OT But probably affects most on this board

[jtschantz]

I know this is off topic, but if you use paypal (which I am sure most on here do), you better read this now or possibly be very sorry you didn't come tax time in 2012. https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W

Anyone have any thoughts? Excuse me if this has already been covered on this board.

[Leon]

Originally Posted by jtschantz

I know this is off topic, but if you use paypal (which I am sure most on here do), you better read this now or possibly be very sorry you didn't come tax time in 2012. https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W

Anyone have any thoughts? Excuse me if this has already been covered on this board.

This is a good post. So basically, my first 199 (paypal) customers are the ones who I will take paypal from.

There is the $20,000 threshold AND the 200 transactions, in order to have to report. Not just one or the other. I can see this being a huge loss for paypal.

[Jim VB]

Originally Posted by jtschantz

I know this is off topic, but if you use paypal (which I am sure most on here do), you better read this now or possibly be very sorry you didn't come tax time in 2012. https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W

Anyone have any thoughts? Excuse me if this has already been covered on this board.

Understand, that this doesn't change anyone's requirements at all. The need to report sales income stays exactly the same. The only difference is that now, someone may check up on you.

[ChiefBenderForever]

Couldn't a seller open multiple accts ? I bet some already have.

[Leon]

Originally Posted by JohnnyHarmonica

Couldn't a seller open multiple accts ? I bet some already have.

They will probably curtail that by asking for SSN's and EIN's.

Jim- no doubt you are correct. I have a spreadsheet each year of where, when and for how much I buy and sell my cards for. At the end I tally them up and there you go, straight onto my CPA. Last year was not a good year but I was still in the positive. I wish I had to pay millions in taxes!!!

[D. Bergin]

I already report my sales so it doesn't bother me at all.

What concerns me is that this is just the first step towards the government imposing a federal internet sales tax.

[Jim VB]

Originally Posted by D. Bergin

I already report my sales so it doesn't bother me at all.

What concerns me is that this is just the first step towards the government imposing a federal internet sales tax.

Depending upon what state you live in, you probably already have an "internet sales tax." Most states require you to pay a tax on all internet purchases. However it is extremely difficult to enforce.

Most state tax forms have a line item asking for purchases you made, on which no tax was charged. Most people ignore it.

[Rich Klein]

A local card shop, owned by a nice and honest older man (Leon has met him and agrees with me), nearby I'm in favor of these concepts.

The advantages that internet sellers have over B&M stores is not fair to them and being able to even out that is a good idea in my book.

Rich

[chiprop]

there is a good chance this will be repealed before it goes into effect

[4815162342]

Originally Posted by Rich Klein

A local card shop, owned by a nice and honest older man (Leon has met him and agrees with me), nearby I'm in favor of these concepts.

The advantages that internet sellers have over B&M stores is not fair to them and being able to even out that is a good idea in my book.

Rich

I understand what you are saying, but I'm not a big fan of spreading the misery around.

[D. Bergin]

Originally Posted by Rich Klein

A local card shop, owned by a nice and honest older man (Leon has met him and agrees with me), nearby I'm in favor of these concepts.

The advantages that internet sellers have over B&M stores is not fair to them and being able to even out that is a good idea in my book.

Rich

I'd have to disagree. People who own B&M stores are also allowed to sell out of state on the internet, and many if not most of them do to supplement their income. Also, something sold in the store does not carry a S&H charge. It's just an additional burden for everybody and everybody's costs go up.

Another item buyers don't seem to realize. Paypal or a Merchant account gets a cut of that S&H charge, not just the item price. They also get a cut of State Sales Tax if paid........which the seller has to pay for, on top of collecting and submitting the Exact tax rate from the buyer.

Paypal is certainly not going to be hurting if all sellers are forced to collect a Federal Internet Tax, because they are also going to be getting a piece of that to, every time it gets paid, which will be the sellers responsibility to pay for in fees, on top of paying back the exact amount collected.

Lower bids/sales, less money and more paperwork.

No, I'm afraid from a selfish standpoint........I'm not in favor.

"Even playing field" is a myth perpetrated by Big Box Stores. It certainly is not going to save the little Mom & Pop downtown strip ideal.

[jtschantz]

I don't think the issue here is so much about sales tax as it is more about personal income tax..just sayin!

[D. Bergin]

Originally Posted by jtschantz

I don't think the issue here is so much about sales tax as it is more about personal income tax..just sayin!

Yeah, sorry I took it in another direction. Just theorizing what this is eventually leading to.

If you are already keeping records and reporting your sales it shouldn't bother you. I just think it's a tool to track how much commerce is actually going on with the internet so they can use it as a bargaining chip to claim how much revenue the government is losing so they can either tax it at a federal level or into a combined state tax fund.

[Jim VB]

Originally Posted by D. Bergin

Yeah, sorry I took it in another direction. Just theorizing what this is eventually leading to.

If you are already keeping records and reporting your sales it shouldn't bother you. I just think it's a tool to track how much commerce is actually going on with the internet so they can use it as a bargaining chip to claim how much revenue the government is losing so they can either tax it at a federal level or into a combined state tax fund.

We have no national sales tax of any kind, in any area. Historically, the Federal Government has left Sales Tax issues up to the state and local governments to handle (as they have property taxes.) Could this change? Sure. But I don't see it happening in the foreseeable future.

I do think it is a move to close a loophole in the collection of income taxes. Therefore, it is designed as enforcement of a law already on the books, and not a new law.

[baseballart]

As Jim VB has pointed out, the reporting requirement by Paypal does not change a taxpayer's obligation to properly file his or her income tax returns. As well, every state with a use tax requires taxpayers to self-assess out-of-state purchases. I have seen California use federal customs importing records to deal with unpaid California use tax.

A national value added tax (in which businesses get input credits on taxes they pay on their expenses) is the best taxing method in terms of fairness and cost of administration. As such, I expect there is somewhat less than a zero per cent chance of it ever being implemented.

In Canada, we have such a tax, and despite complaints from consumers, it levels the field of competition between sellers.

I act for many taxpayers with unreported revenue. And everyone of them has reported all their credit card sales, as they know that these amounts cannot escape detection of the tax authorities.

[teetwoohsix]

Pretty soon they will figure out a way to tax the air we breathe.

[53Browns]

Actually I believe they are working on a bill right now that will tax every third breath we take. Something to do with carbon omissions.

Wouldnt put it past them...

[M's_Fan]

I am a tax lawyer so I might be able to explain what is going on here in very general terms.

IRS 6050W was passed as part of The Housing Assistance Tax Act of 2008. This was passed in July of 2008 under the previous Congress/Administration, to try and prevent the "subprime mortgage crisis" from spreading to the rest of the economy (this was passed in July of 2008, and the economy nearly collapsed in October, so we all know how successful this legislation was).

You may ask, "Why in the heck did they pass this tax reporting law in a housing bill?" To answer this, let me give you a background on how much tax legislation gets passed: Congress wants to pass a bill spending all sorts of money on government programs. To make the numbers look like at least part of the legislation is paid for, and thus won't add to the deficit, they pass some new tax provision which Congressional accountants have determined will raise money for the government. So that's where IRS 6050W came from. They passed all sorts of revenue raising gimmicks in the Obamacare legislation as well. Sausage making at its finest.

The purpose of this law is to try and match up the information reports with what people report on their income taxes. It provides an easy way for the IRS to claim that there is unreported income.

Right now the limits are $20k and 200 transactions, not $20k or 200 transactions. So I definitely will keep my paypal transactions under $20k.

Legal Disclaimer: None of this is to be construed as legal advice or forming an attorny-client relationship, see your own tax advisor.

[Leon]

Originally Posted by M's_Fan

I am a tax lawyer so I might be able to explain what is going on here in very general terms.

IRS 6050W was passed as part of The Housing Assistance Tax Act of 2008. This was passed in July of 2008 under the previous Congress/Administration, to try and prevent the "subprime mortgage crisis" from spreading to the rest of the economy (this was passed in July of 2008, and the economy nearly collapsed in October, so we all know how successful this legislation was).

You may ask, "Why in the heck did they pass this tax reporting law in a housing bill?" To answer this, let me give you a background on how much tax legislation gets passed: Congress wants to pass a bill spending all sorts of money on government programs. To make the numbers look like at least part of the legislation is paid for, and thus won't add to the deficit, they pass some new tax provision which Congressional accountants have determined will raise money for the government. So that's where IRS 6050W came from. They passed all sorts of revenue raising gimmicks in the Obamacare legislation as well. Sausage making at its finest.

The purpose of this law is to try and match up the information reports with what people report on their income taxes. It provides an easy way for the IRS to claim that there is unreported income.

Right now the limits are $20k and 200 transactions, not $20k or 200 transactions. So I definitely will keep my paypal transactions under $20k.

Legal Disclaimer: None of this is to be construed as legal advice or forming an attorny-client relationship, see your own tax advisor.

Thanks...always good to hear from someone in the know...best regards

[ChiefBenderForever]

So can you sell 199 items for a million dollars or not ?

[Leon]

Originally Posted by JohnnyHarmonica

So can you sell 199 items for a million dollars or not ?

You will still owe taxes (plus or minus) just like today, but the IRS won't require the reporting from the venue, is the way I understand it.

[Exhibitman]

Let me tell you how it will be,
There’s one for you, nineteen for me,
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
Should five per cent appear too small,
Be thankful I don’t take it all,
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat,
If you get too cold, I I’ll tax the heat,
If you take a walk, I’ll tax your feet.
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
Now my advice for those who die,
Declare the pennies on your eyes,
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
And you’re working for no-one but me.

The brilliance of the Beatles aside as a general point, there really isn't an issue here if you run your card business as a proper business already. Honestly, the whining over the government creating a reporting mechanism that does no more than allow it to be sure that every business is complying with the tax laws is ridiculous. If being 'forced' to comply with the same tax laws as everyone else who runs a business is just too much for you, get out of the business. Otherwise, man up and be responsible businesspeople.

[ChiefBenderForever]

Just wondering how it is going to affect all the laundering/loop hole cash shenanigans going on, baseball cards are a tiny percent of their business. I don't see how ebay and paypal don't lose millions next year unless thousands of people are ready to go to jail. It doesn't affect me at all but very interesting to see what the outcome will be. Ebay stock at 29.90 a share right now, let's see what it is a year from now.

[Jim VB]

Originally Posted by JohnnyHarmonica

Just wondering how it is going to affect all the laundering/loop hole cash shenanigans going on, baseball cards are a tiny percent of their business. I don't see how ebay and paypal don't lose millions next year unless thousands of people are ready to go to jail. It doesn't affect me at all but very interesting to see what the outcome will be. Ebay stock at 29.90 a share right now, let's see what it is a year from now.

The "laundering/loop hole cash shenanigans" are treated exactly the same way as any other purchase. They count as one transaction and whatever dollar amout they are for.

Unless people go back to writing checks (which Ebay has made challenging, because they won't let you say you except them), Ebay will be fine.

[ChiefBenderForever]

But what about the people who have been selling hundreds of thousands of dollars of goods under the radar ? They either have to get multiple accts or limit themselves to sales or report income. We are talking about millions of dollars here. So less sales will equal less revenue for ebay. My unprofessional advice would be to sell ebay stock soon but I am no expert and really don't know anything, I guess time will tell.

[teetwoohsix]

Originally Posted by JohnnyHarmonica

But what about the people who have been selling hundreds of thousands of dollars of goods under the radar ? They either have to get multiple accts or limit themselves to sales or report income. We are talking about millions of dollars here. So less sales will equal less revenue for ebay. My unprofessional advice would be to sell ebay stock soon but I am no expert and really don't know anything, I guess time will tell.

Or stop selling on ebay

[Jim VB]

Originally Posted by JohnnyHarmonica

But what about the people who have been selling hundreds of thousands of dollars of goods under the radar ? They either have to get multiple accts or limit themselves to sales or report income. We are talking about millions of dollars here. So less sales will equal less revenue for ebay. My unprofessional advice would be to sell ebay stock soon but I am no expert and really don't know anything, I guess time will tell.

Multiple accounts won't help. Anyone who Ebay determines may be close to the limit will be asked to supply Ebay/Paypal with a Social Security Number (or an EIN, for a business.) Multiple accounts will be liknked to either your specific SSN or your EIN.

Yes, I suppose that some sellers could stop selling on Ebay, but other avenues to sell through are just as easy for the information to be tracked (unless you think there will be a resurgence of weekly card shows.) Other, large auction houses will be next. Any credit card sales are already tracked, through the bank.

I would never advise anyone concerned about paying profits on taxes that the solution is to do less sales. I do wish they would all pay the required taxes on their profits.

[Dan Carson]

If Meg was in office this wouldn't happen!

[BleedinBlue]

...and how it affects my situation.

This year I decided to liquidate a fair number of cards for various reasons including space, change in collecting focus and finances. I've still got a ways to go on this clean-up which will roll into 2011. In my case I am selling cards which I have purchased over the last 30+ years and held in my personal collection. I don't have records on what I paid for each card except for those purchased in the last 4 years. How so I report "profits" when I don't know purchase price? Given that some of these cards have greatly appreciated but some have also drastically depreciated, where does that leave me from a reporting standpoint? At this point I plan on selling less. I'm not in business, I'm just trying to thin my collection. And I did expect to sell more than $20k in 2011. Certainly I planned on selling more than 200 items.

[Leon]

Originally Posted by BleedinBlue

...and how it affects my situation.

This year I decided to liquidate a fair number of cards for various reasons including space, change in collecting focus and finances. I've still got a ways to go on this clean-up which will roll into 2011. In my case I am selling cards which I have purchased over the last 30+ years and held in my personal collection. I don't have records on what I paid for each card except for those purchased in the last 4 years. How so I report "profits" when I don't know purchase price? Given that some of these cards have greatly appreciated but some have also drastically depreciated, where does that leave me from a reporting standpoint? At this point I plan on selling less. I'm not in business, I'm just trying to thin my collection. And I did expect to sell more than $20k in 2011. Certainly I planned on selling more than 200 items.

Unfortunately, I believe the rule is that if you can't prove a cost basis, to support your net profit/loss, then the cost basis is 0. I have done that with some cards when I didn't have the necessary back up.

[ChiefBenderForever]

Based on what Jim is saying ebay is going to lose millions in income, and sellers not reporting are going to have to get creative, using a spouse, relative, or someone they can trust to set up accts and bail out at 19k, and of course they will want a cut. The card market probly wont be affected as much compared to electronics, dvds, ect. On the bright side maybe some will see the light and get legit. I wonder how many don't have a clue and end up getting slapped by the big man, my guess is more than a few. With the huge sales the past few months of all the dumping of merch my guess is ebay will surpass earnings so maybe hold off selling for a few months, if they don't adjust earnings expectations they could get slaughtered the next quarter. As always I have no clue what I am saying but find it interesting, I have never understood how this whole situation was off the radar all these years.

As far as bleedinblue situation goes, my unprofessional advice would be go to the national and take the best cash deal you can get !

[Jim VB]

Originally Posted by BleedinBlue

...and how it affects my situation.

This year I decided to liquidate a fair number of cards for various reasons including space, change in collecting focus and finances. I've still got a ways to go on this clean-up which will roll into 2011. In my case I am selling cards which I have purchased over the last 30+ years and held in my personal collection. I don't have records on what I paid for each card except for those purchased in the last 4 years. How so I report "profits" when I don't know purchase price? Given that some of these cards have greatly appreciated but some have also drastically depreciated, where does that leave me from a reporting standpoint? At this point I plan on selling less. I'm not in business, I'm just trying to thin my collection. And I did expect to sell more than $20k in 2011. Certainly I planned on selling more than 200 items.

My first advice is to get a professional tax advisor, and ignore all advice (including mine) that you get from a message board.

As an aside, I would go back and re-read your post, removing any reference to cards, and insert the words "stocks." If you were reducing your 30+ year holdings of stocks, you would expect to have some winners and some losers. You would know that you owe tax on the net amount of any profit. You would expect to pay that amount. The fact that it's cards makes no difference.

[M's_Fan]

The paypal website makes it clear that you have to trigger both the 200 transaction AND the $20k gross sales volume mark:

Will I Be Affected by the 2011 Tax Changes if I Only Meet One of the Thresholds?

No. A merchant has to pass BOTH thresholds ($20,000 in gross sales volume and 200 transactions) in 2011 to qualify for the new requirements. A business receiving $10,000 in payments per year would not be affected by the new requirements.

Some have suggested opening multiple accounts to get around this. From the paypal website:

If I have multiple accounts that, when combined, meet the thresholds, but individually they don’t, will I still qualify?
Yes. PayPal and all other payment processors will report sales and transaction volume to the IRS by SSN/TIN/EIN.
For example, if you have two accounts tied to the same SSN/TIN/EIN with the following payment levels:

Account A - $18,000 in sales and 180 transactions
Account B - $2,000 in sales and 20 transactions
Your accounts will qualify under the new regulation.

Look for the IRS or Congress to ratchet down the $20k limit over time and close the loopholes people have found to get around this reporting requirement.

Legal Disclaimer: None of this post is to be construed as legal advice or forming an attorney-client relationship; see your own tax professional.

[Jim VB]

Originally Posted by JohnnyHarmonica

Based on what Jim is saying ebay is going to lose millions in income, and sellers not reporting are going to have to get creative, using a spouse, relative, or someone they can trust to set up accts and bail out at 19k, and of course they will want a cut.

Johnny,

Where do you think those sellers will turn? Right now, your premise is that these sellers would rather not sell than pay the taxes they owe. I don't think that's a very sustainable business model.

[baseballart]

Originally Posted by Exhibitman

The brilliance of the Beatles aside as a general point, there really isn't an issue here if you run your card business as a proper business already. Honestly, the whining over the government creating a reporting mechanism that does no more than allow it to be sure that every business is complying with the tax laws is ridiculous. If being 'forced' to comply with the same tax laws as everyone else who runs a business is just too much for you, get out of the business. Otherwise, man up and be responsible businesspeople.

Adam

I agree 100% with what you're saying. However, if everyone complied, that would be bad for my business

And to reiterate what I said before, any business person who doesn't report his or her revenue from traceable credit card sales is simply playing audit roulette with the highest degree of stupidity, and should be prepared to face very severe consequences if they are audited.

[ChiefBenderForever]

Thats a good question Jim, I'm not sure. Ebay made it possible for a lot of people to make a lot money on the side or full time but many never filed anything on it and I doubt will want to start now. I'm not talking about a business model, more of the cash cow that worked out for a lot of people that won't work as good anymore. Maybe pawn shops, flea markets, and action in the streets will start to pick up. I don't think it will have much of an impact on our hobby, but some sellers will have to be careful.

[Exhibitman]

Originally Posted by Dan Carson

If Meg was in office this wouldn't happen!

Uh, yes it would. The law in question is Federal, not state, and passed in 2008, signed into law by George W. Bush.

[jtschantz]

Originally Posted by Jim VB

Johnny,

Where do you think those sellers will turn? Right now, your premise is that these sellers would rather not sell than pay the taxes they owe. I don't think that's a very sustainable business model.

Bingo!..you are correct that this is not a sustainable business model for a business, but my guess is that most collectors don't consider themselves or thier collecting "habits" as a business. They collect items that interest them and sell off items when they get tired of them or want to free up cash for something else that has caught their eye. These (and I think there alot of them) are the people that are going to have to either run their hobby (obsession) more carefully in the future or get out. Ebay, paypal, and this board have made it much easier for the collector to obtain and sell items. I am not sure everybody is up for turning their hobby into a business. I think some will slow down or get out all together. I am glad this thread is going where I was hoping it would go.

I hear people complain all the time about buyers premiums (12-19%), ebay and paypal fees (10%+), but I have seldom heard anyone mention that they are taking a 20-30% tax hit on everything they sell. Why not? I really think this is going to have a huge affect on the hobby starting Jan 1. Hope I am wrong.

[Exhibitman]

Originally Posted by jtschantz

I hear people complain all the time about buyers premiums (12-19%), ebay and paypal fees (10%+), but I have seldom heard anyone mention that they are taking a 20-30% tax hit on everything they sell. Why not?

Because your statement is not accurate. If you are running a proper business you pay income taxes on net income (after expenses), not on gross sales. Roughly speaking, if a card costs you $100 and you sell it for $110 your taxable income from that sale is $10, not $110. BP, Paypal and Ebay fees are charged against the gross, regardless of the net profit or loss on the item. A 10% hit on a $110 sale is $11, leaving you at a net loss of a buck for the sale if the item cost you $100. A 30% income tax on $10 is $3, leaving you at a profit of $7 on that $110 sale. That's why the sales costs hurt so much more than the taxes.

Like I've always said, I wish I was paying a million dollars a year in income taxes.

[BleedinBlue]

No doubt I would expect to record stock transactions and record them for tax purposes. However, I've never thought about buying a $20 blaster box at the Walmart checkout and writing off that $20 from my income when the contents ended up being worthless commons.

Considering that most of my collection was purchased out of wax boxes over the last 30 years I'm sure I've lost about 90% of my invested capital on those transactions. How do I write that off from my income?

Originally Posted by Jim VB

My first advice is to get a professional tax advisor, and ignore all advice (including mine) that you get from a message board.

As an aside, I would go back and re-read your post, removing any reference to cards, and insert the words "stocks." If you were reducing your 30+ year holdings of stocks, you would expect to have some winners and some losers. You would know that you owe tax on the net amount of any profit. You would expect to pay that amount. The fact that it's cards makes no difference.