years but the threshold was $20,000 and at least 200 transactions. Except for several states where the threshold was $600. As has been stated, this all changes starting 2022 when the threshold drops to $6oo, no matter how few transactions. Unless the IRS creates a new form to handle 1099k "income" it will be a nightmare for the average small hobbyist seller on Reverb, Ebay, etc.
 

Johnny Alien

Gretschie
Apr 29, 2014
128
Harrisburg, PA
People were always supposed to collect tax on their used sales though no one really did. So adding the tax to sales on sites didn't really bother me. Its extra money but at least the website collected it and paid it. This new threshold creating the 1099 puts all the onus on us to keep receipts and record these sales as profits or loss. If you sell one or two big things it might not be a big deal but people that turn over loads of small stuff will really be put out. I know I have low tolerance for these things. I buy/sell used records and that's the exact thing that could be a real headache. I am unloading stuff at the end of this year and then refraining from ever doing stuff like that again. Its just not worth my time. But it IS a good thing for me as far as finding gear and holding onto it. Thats a plus.
 

Highroller

Country Gent
Jun 11, 2015
1,839
Portland, OR
It's actually not stuck in limbo and is not tied to the spending bill at all. It is part of the American Rescue Plan Act of 2021 that passed earlier this year and was signed into law. These changes are taking affect Jan 1 2022.

Yeah, the thing that's "stuck in limbo" right now are regulatory changes to In-flow Out-flow reporting requirements - how banks and payment service providers (paypal, etc) report large movements of cash between accounts. It's a completely different thing, but the proposed changes were made at the same time as the 1099K changes, so everybody gets them confused. One's law now, the other's not.

btw, the American Rescue Plan Act was the thing that resulted in millions of Americans getting those covid relief payments and extended unemployment benefits earlier this year. Maybe a good way to think about things is to balance out your puny increased 1099 tax liability with the covid payments you got last spring. Probably still a net gain, at least for a lot of people.

Just saying, YMMV, my opinion only, etc, etc etc.
 
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Gretschtim1

Country Gent
Dec 4, 2012
3,629
Dundalk, Md
Maybe a good way to think about things is to balance out your puny increased 1099 tax liability with the covid payments you got last spring. Still a net gain, at least for most people.
In my case - not even close and nearly two years later I'm still losing money trying to keep my business afloat.
Bye Bye middle class.
 

Highroller

Country Gent
Jun 11, 2015
1,839
Portland, OR
Sorry to hear that, Gretschtim. As a former business owner myself, I fully understand how hard it can be. At a certain point, you gotta ask yourself: Why am I doing this?

I sure did. That's why I'm a former business owner!
 

JLD4133

Country Gent
May 10, 2011
1,515
Mequon, WI
Clearly, the IRS would like to see these sales identified. Presumably, they would expect that they be reported by the seller, and that net profits of a business engaged in buying and selling instruments be taxed; and for those who have occasional sales of instruments (i.e., not engaged in the business of buying and selling), reporting of short and long term capital gains would be required, and net gains taxed.
 

Frank_NH

Synchromatic
Mar 25, 2013
851
Lebanon, NH
Since this thread began I've been doing a lot of research about this issue. The "comforting" words I've read about the effect of this rule change on casual online sellers usually goes something like this: "If you bought a $1200 couch and sold it to your buddy for $800 through Venmo, don't worry - you won't owe any tax. And if you happen to sell for $1600 dollars, then by golly you made a capital gain and you should pay your fair share!"

What appears to be lost on all of these "experts" is the issue of confirming you actually didn't make a capital gain, and if you did how to properly report it. Who has a receipt from a couch they bought back in 2011? What if you inherited it? Maybe you found it in a dumpster. If you purchased it online, you may have appropriate documentation (just a credit card statement is not sufficient). And remember, it's not just one item but potentially dozens of items sold over a year. On your federal tax form, do you itemize each and every online sale, original price, sold price, and retain pages of supporting documentation? For a business, I would assume this is standard operating procedure, but for a casual seller trying to unload their old couch? That's why the old threshold of $20,000 was appropriate - it was large enough to separate the casual online sellers from the businesses.

Sadly, online marketplaces like eBay and Reverb are going to see a big hit from this next year. One of the major attractions of Reverb to me was the access to ordinary music gear folks like myself who wanted to sell a pedal, pickups, guitar neck, etc. The new 1099K reporting and documentation requirements and lack of clarification on the tax reporting are, for me, just too much of a hassle. Maybe they can repeal this legislation next year if there is enough momentum to do so but I'm not optimistic.
 

Highroller

Country Gent
Jun 11, 2015
1,839
Portland, OR
The "comforting" words I've read about the effect of this rule change on casual online sellers usually goes something like this: "If you bought a $1200 couch and sold it to your buddy for $800 through Venmo, don't worry - you won't owe any tax.

Not exactly, Venmo doesn't know what you paid for it. They'll see a single $800 sale, $200 of which are in excess of the $600 limit, and send you a 1099K for $200. It'll be up to you to show you lost money on the deal, either by filing as a business or by filing a capital gains/loss statement (1040 Schedule D, iirc?).

What appears to be lost on all of these "experts" is the issue of confirming you actually didn't make a capital gain, and if you did how to properly report it. Who has a receipt from a couch they bought back in 2011? What if you inherited it? Maybe you found it in a dumpster ...

I think everybody here agrees that the record-keeping to make the new rules work are going to be a serious PITA.

Sadly, online marketplaces like eBay and Reverb are going to see a big hit from this next year.

Yep, no doubt they will.
 

juks

Country Gent
Nov 26, 2020
1,824
Fremont, California
Not exactly, Venmo doesn't know what you paid for it. They'll see a single $800 sale, $200 of which are in excess of the $600 limit, and send you a 1099K for $200. It'll be up to you to show you lost money on the deal, either by filing as a business or by filing a capital gains/loss statement (1040 Schedule D, iirc?).



I think everybody here agrees that the record-keeping to make the new rules work are going to be a serious PITA.



Yep, no doubt they will.

No Venmo will send you a 1099K for $800. The $600 is just a reporting threshold to them. If the amount is more than $600, they report the total amount to IRS and send you the same in 1099K.

If the total is below $600, they don't have to report it to IRS but you are in principle still suppose to report it in your taxes if it was income.
 

speedicut

Friend of Fred
Jun 5, 2012
6,088
Alabama
It's actually not stuck in limbo and is not tied to the spending bill at all. It is part of the American Rescue Plan Act of 2021 that passed earlier this year and was signed into law. These changes are taking affect Jan 1 2022.
Sounds like they're 'rescuing' the money from our pockets...
As as far as considering it a payback for covid stimulus money, us taxpayers are already on the hook for that.
 

Gretschtim1

Country Gent
Dec 4, 2012
3,629
Dundalk, Md
Sorry to hear that, Gretschtim. As a former business owner myself, I fully understand how hard it can be. At a certain point, you gotta ask yourself: Why am I doing this?

I sure did. That's why I'm a former business owner!
:)
Yeah thanks. I've been considering getting out of the business since last Winter. It's only worse this year because the endless restrictions have made it impossible for many places to start up live music again. For years I've done tons of programs and sound system repairs and installs in senior centers. All those jobs went away in March 2020 and haven't come back yet.
At least last year I was getting some PAU money but that went away in September. So this Winter is gonna be much harder to deal with. In years past I made enough money doing outside live shows during the Summer months to get me through the cold Winter months. I had a few outside festivals this year but nothing like I had pre-Covid. My usually busy studio schedule has been nearly non-existent this year.
With the down swing in the economy people are holding onto the money they have especially musicians.
 
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panhead6zero

Country Gent
Jan 17, 2015
1,107
The Motor City
Thanks Rich, for allowing this thread to continue! Bottom line, whatever side of the political spectrum you reside, we are all being screwed. I would like to know each Congress persons' credit score. I don't care about their taxes. But if you can't manage your own finances, why in blazes would I want you managing my tax money?
 

juks

Country Gent
Nov 26, 2020
1,824
Fremont, California
Was just watching Troggly's show today. Made me think. Not suggesting anybody to do this, but was just wondering if it would work.

Reverb had all these foreign sellers who obviously don't have a SSN. And I don't think a 1099K will be sent to them either.

Then you have this software where you can change you IP address to be in any country. Let's say you change your IP to be in Switzerland. Open account as Swiss seller. You probably need a bank account there as well but with CH that's not a problem. You can even open a number account so even the bank won't know who you are :).

Then you do all your selling through that Reverb account and avoid the income tax. Obviously only worth the trouble if you sell alot.

And I don't know if bank rules are changing as well, but at least now they don't report foreign transfers under 10K.
 

Highroller

Country Gent
Jun 11, 2015
1,839
Portland, OR
No Venmo will send you a 1099K for $800. The $600 is just a reporting threshold to them. If the amount is more than $600, they report the total amount to IRS and send you the same in 1099K.

Really? Ok, I stand corrected. Seems like there should be a way to deduct that first $600 one way or another as non-taxable income. Maybe on your 8949?

If the total is below $600, they don't have to report it to IRS but you are in principle still suppose to report it in your taxes if it was income.

Yeah, like anybody'd do that! Ha!

I dunno ...
It's patently unfair to say if I sell $599 worth of goods I don't have to pay any taxes on it, but if I sell $601 worth of goods, I pay taxes on all of it. Makes no sense.

But then again, this is the IRS we're talking about! :rolleyes:

Maybe good ol' Ben Franklin said it best: "in this world, nothing can be said to be certain, except death and taxes."
 
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Gretschtim1

Country Gent
Dec 4, 2012
3,629
Dundalk, Md
Reverb and Ebay will take the biggest hit.
Lots of people will decide that it's not worth the hassle to deal with 1099s and they will sell their stuff locally making private cash deals like we use to do before there was a Reverb or Ebay. That's okay with me since I stopped selling on Ebay and Reverb when their fees went up last year. I also like selling locally because you don't have to deal with shipping and packaging fees. The buyer picks the gear up hands you the cash and deal is done...:D.
 

ramjac

Synchromatic
Aug 14, 2011
983
Wisconsin
Probably not good for Reverb, but I’m not so sure that eBay isn’t viewing it as at worst case bittersweet. At least they don’t seem to be making a secret of their opinion that low-volume sellers are a liability, and they’ve drawn a lot of criticism for it. They’ll still have to fall back on draconian seller policies to weed out the Joe Onesytwosies under $600, but starting next year for a significant group of smaller sellers, they can just shrug and point their finger at the taxman.

I have mixed feelings about the desirability of an exodus to Craigslist. On the one hand, Craigslist and other minimally controlled online forums are the only sites on which I’ve ever successfully sold guitar gear. But on the other, IT’S CRAIGSLIST, with all its well-known lowballing warts, flaws and frustrations. But then again, it seems like the days on eBay where you’d almost never receive unsolicited lowball offers or attempts at haggling if you didn’t enable “best offer” are long gone. But then yet again, Craigslist seems like it’s still predominantly viewed as a local platform, so even if sellers migrate over there and buyers follow, the lack of national or global visibility could be bad for pricing depending on what you’re trying to unload and where you live. Who knows? I guess I’ll sit back and watch.
 


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