Got the letter from Reverb....

[juks]

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?



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!

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

Like I said above, I did some gig work for Amazon in 2019 and 2020. In 2019 well above $600 so they issued 1099. In 2020 only $150 as I stopped doing that. And Amazon did not issue a 1099.

I did report the $150 as income, as it was salary. Not worth taking a risk of not reporting peanuts. If it's income, you are supposed to report it. You just won't have a 1099 for below $600. I don't see how you could deduct the $600 if you have 1099 for more than that.

However, had I sold a guitar, I would not have declared it. But you didn't need to in 2020, or 2021 for that matter.

 

[englishman]

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.

This is true BUT only if that's the only thing you sell in a year.
" sellers who sell $600 or more on the platform in a calendar year."

You can't sell a bunch of things for $500 and stay under the radar, once you hit that big 600 target, then ANYTHING else you sell for the rest of the year will be added to your 1099 score.

 

[Johnny Alien]

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!

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

Technically if its honestly additional income then we should have always been reporting it and paying taxes BUT the end goal for them is to find people that are making income through alternate sources and make them pay their fair share. I understand and appreciate that they want to find people like that but $600 is way too low of a threshold. $600 does not seem high enough to identify someone that is using sales as an alternate source of income.

 

[Frank_NH]

Technically if its honestly additional income then we should have always been reporting it and paying taxes BUT the end goal for them is to find people that are making income through alternate sources and make them pay their fair share. I understand and appreciate that they want to find people like that but $600 is way too low of a threshold. $600 does not seem high enough to identify someone that is using sales as an alternate source of income.

That's why the old threshold of $20,000 was appropriate. It helped to delineate businesses with large total sales from casual sellers. And remember - while we're talking about just selling music gear online, this kind of tax reporting will affect ALL online sales transactions. So you must keep receipts for everything you own going forward.

By the way, since capital gains on items owned less than a year are taxed at a higher rate than items owned longer, you will have to keep accurate date records and note them when you fill out your taxes to account for all of that income you're earning from online sales.

I'm curious - for those who received the letter from Reverb.com, was that the first you heard about this tax change from them? The law has been on the books for some time and I know eBay has been warning its users and is in fact is lobbying Congress to change/modify this 1099K reporting rule.

 

[englishman]

That's why the old threshold of $20,000 was appropriate. It helped to delineate businesses with large total sales from casual sellers. And remember - while we're talking about just selling music gear online, this kind of tax reporting will affect ALL online sales transactions. So you must keep receipts for everything you own going forward.

By the way, since capital gains on items owned less than a year are taxed at a higher rate than items owned longer, you will have to keep accurate date records and note them when you fill out your taxes to account for all of that income you're earning from online sales.

I'm curious - for those who received the letter from Reverb.com, was that the first you heard about this tax change from them? The law has been on the books for some time and I know eBay has been warning its users and is in fact is lobbying Congress to change/modify this 1099K reporting rule.

Well yeah, the letter addressed the changes begining at the end of this month.

 

[AZBrahma]

If I wonder if, or how, this affects selling things to a local brick and mortar like....you guessed it, Guitar Center. Is the onus going to be on them to make sure a 1099 is generated? If so, between that and online sales, if this is the case I see the quality of life pertaining to hobbyist sales and exchanges slip, slip, slipping away...

 

[juks]

If I wonder if, or how, this affects selling things to a local brick and mortar like....you guessed it, Guitar Center. Is the onus going to be on them to make sure a 1099 is generated? If so, between that and online sales, if this is the case I see the quality of life pertaining to hobbyist sales and exchanges slip, slip, slipping away...

I'm wondering about GC too. If they too have to issue 1099, my exchange strategy will have an issue, though I have the invoices from all the gear I bought from them so I'll be just showing losses then.

But then they have to strat issuing paperwork for the price they pay for the used gear. They don't do it currently.

 

[Gretschtim1]

Technically if its honestly additional income then we should have always been reporting it and paying taxes BUT the end goal for them is to find people that are making income through alternate sources and make them pay their fair share. I understand and appreciate that they want to find people like that but $600 is way too low of a threshold. $600 does not seem high enough to identify someone that is using sales as an alternate source of income.

Well the term fair share is totally distorted. Fair share would be a flat tax.
Say for instance 10%
If you make a dollar you pay 10 cents.
If you make $1,000 you pay $100 and so on.
Charging someone a higher tax rate just because they make more money is not fair and it never was.
All that does is destroy the incentive to work harder.
The other thing that bothers me is that they are double taxing us.
We pay tax on the item when we buy it. What's fair about them charging another tax when we sell the same item?
Like I said there's no such thing as "fair share" when it comes to taxes.
If you add up all the money that we pay out on all the different taxes there are we are already paying out over 50% of what we earn - I think that is way past a fair share.

 

[gretscher09]

The link below is Reverb's explanation of the 1099K rule. It is a little misleading in that they give an example where someone sells a guitar for less than they paid for it so they have "no taxable income to report". While technically true, they do have to report the 1099K on their tax return and the entire amount will be considered taxable income. The problem is how do you tell the IRS it is not taxable income when you file your tax return? The only forms available to show what you paid for the guitar, and that the 1099K amount is not taxable, are Schedule C Business or Schedule D Capital Gains. Reverb doesn't mention what forms to use or how you are supposed to show the IRS your 1099K is not taxable income. They punt and say consult a tax professional.

It is also important to know that the amount on your 1099K will be the gross sales amount including: Sale price, Shipping, Sales tax, Selling fees, Bump fees, Credit card fees, etc. So the amount on your 1099K will be much higher than the actual net amount Reverb deposited to your bank account. So you have to keep track of all that and, as of right now, fill out a Schedule C or D to explain why the 1099K is not taxable income. A useless nightmare! Good luck.

https://help.reverb.com/hc/en-us/articles/4411577966227

 

[juks]

I already saw one seller on Reverb announcing that they will stop selling there after Dec 31st.

130 reviews so fairly active but I think it's not a shop, more of a private gig.

 

[Groutsch]

Here's an idea. Buy a $40 guitar from goodwill auction and $20 shipping cost. Fix it and use 4 hours of your time let's say at $60 per hour (you are a professional ) and $20 in parts. Then sell it to GC when they have their used gear buy in day at $30.

You have now incurred a loss of $290 for the transaction that is deductible from your over all annual income. If you tax rate is 30%, you have just deducted the over all taxable income by $290 which saves you $87 in taxes you have to pay.

And of course the next guitar is a challenge that takes 10 hours to fix .

I believe this was exactly why hobby expenses were not allowed as deductions. But if they now consider your hobby as a business, how could they deny normal business deductions?

My tax guy will get some questions in February .

Ask your tax guy, but I think that you can't deduct the value of your time unless you pay yourself for your time; and if you pay yourself for your time, you need to pay income tax AND self-employment tax, which comprises both the employer and employee portions of payroll taxes.

Since our tax code (unfairly) favors capital over labor, it's better to keep track of your cost basis and treat any profit as a capital gain. You will thereby avoid payroll taxes and possibly pay a lower tax rate.

 

[hcsterg]

I have a Reverb account, but never used it...

A+!

 

[Johnny Alien]

If Reverb wanted to keep sellers and attract new ones they should work on a new system in which you can sell items you bought. So I could go into my purchases and list a guitar that I bought through their website. Since they know the price I paid they could deduct that from my selling price. Each account would then have a running yearly total. So if I bought a new guitar and sold it for $300 less then the purchase price but also sold something I never bought there for $800 it would give me a yearly total of $500. It would encourage retailers to sell through them and because it would be way less work for casual buyers and sellers it would encourage them to use Reverb vs ebay and private forum sales.