Now, when you sell a used guitar...

Bkat

Electromatic
Dec 8, 2013
70
Illinois
An FYI for all. Read this in the New York Times today.

In part...

In 2021, as part of the American Rescue Plan, Congress changed the rules for how online marketplaces and payment services must report transactions. The aim was to better track gig economy income that wasn’t reported to the IRS.

Before this year, online companies that process payments — including marketplaces like eBay and Poshmark and payment services like PayPal and Venmo — were required to send 1099-Ks only to sellers who exceeded 200 transactions and $20,000 in income annually. That threshold captured sellers running businesses, while excluding most people who were merely cleaning out their closets.

But this year, the income threshold dropped to $600, with no minimum number of transactions. If you received $600 or more for the sale of goods or services, you may receive a 1099-K in early 2023 — even if you are just an occasional online seller of used household items or clothing.

Under the new rule eBay will send both you and the IRS a Form 1099-K, showing you were paid. The company knows nothing about your initial purchase; it’s up to you to document the original price to show that no tax is owed.


Save those old receipts!
 

LesB3

Gretschie
Silver Member
Aug 17, 2021
363
Philadelphia, PA
How many guitars (let alone other stuff) get sold at a price above $600 in a day in the US ? Must be a staggering number to keep track of unless Uncle Sam has hired a few thousand more bean counters to administer it.
It's now $600 in a *calendar year* so you could sell a few pedals for $100 each and still get a 1099 at the end of the year. I won't sell anything online now at all.

...And I think the official number of new bean counters is supposed to be like 80,000?
 

jvin248

Gretschie
May 16, 2017
246
Near Detroit
...Must be a staggering number to keep track of unless Uncle Sam has hired a few thousand more bean counters to administer it.

They are ... 88,000+ new agents "to audit the rich, bwahahaha".... and something something in the news about new hires being willing to carry and use something something for enforcement.

The big problem for guitar hobbyists is all those guitars in the collection they bought years ago and have no receipts or the blue ink on the receipts faded away. Most citizens get rid of old financial documents and receipts after the IRS's published seven year retention limit. So used guitar sales are going to be a landmine of financial risk. Soon there will be digital currency (CBDC) and the challenge of accounting for original value will be even more difficult for tax payers.

No one will be able to get value out of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will be bought.

Players will be back to owning just a single guitar, not a fleet.

Guitar factory and retail sales will plummet and Guitar Brands will vanish.

.
 

LesB3

Gretschie
Silver Member
Aug 17, 2021
363
Philadelphia, PA
Do the tax people take into account of the original price of the seller's guitar and the difference in any of profit? Or, is there a loss $ factor involved where the seller gets a subtraction of original cost?
I think if you have a legitimate business and have expense of $2,000 for a new guitar, but then sell at a loss for $1,800, you can claim the $200 loss on your tax form. Of course, this would be amalgamated with all of your other expenses and incomes, not to mention depreciated inventory, etc.

But how you do that on your personal return, I don't have a clue.
 

LesB3

Gretschie
Silver Member
Aug 17, 2021
363
Philadelphia, PA
No one will be able to get value out of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will be bought.

Players will be back to owning just a single guitar, not a fleet.

Guitar factory and retail sales will plummet and Guitar Brands will vanish.

.

Dogs and cats, living together.
Mass hysteria!!!

Note: an alternative to the land-fill is to "donate" the gear instead. Then you can at least take the tax deduction.
 

rmconner80

Electromatic
Jun 19, 2017
34
Clifton VA
Do the tax people take into account of the original price of the seller's guitar and the difference in any of profit?

Or, is there a loss $ factor involved where the seller gets a subtraction of original cost?
No, but you can. The state I am in started this $600 threshold a few years ago. So I now have to keep a spreadsheet and receipts for purchases and sales, along with shipping costs, sellers fees etc. Because I was already reporting income as a self employed part time musician, I consider the gear sales part of my ‘small business’. No getting around it, once i got netted into it with 1099s, I was no longer in the ‘informal economy’.

It is a real pain, but with all the fees, shipping costs, and the fact that used items sell for less than they cost new, I actually end up losing money on annual sales of gear. This translates to reducing the taxable income on my gigs. So it basically has the reverse effect than the intention of the tax policy, which I find humorous. That said, if I had profits on my sales of musical gear, I’d have no problem paying income tax on it.

The real bummer though is that I sold a couple guitars this year that I have owned for more than 10 years. Lacking any purchase receipt for those where I could document the cost, I now have to pay full income and SE tax on those sales, not on just the ‘profits’.

Long story short, it’s doable but you have to be diligent about record keeping.
 

Bkat

Electromatic
Dec 8, 2013
70
Illinois
I posted this mainly to inform. So no political intent implied.

Basically, it's like capital gains tax. Except they're throwing out a larger net to see what gets caught and seemingly looking into smaller amounts.

In short, if you bought a guitar for $2,000 a couple years ago and sell it for $1,600, you don't owe anything but will get the form because of the transaction. As long as you keep the original $2,000 receipt you have nothing to worry about. You don't owe anything. If you sold it for $2,200, then you're taxed on the $200 "profit."

It does sound a bit onerous and I have to imagine the IRS wasn't happy about it either. Government agencies don't like being tasked with more work, especially when they're already on overload, and I doubt there will be agents assigned to sniffing out the guys who sold one MIM Fender on Ebay.

I also suspect the IRS will be reasonable if (and that's a big if) it ever comes up.

So back to the $2,000 guitar someone sold on Ebay for $1,600... I think it's safe to assume that if (and that's a big if) you were ever questioned about it, the fact it's a used mass-produced item will make the default position that you likely sold it for less than what you paid, even if you've lost the receipt. (Just say you're a musician and that we're all flakes which is why you lost it. They'll buy that.)

Now if they're seeing dozens of 1099s with your name on it, they might ask a few more questions. But one or two here or there and no one will be busting down your door. Remember, they're human too.

I don't think this is huge worry. Kind of a pain and yeah, maybe it is trying to shake down the little folks for some loose change while large corporations avoid paying their due share. (They have better lobbyists.) I just wanted forum members to know what it's all about.
 

speedicut

Friend of Fred
Gold Supporting Member
Jun 5, 2012
6,372
Alabama
In my experience as a small business owner I have found the IRS to be incompetent as a whole while the individual employees I've spoken to on the phone have generally been kind and helpful ( after a two hour hold time).
So, I'm not sure I have confidence in them to not screw things up... But, at least in the end you may be able to set aside a day to call and get something straightened out.
 

Synchro

The artist formerly known as: Synchro
Staff member
Jun 2, 2008
26,685
Tucson
While I certainly understand the concerns this raises, I will echo Thunder 58‘s comments that we want to be careful not to allow this discussion to become political. Political concerns are real, but we can’t solve them here. More to the point, the members here represent a number of viewpoints, and political disagreements can bleed over into other areas, disrupting the harmony of the forum, overall.
 


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