January 1 could be interesting thanks to congress.

[sreader3]

Originally Posted by Exhibitman

First of all I have dealt with IRS and state auditors. You do not need paper proof to prove basis. Testimony is evidence. I've had clients face down the IRS with direct testimony. I paid $500 for a Warren Spahn card that I sell for $1,000 on eBay and I get a 1099, I report it as such and that will stand up in a court or in an audit. The only things you absolutely must have receipts to prove on your personal return are charitable deductions.

Why should one not worry about the situation you are describing where deducting basis from the revenue shown on the 1099 triggers an audit and forces one to pay an attorney and testify to prove one's innocence? That sounds like a nightmare. Except for the attorney.

[Exhibitman]

Originally Posted by sreader3

Why should one not worry about the situation you are describing where deducting basis from the revenue shown on the 1099 triggers an audit and forces one to pay an attorney and testify to prove one's innocence? That sound like a nightmare. Except for the attorney.

Now that is a textbook case of catastrophizing. The IRS audits roughly 0.3% of returns (3 of every 1000). The IRS initiates criminal investigations against fewer than 2 percent of all American taxpayers. Of that number, only about 20 percent face criminal tax charges or fines. Yet 1099s go out by the hundreds of millions. Getting a 1099 and reporting your income and expenses based on it does not trigger an audit. Not reporting anything is more likely to trigger one. All the 1099 does is give the iRS computer a baseline to test the return against. if an anomaly comes up, the IRS asks questions. It may be as little as a letter informing you that there is a discrepancy that you need to address. I've gotten a few of those and have cleared them up pretty quickly with the help of my CPA or my firm payroll processor.

[raulus]

Originally Posted by Exhibitman

Now that is a textbook case of catastrophizing. The IRS audits roughly 0.3% of returns (3 of every 1000). The IRS initiates criminal investigations against fewer than 2 percent of all American taxpayers. Of that number, only about 20 percent face criminal tax charges or fines. Yet 1099s go out by the hundreds of millions. Getting a 1099 and reporting your income and expenses based on it does not trigger an audit. Not reporting anything is more likely to trigger one. All the 1099 does is give the iRS computer a baseline to test the return against. if an anomaly comes up, the IRS asks questions. It may be as little as a letter informing you that there is a discrepancy that you need to address. I've gotten a few of those and have cleared them up pretty quickly with the help of my CPA or my firm payroll processor.

Don’t forget all the new funding for the IRS to help catch tax cheats.

https://www.cnbc.com/amp/2022/08/31/...happening.html

[Shoeless Moe]

Originally Posted by raulus

Don’t forget all the new funding for the IRS to help catch tax cheats.

https://www.cnbc.com/amp/2022/08/31/...happening.html

All the new hires will be investigating all the people who got PPP loans. You think they care about people selling a few thousand dollars worth of stuff on Ebay when they can get the bigger fish?

[Brian Van Horn]

Question for Exhibitman (Adam) and Bob C.

Is there still any argument/grounds for reporting under 1099-B?

[BobC]

Originally Posted by Brian Van Horn

Question for Exhibitman (Adam) and Bob C.

Is there still any argument/grounds for reporting under 1099-B?

Hey Brian, not sure what the exact question is you are asking. What do you mean by "Is there still any argument/grounds for reporting under 1099-B?"

A 1099-B is used to report your broker and barter transactions to the IRS. Typically, the most common use for these is when you sell some stocks you own in a personal investment account, not in a 401K, IRA, Roth, or other specialized retirement type account. These reporting requirements are still there and in place, and every investment firm you work with that handles stocks and investments for you is required to send these 1099-B forms to the IRS, and you, to show the gross amount you received from the sale of your stocks/investments every year. You typically then report these on Schedule D of your personal income tax return, along with related forms 8749, and also have to report and deduct your basis (what you originally bought the stock for), along with any additional costs of sales, from the gross proceeds you received from selling that stock in determining your net taxable capital gain (or loss) from their sale.

https://www.irs.gov/pub/irs-pdf/f1099b.pdf

https://www.irs.gov/pub/irs-pdf/f1040sd.pdf

https://www.form8949.com/form-8949.html

https://www.irs.gov/instructions/i1099b

By the way, the 1099-B form is for reporting broker and BARTER transactions. As I've said on the forum before, technically, when you do a card trade with someone, that is a barter transaction, and you are technically supposed to report and pay taxes on any relevant net income or net gain you may have realized from the trade. Now the actual requirement to file a 1099-B form falls on the Barter Exchange through which the parties to the barter transaction operated and handled the exchange through. So, you and someone you make a card trade with don't personally have any obligation or need to worry about preparing and sending in 1099-B form to the IRS. But just so everyone knows, you are supposed to be treating such trades as possibly taxable sales transactions. A Barter Exchange is a formal group/organization that keeps track of trading activity between members and has actual accounts they keep for them. Similar to how an investment firm keeps an account for their clients and tracks their stock and other investment activity for them.

And before anyone wonders if Net54 could ever be considered a Barter Exchange, because it does act as a platform and help to facilitate trades amongst it's members, rest assured that is not the case. There is no fee paid to join and use Net54, nor does Net54 track and keep records of member's trading activities and account for them and the values of the items they are trading.

Not sure if this covered what your original question might have been. If not, can you be a little more specific on what you are asking about or for? Thanks, hope this helps.

[Brian Van Horn]

Originally Posted by BobC

Hey Brian, not sure what the exact question is you are asking. What do you mean by "Is there still any argument/grounds for reporting under 1099-B?"

A 1099-B is used to report your broker and barter transactions to the IRS. Typically, the most common use for these is when you sell some stocks you own in a personal investment account, not in a 401K, IRA, Roth, or other specialized retirement type account. These reporting requirements are still there and in place, and every investment firm you work with that handles stocks and investments for you is required to send these 1099-B forms to the IRS, and you, to show the gross amount you received from the sale of your stocks/investments every year. You typically then report these on Schedule D of your personal income tax return, along with related forms 8749, and also have to report and deduct your basis (what you originally bought the stock for), along with any additional costs of sales, from the gross proceeds you received from selling that stock in determining your net taxable capital gain (or loss) from their sale.

https://www.irs.gov/pub/irs-pdf/f1099b.pdf

https://www.irs.gov/pub/irs-pdf/f1040sd.pdf

https://www.form8949.com/form-8949.html

https://www.irs.gov/instructions/i1099b

By the way, the 1099-B form is for reporting broker and BARTER transactions. As I've said on the forum before, technically, when you do a card trade with someone, that is a barter transaction, and you are technically supposed to report and pay taxes on any relevant net income or net gain you may have realized from the trade. Now the actual requirement to file a 1099-B form falls on the Barter Exchange through which the parties to the barter transaction operated and handled the exchange through. So, you and someone you make a card trade with don't personally have any obligation or need to worry about preparing and sending in 1099-B form to the IRS. But just so everyone knows, you are supposed to be treating such trades as possibly taxable sales transactions. A Barter Exchange is a formal group/organization that keeps track of trading activity between members and has actual accounts they keep for them. Similar to how an investment firm keeps an account for their clients and tracks their stock and other investment activity for them.

And before anyone wonders if Net54 could ever be considered a Barter Exchange, because it does act as a platform and help to facilitate trades amongst it's members, rest assured that is not the case. There is no fee paid to join and use Net54, nor does Net54 track and keep records of member's trading activities and account for them and the values of the items they are trading.

Not sure if this covered what your original question might have been. If not, can you be a little more specific on what you are asking about or for? Thanks, hope this helps.

I am not an accountant. That position was held by my late father. That said, at until April of this year you could report collectibles under 1099-B.

[sreader3]

Originally Posted by Exhibitman

Now that is a textbook case of catastrophizing. The IRS audits roughly 0.3% of returns (3 of every 1000). The IRS initiates criminal investigations against fewer than 2 percent of all American taxpayers.

Like you I had a legal practice for many years and got many 1099s. I suppose practicing law for 25+ years made me an expert at "catastrophizing." But I would say for good reason. I don't like this 1099 expansion one bit. Perhaps, as you say, the IRS in the recent past has only audited 0.3% of returns. However, past is rarely prologue. The Orwellian-named "Inflation Reduction Act" just added funding for thousands upon thousands of new IRS auditors (we can argue about the exact number). So we can all safely chuck that 0.3% number out the window. Yes, this new regime will result in some incremental revenue to the feds from tax cheats. However, it will come at a nontrivial cost in terms of time, cost, effort and worry to non-cheats. There are almost never solutions. There are only trade-offs. The feds are encroaching on new turf. Everyone should admit that.

Let me add that I enjoy your blog. Thanks for starting that.

Edited to add: Same comments to Bob C. Yes I am serious. I am very concerned about federal encroachment. I do not place unqualified trust in federal authorities, although I know many good people who work for the federal government. Neither did our founders repose trust in centralized authority. Apparently you are not as concerned, which is your right. It is still a free country.

[jamest206]

Plenty of opportunities for deferments, don’t forget that fellas. I won’t file until October and am not worried at all about this. I will have everything lined up as well.

[G1911]

Originally Posted by sreader3

Like you I had a legal practice for many years and got many 1099s. I suppose practicing law for 25+ years made me an expert at "catastrophizing." But I would say for good reason. I don't like this 1099 expansion one bit. Perhaps, as you say, the IRS in the recent past has only audited 0.3% of returns. However, past is rarely prologue. The Orwellian-named "Inflation Reduction Act" just added funding for thousands upon thousands of new IRS auditors (we can argue about the exact number). So we can all safely chuck that 0.3% number out the window. Yes, this new regime will result in some incremental revenue to the feds from tax cheats. However, it will come at a nontrivial cost in terms of time, cost, effort and worry to non-cheats. There are almost never solutions. There are only trade-offs. The feds are encroaching on new turf. Everyone should admit that.

Let me add that I enjoy your blog. Thanks for starting that.

Edited to add: Same comments to Bob C. Yes I am serious. I am very concerned about federal encroachment. I do not place unqualified trust in federal authorities, although I know many good people who work for the federal government. Neither did our founders repose trust in centralized authority. Apparently you are not as concerned, which is your right. It is still a free country.

+1. The IRS expansion plans are to more than double its workforce. It seems clear that they will be coming after as many people for as many things as possible for as much money as possible. Our tax system is a pain in the rear for people who don't specialize in it; do anything wrong in the process made to be as convoluted as possible and they get to take more from you. I understand many here like this, but it seems very difficult to see how it isn't clear they will be targeting to get as many people as they can. That's the entire point of doubling in size, to route more money to the state and away from the citizens. There is an extremely long history of the IRS coming after low and middle class people for trivial things.

[sreader3]

Originally Posted by G1911

+1. The IRS expansion plans are to more than double its workforce. It seems clear that they will be coming after as many people for as many things as possible for as much money as possible. Our tax system is a pain in the rear for people who don't specialize in it; do anything wrong in the process made to be as convoluted as possible and they get to take more from you. I understand many here like this, but it seems very difficult to see how it isn't clear they will be targeting to get as many people as they can. That's the entire point of doubling in size, to route more money to the state and away from the citizens. There is an extremely long history of the IRS coming after low and middle class people for trivial things.

+2. Thank you.

[BobC]

Originally Posted by sreader3

Edited to add: Same comments to Bob C. Yes I am serious. I am very concerned about federal encroachment. I do not place unqualified trust in federal authorities, although I know many good people who work for the federal government. Neither did our founders repose trust in centralized authority. Apparently you are not as concerned, which is your right. It is still a free country.

My question to you about being serious had absolutely nothing to do with whether we can trust the government or not, it was solely directed at your comment that, and I quote, "the situation you are describing where deducting basis from the revenue shown on the 1099 triggers an audit". That is not even close to anything Adam/Exhibitman said or ever implied.

Simply deducting one's basis from the proceeds they got from something they sold, to determine their net taxable income/gain, is NOT just in and of itself ever going to trigger an IRS audit. In fact, the IRS pretty much fully expects everyone reporting such sales on their tax return is also going to be deducting the basis of what they sold. I just didn't want someone reading what you stated in your post to think that by doing what they are supposed to be doing on their tax return, deducting their tax basis of an item sold, it was suddenly going to trigger an IRS audit for them. That comment/thinking is totally wrong!!!!!

I probably have no more, and maybe even less, trust in our government and politicians than you, and also am not a big fan of encroachment and even more government oversight and regulations. I am merely speaking to the tax laws and requirements/reporting in place, and what people need to be aware of in complying with what is out there. I am not commenting on and either approving or condemning our government and the tax laws they passed, just trying to better explain them and how they are supposed to work for people, especially in regard to how those tax laws can impact their collecting activities.

[sreader3]

You Said: Simply deducting one's basis from the proceeds they got from something they sold, to determine their net taxable income/gain, is NOT just in and of itself ever going to trigger an IRS audit. In fact, the IRS pretty much fully expects everyone reporting such sales on their tax return is also going to be deducting the basis of what they sold.

Will you personally commit to that for the next 5 years? Will you commit to paying the attorney fees of anyone who is audited for failing to pay their claimed tax liability under an IRS audit for noncompliance with the new 1099 rules if they are ultimately found innocent?

You Said: I probably have no more, and maybe even less, trust in our government and politicians than you, and also am not a big fan of encroachment and even more government oversight and regulations.

I doubt it.

You Said: I am merely speaking to the tax laws and requirements/reporting in place, and what people need to be aware of in complying with what is out there. I am not commenting on and either approving or condemning our government and the tax laws they passed, just trying to better explain them and how they are supposed to work for people, especially in regard to how those tax laws can impact their collecting activities.

Great. Carry on.

[BobC]

Originally Posted by sreader3

You Said: Simply deducting one's basis from the proceeds they got from something they sold, to determine their net taxable income/gain, is NOT just in and of itself ever going to trigger an IRS audit. In fact, the IRS pretty much fully expects everyone reporting such sales on their tax return is also going to be deducting the basis of what they sold.

Will you personally commit to that for the next 5 years? Will you commit to paying the attorney fees of anyone who is audited for failing to pay their claimed tax liability under an IRS audit for noncompliance with the new 1099 rules if they are ultimately found innocent?

You Said: I probably have no more, and maybe even less, trust in our government and politicians than you, and also am not a big fan of encroachment and even more government oversight and regulations.

I doubt it.

You Said: I am merely speaking to the tax laws and requirements/reporting in place, and what people need to be aware of in complying with what is out there. I am not commenting on and either approving or condemning our government and the tax laws they passed, just trying to better explain them and how they are supposed to work for people, especially in regard to how those tax laws can impact their collecting activities.

Great. Carry on.

You were the one who said deducting the cost of items you were selling on your tax return would get you audited by the IRS. That is 100% false, and I simply posted a civil response to correct your error, so some unsuspecting Net54 member reading your comments wouldn't mistakenly think what you said was correct when it comes to filing their income taxes. I can just see someone reading, and believing, what you wrote is true, so that when they get their 1099-K form next year and go to do their taxes, they remember what you said and don't deduct the costs of what they paid for the items they sold. Because they think that if they do, based on what you said, it will automatically get them audited by the IRS. The end result being that because they don't claim a perfectly valid tax deduction on their return, they end up overpaying their income taxes. I was merely trying to help and save those innocent people from making a mistake.

And what the heck is with this ridiculous commitment you want me to make? Simply deducting the cost basis of items you sell on your tax return will never of itself trigger an IRS audit. But someone that doesn't properly or accurately report the 1099-K information they get on their tax return, or maybe just ignores the 1099-K form entirely and doesn't report it on their return at all, is probably going to hear from the IRS, and have a much greater chance of actually getting audited. Not properly or accurately reporting the 1099-K info on your return versus not deducting the cost basis of items you are selling, are two completely and entirely different things. I never said or implied that ignoring or misreporting the info you get on a 1099-K form sent to you would not potentially result in an IRS audit. I said deducting the tax basis cost of items you sold on your tax return would not in and of itself get you audited. Heck, the tax cost basis of items you sell don't even get reported on the 1099-K forms, so what does what I said about them have to do with getting audited for not properly or accurately reporting info you do get on a 1099-K on your tax return? Do you really not understand that? So no, I'm not going to make such a stupid commitment because what you're asking me is totally whack. What you're asking me to do is basically the same thing as me saying if you don't speed, you won't get a speeding ticket. And then you turn around and want me to commit to pay everyone's costs that does get caught and ticketed for reckless driving, and then somehow beats that reckless driving ticket in court. It is two entirely different things!!!!

Not sure why you would doubt what I said. Won't be the first, and probably not the last time either, I have someone on the forum claim they know what I mean or how I think, better than I know myself. It is totally impossible, but still makes me laugh when someone thinks they can know a person better than that person knows themself, especially when the only interaction they've ever had is over the internet and they've never even met in person.

And I will carry on. And if someone else makes more erroneous and incorrect tax statements on here that I see, I will go ahead and correct them for everyone else's benefit. Whether they like it or not!

[BobC]

Originally Posted by sreader3

Why should one not worry about the situation you are describing where deducting basis from the revenue shown on the 1099 triggers an audit and forces one to pay an attorney and testify to prove one's innocence? That sound like a nightmare. Except for the attorney.

C'mon, are you really being serious?!?!?!

Reporting what you have received as gross income/revenue, as shown on a 1099 you receive, and then deducting the expenses and costs you had in acquiring the items you sold, and/or other costs involved in marketing and selling them, are NOT going to trigger an audit by the IRS. Do you really not believe the IRS knows the 1099s only report the gross amount someone receives, and that in virtually almost every instance that does NOT reflect the actual taxable net income or taxable net gain someone ends up with and that they actually owe tax on? You do not pay and owe taxes on gross income/revenue, you due owe it on net taxable income/revenue.

The IRS is not stupid and looking to create even more senseless work for themselves. They have Congress and the rest of the government to do that for them.

[sreader3]

Originally Posted by BobC

The IRS is not stupid.

Sorry Bob. You are a super cool dude and I appreciate your NYC information. But the IRS is, in fact, very stupid. This latest Dem 1099 overreach just gives them more authority to troll through the records of legitimate taxpayers. It is yet another bad Dem idea that has come to fruition.

[BobC]

Originally Posted by sreader3

Sorry Bob. You are a super cool dude and I appreciate your NYC information. But the IRS is, in fact, very stupid. This latest Dem 1099 overreach just gives them more authority to troll through the records of legitimate taxpayers. It is yet another bad Dem idea that has come to fruition.

The comment I made was in reference to the IRS not being stupid by going out and suddenly auditing everyone for simply deducting the tax basis of items they were selling. That WOULD be senseless and stupid, with no other evidence or issues to indicate the person's return was somehow wrong and their income tax underpaid. The IRS doesn't have the time or resources to even think about doing something like that as they are already still way behind in processing millions of tax returns from last year. So why would they voluntarily want to make their backlog and situation even worse by suddenly starting to audit even more returns with no real issues, that will likely never result in any additional tax revenue? That would just stupidly be adding more work that they don't have the time or resources to perform.

And as for the comment about trolling legitimate taxpayer records, what is the IRS supposed to do? They are simply doing their job in looking at the records and every 1099 they receive to make sure that they are picked up on the taxpayer's tax returns. They aren't "trolling" anything. What you are suggesting would be similar to someone saying how a cop sitting by the side of the road using radar to catch speeders is somehow "trolling" all the "legitimate" drivers going by that aren't speeding. Do you have some better way for the IRS to determine who is or is not properly reporting and paying taxes on their sales, and similarly, for the police to determine who is or is not speeding, without having some way for either the IRS or the cops to measure and check things?

And what is with the comment that "the IRS is, in fact, very stupid"? If it is a fact, exactly what factual evidence or information is there to support and prove that? After making that statement, you immediately jumped over and laid the blame on the Democrats for this change in the tax reporting threshold, and how the IRS was now going to "troll" "legitimate" taxpayer's records because of it. What does any of that have to do with the IRS' collective intelligence or stupidity? The IRS and their employees are only doing the job they were hired to do. Are you saying the individual employees/agents of the IRS are stupid, or that somehow the entire IRS organization is stupid, and if so, how are you measuring that? So, is the IRS dumber or smarter than the Dept. of Justice? What about the Dept. of Defense, or maybe the General Accounting Office? I really am curious as to how one can determine and measure if a particular government office or agency is more or less intelligent than others. I can understand if a particular individual in some government office/agency is deemed stupid for something they said or did, or how an entire office/agency itself could be deemed stupid for some particular thing they said or did, but to claim an overall office/agency itself is simply stupid in whole, how can that be? Unless you're somehow saying the idea of having such an office/agency itself is just dumb. But in the case of the IRS, the government has to have some office/agency in place to enforce and collect income taxes so the government can function and pay to get things done. That is clearly not stupid, it is extremely necessary. So again, how exactly is the IRS as a whole, stupid?

Scot, you're a great guy and have nothing to be sorry for. I'm just trying to figure out where you're coming from. in all my decades working with (and against - LOL) the IRS, I've come to have a pretty good idea of how they work and function. They are basically apolitical, and simply trying to enforce the tax laws they are handed by our government, whether it be from Dem and Rep sponsored legislation. They are just trying to do what they are supposed to do, to the best of their ability, and are normally more than fair in their dealings with the taxpaying public.

[BobC]

Sorry, double post.