1099 and YOU

[cohibasmoker]

Guys/Gals,

A revised tax regulation will be going into effect next year so I thought that it may be best to let everyone know what the deal is so they can prepare. In essense, the bill; requires companies to report to the IRS payments of more than $600 a year to any vendor.

Now, how does that apply to the us? In discussions with other members, the issue is, are we a company or small business? Most of us will say that we are NOT because we only dabble in the hobby - we buy items and occasionally sell them to support our habits. So since we are NOT a company or small business, we would not have to file. Well, is that really accurate? Suppose we sell items on eBay and during the year, and we pay more than $600.00 in fees - does that make us a company or small business? How about PayPal fees? If our PayPal fees exceed $600.00 does that make us a company or small business?

Hey, I can't say for sure but in the eyes of the IRS, that may very well decide you are at least a small business. Now if the IRS feels we are a small business, they will start digging - suppose we bought a football, helmet or jersey for $600.00 or more, did you file a 1099 form? No forms? you may have a problem. Remember they want their money and YOU have to prove your case - NOT the IRS.

Hey, I am NOT an accountant so it would be best if each member go to their account and get advise on their own situation. A wise man told me years ago "pay your taxes" and he was right. I sleep better and if anyone is audited by the IRS and discrepancies are found, with penalties and fees, paying your taxes upfront is the cheapest way to go.

Here's a link to the bill


http://www.businessweek.com/smallbiz/content/may2010/sb20100526_855178.htm

Jim

flaa1a@comcast.net

[CampWest]

Yeah, thanks Democrats... Sneak a tax law onto page 737 of a HEALTH CARE BILL...

An inidividual engaged in a hobby should be more worried about the IRS looking for Cap Gains tax on hobby-related sales. You say you pay all taxes and sleep better... Do you calculate hobby related gains and losses and report on your tax return?

The issue with this 1099-MISC requirement is closing The Tax Gap - unreported income... Say you are a business owner of a retail store and you hire a carpenter to build you a sales display for $750 in labor. The IRS wants to know that the carpenter made $750 from working for you and collect taxes on that $750. Currently the IRS has no way of knowing the carpenter earned $750 from your business.

If you are an individual engaged in a hobby not for profit - then you are not considered a business and would have no requirements to file 1099-MISC. If you operate your hobby as a for-profit business, then you would likely need to meet the 1099-MISC filing requirements. While this increases your burden in accounting and filing, this should not increase your taxes, it would increase the taxes of the vendor.

Hobbyists could be impacted though if they sold merchandise to somebody else operating as a business. THE NEW BILL COVERS GOODS AND SERVICES, where the old requirements only covered services. Say you sell $2000 worth of merchandise to JTSports or consign it with Mears, you may be considered a vendor and issued a 1099 by that business. Then you may need to prove to the IRS that you should not be taxed on that payment.

Someday, they will look for unreported hobby income and gains generated off of ebay and other auction sales. Most collectors don't maintain records proving original cost and acquisition date, which will make it horribly difficult to prove you do not have unreported gains.
http://www.irs.gov/newsroom/article/0,,id=174478,00.html

here the IRS talks about taxable gains from selling property on World of Warcraft or whatever....
http://www.irs.gov/businesses/small/article/0,,id=215593,00.html

[kudu]

Maybe a stupid question, but if the Health Care Law gets repealed, does the 1099 rule get repealed as well?

[cohibasmoker]

Yeah, thanks Democrats... Sneak a tax law onto page 737 of a HEALTH CARE BILL...

An inidividual engaged in a hobby should be more worried about the IRS looking for Cap Gains tax on hobby-related sales. You say you pay all taxes and sleep better... Do you calculate hobby related gains and losses and report on your tax return?

The issue with this 1099-MISC requirement is closing The Tax Gap - unreported income... Say you are a business owner of a retail store and you hire a carpenter to build you a sales display for $750 in labor. The IRS wants to know that the carpenter made $750 from working for you and collect taxes on that $750. Currently the IRS has no way of knowing the carpenter earned $750 from your business.

If you are an individual engaged in a hobby not for profit - then you are not considered a business and would have no requirements to file 1099-MISC. If you operate your hobby as a for-profit business, then you would likely need to meet the 1099-MISC filing requirements. While this increases your burden in accounting and filing, this should not increase your taxes, it would increase the taxes of the vendor.

Hobbyists could be impacted though if they sold merchandise to somebody else operating as a business. THE NEW BILL COVERS GOODS AND SERVICES, where the old requirements only covered services. Say you sell $2000 worth of merchandise to JTSports or consign it with Mears, you may be considered a vendor and issued a 1099 by that business. Then you may need to prove to the IRS that you should not be taxed on that payment.

Someday, they will look for unreported hobby income and gains generated off of ebay and other auction sales. Most collectors don't maintain records proving original cost and acquisition date, which will make it horribly difficult to prove you do not have unreported gains.
http://www.irs.gov/newsroom/article/0,,id=174478,00.html

here the IRS talks about taxable gains from selling property on World of Warcraft or whatever....
http://www.irs.gov/businesses/small/article/0,,id=215593,00.html

Since most of my purchases are on eBay, I simply make a copy of every purchase I make. If and when I sell it (profit or not), I'll make a copy of the sale and attach the original purchase with the receipt from the USPS that the item was mailed. I have a spreadsheet and log everything. I also keep track of eBay and PayPal fees. At the end of the year, I'll bundle it up and TOT my accountant. It seems like a lot of work but once you do it, it's not that difficult.

If the healthcare bill is repealed, I would imagine it all goes away. Whether or not it stays or goes, best to log EVERYTHING.

Jim

flaa1a@comcast.net

[xpress34]

Yeah, thanks Democrats... Sneak a tax law onto page 737 of a HEALTH CARE BILL...

You know what... it's comments like these that keep me looking less and less at GUU.

The fact that NO MODS have done anything to edit it says volumes.

So if this forum is still open to political debates ( I am an Independent by the way - I won't register for either party) maybe all the Right Wingers will want to talk about the REPUBLICAN 'saviors' who have already admitted that they can't do the things they PROMISED to do if elected:

GOP Already Breaking Campaign Promises (http://www.newser.com/story/109142/gop-already-breaking-campaign-promises.html)

"Well, that was fast. Republicans are already backpedaling on a number of provisions of their “Pledge to America,” including promises to cut spending and reform Congressional rules. The GOP had railed against Democrats’ strong-arm legislative tactics, pledging to send all bills through a full committee process and to “let any lawmaker—Democrat or Republican—offer amendments.” Yet with its very first act—health care reform repeal—it will break both pledges, Politico reports.

Republicans also haven’t put the constitutional citations they promised on any early bills, though they say they may add them later when the bill hits the floor. The GOP has also ditched a promise to publicly reveal who attends committee meetings, something that could be used against reps who play hooky. Oh, and that pledge to cut $100 billion in spending in the first year? They’ve admitted that’s not actually feasible, the AP reports, thanks to the vagaries of the budget cycle."

Everyone wants to rail on the Democrats, the Republicans, the Tea Party, etc... GUESS WHAT? They're all the same! Maybe they pedal different ideologies, but they're all snake oil salesmen selling you a line to get elected and then vote whatever way gets the most money in THEIR pockets. They don't give a damn about you or I.

That said, I don't care what anyone's issues are here with the Government. This is a GAME USED SPORTS MEMORABILIA FORUM.

If you want to state facts that affect us - such as this new bill on 1099s - that's fine, but the Political sidebars, snipes, opinions and such is BS and has NO PLACE on this site.

Sorry for the rant, but it just makes me sick that I can't even get away form political commentary on here.

Good day.

- Smitty

[sylbry]

You know what... it's comments like these that keep me looking less and less at GUU.

The fact that NO MODS have done anything to edit it says volumes.

So if this forum is still open to political debates ( I am an Independent by the way - I won't register for either party) maybe all the Right Wingers will want to talk about the REPUBLICAN 'saviors' who have already admitted that they can't do the things they PROMISED to do if elected:

GOP Already Breaking Campaign Promises (http://www.newser.com/story/109142/gop-already-breaking-campaign-promises.html)

"Well, that was fast. Republicans are already backpedaling on a number of provisions of their “Pledge to America,” including promises to cut spending and reform Congressional rules. The GOP had railed against Democrats’ strong-arm legislative tactics, pledging to send all bills through a full committee process and to “let any lawmaker—Democrat or Republican—offer amendments.” Yet with its very first act—health care reform repeal—it will break both pledges, Politico reports.

Republicans also haven’t put the constitutional citations they promised on any early bills, though they say they may add them later when the bill hits the floor. The GOP has also ditched a promise to publicly reveal who attends committee meetings, something that could be used against reps who play hooky. Oh, and that pledge to cut $100 billion in spending in the first year? They’ve admitted that’s not actually feasible, the AP reports, thanks to the vagaries of the budget cycle."

Everyone wants to rail on the Democrats, the Republicans, the Tea Party, etc... GUESS WHAT? They're all the same! Maybe they pedal different ideologies, but they're all snake oil salesmen selling you a line to get elected and then vote whatever way gets the most money in THEIR pockets. They don't give a damn about you or I.

That said, I don't care what anyone's issues are here with the Government. This is a GAME USED SPORTS MEMORABILIA FORUM.

If you want to state facts that affect us - such as this new bill on 1099s - that's fine, but the Political sidebars, snipes, opinions and such is BS and has NO PLACE on this site.

Sorry for the rant, but it just makes me sick that I can't even get away form political commentary on here.

Good day.

- Smitty

You don't like a one sentence comment so you provide a few paragraph rant. Comical. How about just ignoring the comment?

If you (hobbyist) buy an item, sales or use tax is due. If you sell an item and make a profit, income tax is due (or capital gains if the item would qualify as an investment). The health care bill didn't change that. What may change is the issuance of 1099's to force you into paying tax on something you should have been voluntarily complying with in the first place.

[rj_lucas]

One critical point is whether these sales will be treated as ordinary income, or as capital gains. If treated as ordinary income, you'll be taxed at your marginal rate (e.g. 25%, 33%, etc. depending on your total income).

If treated as capital gains, if you've held the item for more than a year before selling you'll be able to take it as a long-term gain (currently taxed at 15%). In addition, if treated as capital gains, any losses from the sale of these items could be used to offset any gains from the sale of other items dollar for dollar.

Rick
rickjlucas@gmail.com

[cohibasmoker]

GUYS and GALS - NO POLITICS. Let's try to stick with this important issue (s) so this thread won't be deleted by the monitors.

Jim

flaa1a@comcast.net

[xpress34]

You don't like a one sentence comment so you provide a few paragraph rant. Comical. How about just ignoring the comment?

If you (hobbyist) buy an item, sales or use tax is due. If you sell an item and make a profit, income tax is due (or capital gains if the item would qualify as an investment). The health care bill didn't change that. What may change is the issuance of 1099's to force you into paying tax on something you should have been voluntarily complying with in the first place.

My point being, why couldn't that poster (or many others on other threads here) stick to the topic of the 1099 without having to insert a Political Commentary - one line or otherwise?

That said. the 1099 law very well could affect us as collectors/dealers, so it is pertinent to the hobby. The politico crap isn't and I'm tired or reading it here.

As far as the 1099's issue, I would like to know how many people here have voluntarily filed 1099s or paid local use taxes on each item they have purchased, sold or traded. My guess would be it is quite low.

The other issue is that once it becomes more widely known, there will be a back lash to it because it won't affect just GU / Sports Collectors - it will affect Comic Book Collectors, Entertainment Collector's, etc.

I understand the idea behind it, but it's effect on eBay will spill over to every other auction site as well as local governments having to hire employees to go door to door on Garage Sales every weekend and collecting taxes or dropping off forms, etc. OR requiring you to request a SALES Permit to have a Garage Sale so the local government can collect it's taxes.

No matter how you cut it, it's going to be a nightmare for both the government (to implement and oversee) and to the citizens to track and comply with.

Just my .02

- Smitty

[CampWest]

You know what... it's comments like these that keep me looking less and less at GUU.

The fact that NO MODS have done anything to edit it says volumes.

So if this forum is still open to political debates ( I am an Independent by the way - I won't register for either party) maybe all the Right Wingers will want to talk about the REPUBLICAN 'saviors' who have already admitted that they can't do the things they PROMISED to do if elected:

GOP Already Breaking Campaign Promises (http://www.newser.com/story/109142/gop-already-breaking-campaign-promises.html)

"Well, that was fast. Republicans are already backpedaling on a number of provisions of their “Pledge to America,” including promises to cut spending and reform Congressional rules. The GOP had railed against Democrats’ strong-arm legislative tactics, pledging to send all bills through a full committee process and to “let any lawmaker—Democrat or Republican—offer amendments.” Yet with its very first act—health care reform repeal—it will break both pledges, Politico reports.

Republicans also haven’t put the constitutional citations they promised on any early bills, though they say they may add them later when the bill hits the floor. The GOP has also ditched a promise to publicly reveal who attends committee meetings, something that could be used against reps who play hooky. Oh, and that pledge to cut $100 billion in spending in the first year? They’ve admitted that’s not actually feasible, the AP reports, thanks to the vagaries of the budget cycle."

Everyone wants to rail on the Democrats, the Republicans, the Tea Party, etc... GUESS WHAT? They're all the same! Maybe they pedal different ideologies, but they're all snake oil salesmen selling you a line to get elected and then vote whatever way gets the most money in THEIR pockets. They don't give a damn about you or I.

That said, I don't care what anyone's issues are here with the Government. This is a GAME USED SPORTS MEMORABILIA FORUM.

If you want to state facts that affect us - such as this new bill on 1099s - that's fine, but the Political sidebars, snipes, opinions and such is BS and has NO PLACE on this site.

Sorry for the rant, but it just makes me sick that I can't even get away form political commentary on here.

Good day.

- Smitty

I hereby edit my comment to "Thanks Politicians for sneaking a tax law change..." I apologize for creating the impression that my comment was party-specific political in nature, when really I meant it as an indictment of the political system in general. I am actually pretty much non-partisan. Sorry for the frustration and confusion.

[CampWest]

There is no political commentary/bias/judgement/opinion/argument/debate/etc intended by this post, it is merely an informational follow-up to the original post and the subsequent non-political discussion of how such law could impact our hobby. :cool: In fact this topic cannot be partisan rhetoric because "everyone agrees should be repealed"... take from that what you will.

NEW YORK (CNNMoney) -- Now that House Republicans have had their token show-vote on the health care law, Congress is turning its attention to one small provision that everyone agrees should be repealed.
On Thursday, three Senate Democrats wrote to House Speaker John Boehner urging the House to vote to repeal the so-called 1099 provision, a hated IRS rule that imposes new paperwork burdens on businesses.
The senators said they "are confident that the Senate can quickly act" on the repeal once the House has moved it along.
"The [1099 provision] is particularly onerous for small businesses ... who cannot afford to employ extra lawyers and accountants to comply with the new rules," Senators Ben Nelson, Maria Cantwell and Amy Klobuchar wrote.
Beginning in 2012, all companies will have to issue a 1099 IRS form not only to contracted workers, as they now must do, but also to individuals or corporations from which they buy more than $600 in goods or services in a year.
The 1099 form is used to document income for individual workers other than wages and salaries: Freelancers get them and businesses send them out.
Under the health care law, the 1099 form would be used to track payments for services and tangible goods. Also, it requires that 1099s be issued not just to individuals, but to corporations as well.
The new mandate has drawn sharp criticism from the business community, politicians and even President Obama. In November, President Obama pledged that he would support a repeal of the provision.
Republican Rep. Dan Lungren of California introduced a bill, called the "Small Business Paperwork Mandate Elimination Act of 2011," to repeal the provision on the House.
"The engine of our economy is small business -- and we cannot afford to do anything that would stall our economic recovery," said Lungren in a written statement. "We should be supporting policies that contribute to job growth, not imposing yet another new government mandate on the backs of small business owners."
Last fall, Congress was unable to muster enough votes to repeal the provision -- once in September (http://money.cnn.com/2010/09/14/smallbusiness/small_business_bill/index.htm?iid=EL) and again in November (http://money.cnn.com/2010/11/30/smallbusiness/1099_senate_fail/index.htm?iid=EL).
The goal of the provision was to raise revenue to pay for health care reform. The government misses out on an estimated $300 billion (http://money.cnn.com/2009/03/26/news/economy/obama_tax_reform_taskforce/index.htm?iid=EL) each year from tax underpayment.
The repeal would cost $19.2 billion between 2011 and 2020, according to an estimate from the Joint Committee on Taxation.

http://money.cnn.com/2011/01/21/smallbusiness/1099_repeal_effort/index.htm

[iceman13]

Senate has now voted YES to repeal it. Obama said he would sign it. It is DEAD.