Taxes and Auction Site Question

[D. Bergin]

Let me first say I an NOT an accountant.

.......but if you are a collector, dealer, or both, who buys and sells out of their collection on a regular basis, it might be worthwhile to declare/register yourself as a business (doesn't matter if it's considered a really small business), get a sales and use tax number from your state, keep track of all your sales, expenses and purchases, and file a Schedule C with your taxes, while taking all legitimate business deductions available to you.

Sounds like a lot of work, but will probably save you a lot of money over the standard hobby income calculations.

[RL]

don't try to beat IRS, they will catch you.

[BRoberts]

Originally Posted by RL

don't try to beat IRS, they will catch you.

Especially when you post on a public message board how you plan to defraud the government.

[russkcpa]

Originally Posted by BRoberts

Especially when you post on a public message board how you plan to defraud the government.

IRS Agents, FBI, DHS, etc monitor all of social media. They would like nothing better than to send someone up the river so that all of the Net54 family gets the message.

Starting a thread basically asking how to avoid reporting income is not smart.

[lug-nut]

Originally Posted by russkcpa

IRS Agents, FBI, DHS, etc monitor all of social media. They would like nothing better than to send someone up the river so that all of the Net54 family gets the message.

Starting a thread basically asking how to avoid reporting income is not smart.

It's research on 'how to run an honest business'...hardback to hit the shelves summer 2021

[Jewish-collector]

Sometimes you just gotta pay the IRS and say WTF

[buymycards]

You can afford a card that is worth more than $20,000? Pay your damn taxes.

[Rhotchkiss]

Originally Posted by BRoberts

Especially when you post on a public message board how you plan to defraud the government.

+1. You can’t make this crap up!!!

[Directly]

'In this world nothing can be said to be certain, except death and taxes' Benjamin Franklin, 1789.

[lug-nut]

I was afraid of what I have read thus far...I was hoping to fall into the 'yard sale' category and not have to claim it. At this point (and thanks to everyone so far) I will make an effort to sell on a private level or just wait it out long enough to make enough $ to pay for the taxes I'll inevitably be paying.

One thing I considered is using an out-of-work/retired friend to list, this way, his income is only the card and not the card plus my income. he will be in a much lower tax braket.

[glchen]

As others have said, it is much better to just go by the IRS rules and pay what taxes you properly owe. There are too many ways for the government to catch you, which would cause big problems that aren't worth it. For example, if there is a deposit into your bank account over 10K, the bank will report that to the government. If you have your friend report that sale on their taxes for you, the IRS may audit him, and ask for his receipt for the cost basis of the card, and he will get in trouble if he submits something fraudulent. Too many possibilities for this to go sideways.

[russkcpa]

Originally Posted by glchen

As others have said, it is much better to just go by the IRS rules and pay what taxes you properly owe. There are too many ways for the government to catch you, which would cause big problems that aren't worth it. For example, if there is a deposit into your bank account over 10K, the bank will report that to the government. If you have your friend report that sale on their taxes for you, the IRS may audit him, and ask for his receipt for the cost basis of the card, and he will get in trouble if he submits something fraudulent. Too many possibilities for this to go sideways.

The bank will report DEPOSITS OF CASH for $10K or more ......and don't try to outsmart the bank by staggering cash deposits that in the aggregate exceed $10K That is more egregious.

[russkcpa]

Originally Posted by lug-nut

I was afraid of what I have read thus far...I was hoping to fall into the 'yard sale' category and not have to claim it. At this point (and thanks to everyone so far) I will make an effort to sell on a private level or just wait it out long enough to make enough $ to pay for the taxes I'll inevitably be paying.

One thing I considered is using an out-of-work/retired friend to list, this way, his income is only the card and not the card plus my income. he will be in a much lower tax braket.

Be careful with this:
If you ARE ever audited the first thing an agent will look at are your bank deposits. If you have deposits that are in excess of income reported you will have a major problem on your hand.
How are you going to explain this ?

If you do get your retired friend to sell the card and report the income his modified adjusted gross income will spike and may throw him into an IRMAA surcharge added to his monthly Medicare premium. That could be substantial and he will be royally pissed at you.

Just be an honest person and report the income. It's not ordinary income if you're not a dealer. It would be a capital gain from sale of collectibles.

I hope you feel better now

[x2drich2000]

Originally Posted by D. Bergin

Let me first say I an NOT an accountant.

.......but if you are a collector, dealer, or both, who buys and sells out of their collection on a regular basis, it might be worthwhile to declare/register yourself as a business (doesn't matter if it's considered a really small business), get a sales and use tax number from your state, keep track of all your sales, expenses and purchases, and file a Schedule C with your taxes, while taking all legitimate business deductions available to you.

Sounds like a lot of work, but will probably save you a lot of money over the standard hobby income calculations.

This seems to have been glanced over here and something I've heard recommended for years. I've never considered my purchases/sales in the past to be a true business so never bothered really considering it, but as my sales have started picking up in both volume and dollar amount, I've started to get more curious about it. Anyone willing to comment on the legality of doing so and, if legal, would it really be worth the effort?

[swarmee]

Originally Posted by x2drich2000

This seems to have been glanced over here and something I've heard recommended for years. I've never considered my purchases/sales in the past to be a true business so never bothered really considering it, but as my sales have started picking up in both volume and dollar amount, I've started to get more curious about it. Anyone willing to comment on the legality of doing so and, if legal, would it really be worth the effort?

If you declare as a business, the IRS has some recommendations to consider. It's thoroughly discussed on the 1099-k thread on the Blowout Baseball forum.

But basically, if you are attempting to make money in the endeavor, and would likely turn a profit in 3 out of 5 years, you're probably a business based on the IRS definition. As such, you get to debit quite a bit of your other expenses rather than just item cost. I think the IRS would be accepting of it if you do it consistently in the future, not flip-flop every year based on whichever way is most preferential to you every year.

You will have to keep or find a lot more paperwork, I'd bet, and you'd probably want someone to help you prepare your taxes, at least the first year.

Some of this is also happening, I'm sure, with the bitcoin kids, since the IRS instructions state that if you're buying in with the intent to sell for a profit, they can be taxed like any other investment.

[Exhibitman]

Justice Oliver Wendell Holmes: "Taxes are what we pay for civilized society..."

James Madison: "The power of taxing people and their property is essential to the very existence of government.''

FDR: "Taxes are what we pay for civilized society. Too many individuals, however, want the civilization at a discount."

Justice Felix Frankfurter: "I like to pay taxes. With them I buy civilization."

[D. Bergin]

Originally Posted by swarmee

If you declare as a business, the IRS has some recommendations to consider. It's thoroughly discussed on the 1099-k thread on the Blowout Baseball forum.

But basically, if you are attempting to make money in the endeavor, and would likely turn a profit in 3 out of 5 years, you're probably a business based on the IRS definition. As such, you get to debit quite a bit of your other expenses rather than just item cost. I think the IRS would be accepting of it if you do it consistently in the future, not flip-flop every year based on whichever way is most preferential to you every year.

You will have to keep or find a lot more paperwork, I'd bet, and you'd probably want someone to help you prepare your taxes, at least the first year.

Some of this is also happening, I'm sure, with the bitcoin kids, since the IRS instructions state that if you're buying in with the intent to sell for a profit, they can be taxed like any other investment.

Yeah, paperwork can be daunting (my daughter, who's a freelance artist keeps trying to get me to use Quickbooks). I generate lb's of files and receipts every year, and I'd be considered a very small business. I've got tubs of paperwork going back years in storage.........just in case.

I used an accountant for several years, just to finalize my return, before realizing it was just simple math and plugging in numbers into the Turbo-Tax software.

It can be stressful pulling all the numbers together during tax-time, but it's really not that complicated, especially if you are at least halfway organized about it.