Buying on TRF and IRS reporting

[grew]

I can not even come up with a big enough facepalm for the OP......

[garGARgar]

Let's take it easy on the OP, seriously. He stated that he was told by someone and seeked advice here. No point in the past 2 posts.

[rr-nyc]

Originally Posted by Cru Jones

what if the trusted TRF seller is doing business as a company and not as an individual?

The seller can, as some do, operate their resale business as a formal company along with an EIN. A buyer has every right to ask for this information so he/she can fulfill any sales tax obligations to their own state. But thats another issue all together and has nothing to do with what the OP's book keeper stated about 1099's. They should be embarassed to have anything to do with accounting and not know what a 1099 is

This is a nice community to buy and sell watches in a reputable, yet informal, way. If the seller of my Daytona asked for my SSN so he could fill out an 8300, I'd walk away from the deal unless I knew exactly who he was and met him in person. Not because I'm hiding money but I have no idea what they might do with my personal identity. Bottom line is that at no time, now or in the future, would I, as a private citizen making a consumer purchase, be obligaged to fill out a 1099.

[Tools]

The problem here, and there truly is a problem, (it's always good for an hour or so at the Club) is that this "hidden tax" scheme was written into the Health Care Bill as a means of generating additional income to help pay for it..

But that bill doesn't actually write tax law, it directs that the tax law be written.. therefore, nobody really knows the affect yet, or what the final law will look like once the IRS publishes it... They need to have the laws on the books by Jan 1, 2012, or else you will need to keep careful track since it would be retroactive if they're late..

One thing that you can be sure of, like all other taxes, it will come out of your pocket..

[dbphotos]

Originally Posted by Mosco

Larry - I'd love to be sitting next to you during trivia games

but spot on.

He is definitely spot on, but what else does he have to do sitting in the middle of the desert?

[Grissom]

Here are a few more links dealing with this issue, from a "reporting" perspective.....examples of what eBay and PayPal will begin doing (1099K)......supposedly....

http://money.cnn.com/2010/05/21/smal...luge/index.htm

http://forums.ebay.com/db2/topic/Sel...Laws/520182858 (there are three informative links in this article)

http://money.cnn.com/2010/05/05/smal...re_tax_change/

Certainly something for us to make a note of.......as with at least eBay/PayPal, they will begin reporting for the tax year 2011....from how I read it. And the new 1099 rules will now eliminate the reporting exemption that currently exists for corporations, and add that we use the 1099 for "goods" reporting as well as for "services". As written, the new rules will require, for example, a freelance designer who buys a new iMac from the Apple Store to send Apple a 1099. What an administrative nightmare!

$20,000.00 can come quick, with respect to Rolex transactions thru PayPal, and it seems that any financial transaction thru credit card processors, and even bank transactions, such as wire transfers, will be reported via the 1099K......so now rather than have one of the parties to a transaction report, the law will mandate the transaction intermediary will do so, as well.......as according to the feds, the IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap.

Wild stuff.....with the added burden that, with regards to how this thread began, we must begin gathering names and taxpayer identification numbers for every payee and vendor that we do business with!

How many think this will rekindle the face to face, cash transaction, or the use of say, USPS Money Orders (I don't think those will be reported) and old fashioned US Mail.....

[looking to buy]

Originally Posted by Grissom

Here are a few more links dealing with this issue, from a "reporting" perspective.....examples of what eBay and PayPal will begin doing (1099K)......supposedly....

http://money.cnn.com/2010/05/21/smal...luge/index.htm

http://forums.ebay.com/db2/topic/Sel...Laws/520182858 (there are three informative links in this article)

http://money.cnn.com/2010/05/05/smal...re_tax_change/

Certainly something for us to make a note of.......as with at least eBay/PayPal, they will begin reporting for the tax year 2011....from how I read it. And the new 1099 rules will now eliminate the reporting exemption that currently exists for corporations, and add that we use the 1099 for "goods" reporting as well as for "services". As written, the new rules will require, for example, a freelance designer who buys a new iMac from the Apple Store to send Apple a 1099. What an administrative nightmare!

$20,000.00 can come quick, with respect to Rolex transactions thru PayPal, and it seems that any financial transaction thru credit card processors, and even bank transactions, such as wire transfers, will be reported via the 1099K......so now rather than have one of the parties to a transaction report, the law will mandate the transaction intermediary will do so, as well.......as according to the feds, the IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap.

Wild stuff.....with the added burden that, with regards to how this thread began, we must begin gathering names and taxpayer identification numbers for every payee and vendor that we do business with!

How many think this will rekindle the face to face, cash transaction, or the use of say, USPS Money Orders (I don't think those will be reported) and old fashioned US Mail.....

Grissom, thank you for an informative look at the topic. I brought this up to be of benefit to the members here and was somewhat taken back by the negative responses. You have responded in the way I had hoped others would. And that is that this is an issue. If not now then later. Since I am self employed and have been through some grueling IRS audits, I know the penalties for failure to "voluntarily" complying.

The tax man is not a happy topic in any country. But unfortunately in our increasingly bankrupt governments, they keep looking for new revenues. Computers allow them to "see" and collect revenue that was never "seen" before.

[mtrunner]

Grissom, I think you are right we are going to see a lot more face to face transactions and the use of money orders!

[looking to buy]

I think the line below says it all. The issue is, will Congress change this requirement? If not then Social Security or tax ID numbers will have to be exchanged for all transaction in excess of $600 involving US buyers and sellers.

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

[Grissom]

Originally Posted by looking to buy

I think the line below says it all. The issue is, will Congress change this requirement? If not then Social Security or tax ID numbers will have to be exchanged for all transaction in excess of $600 involving US buyers and sellers.

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

Looking at this issue again, this morning, and based specifically on the bolded two words above, I think it is important to make a clear distinction regarding INDIVIDUALS and COMPANIES. For those of us who are merely individual buyers (we are not making "company" purchases), the burden of compiling names and tax ID numbers from those we purchase from WILL NOT LEGALLY FALL ON OUR SHOULDERS. Thus, WE will not need, for example, to ask the seller of a watch for his or her tax ID number.....we are individuals, and not companies (unless one makes the purchase through his or her company with company funds). In the case of the OP, if the purchase made, or future purchases to be made, were not "COMPANY" purchases, then, from my read of all this, NOT asking for tax ID numbers WOULD NOT place one in a compromising situation.

The real potential issue, as I see it, will be the REQUIREMENT for PAYMENT PROCESSORS (PayPal, Credit Card Processors, Banks, and the like) to begin sending 1099Ks to all those who meet whatever threshold criteria the US Government/IRS ultimately decide upon.

The casual collector who buys and sells to support their "habit" may be caught up in this, such that they may end up getting 1099K'd should their activity with any one particular payment processing organization, meet or exceed the threshold. As such, I would encourage those who feel they may fit in, to begin keeping extremely good records of not only what they pay for something and what they sell it for, but all the other ancillary expenses related to "the hobby" if it may one day be considered a "business" for tax purposes, in this regard. Trips to watch shows, use of a vehicle/gas/maintenance if you drive anywhere that relates to the hobby. Internet/Phone/Cellular Phone usage that relates to the hobby. Expenses relating to TRF Get Togethers (well, they could certainly be considered "marketing" expenses). Equipment purchases relating to the hobby. Repairs, maintenance of the watches. Shipping costs. And pretty much any other "hobby" related expenditures, as I see it. In case one ends up selling an expensive watch and takes payment in a way that prompts a 1099K, then at least they would have good expense data to use to offset any potential income or capital gain that might arise.....and if a watch gets sold at a loss, then that could then be used to offset any other gains. Were I to be faced with a tax bill for selling a watch, you can bet I would expense out EVERYTHING related to that watch and my watch collecting hobby.....and let the IRS tell me they were denying any of those expenses, as my position would be: Treat my hobby as a "Business" for the purpose of taxing me, then I will also treat it as a business when it comes to expensing out my "cost of doing business".

So, if this ends up moving forward, a chat with your CPA might be in order. And again, to the OP....I think (unless your purchases are made through your company, or thru you as a Professional Corporation such as if you are a Physician, Attorney and the like) then your bookkeeper was a bit confused, perhaps, by the intent of the new proposed regulations, in telling you to begin to acquire that information, with the intent of issuing 1099Ks, to those you make large purchases from.

Hope these ramblings of mine prove useful.......

G-d Bless America!!

[rsg]

Originally Posted by Grissom

Looking at this issue again, this morning, and based specifically on the bolded two words above, I think it is important to make a clear distinction regarding INDIVIDUALS and COMPANIES. For those of us who are merely individual buyers (we are not making "company" purchases), the burden of compiling names and tax ID numbers from those we purchase from WILL NOT LEGALLY FALL ON OUR SHOULDERS. Thus, WE will not need, for example, to ask the seller of a watch for his or her tax ID number.....we are individuals, and not companies (unless one makes the purchase through his or her company with company funds). In the case of the OP, if the purchase made, or future purchases to be made, were not "COMPANY" purchases, then, from my read of all this, NOT asking for tax ID numbers WOULD NOT place one in a compromising situation.

The real potential issue, as I see it, will be the REQUIREMENT for PAYMENT PROCESSORS (PayPal, Credit Card Processors, Banks, and the like) to begin sending 1099Ks to all those who meet whatever threshold criteria the US Government/IRS ultimately decide upon.

The casual collector who buys and sells to support their "habit" may be caught up in this, such that they may end up getting 1099K'd should their activity with any one particular payment processing organization, meet or exceed the threshold. As such, I would encourage those who feel they may fit in, to begin keeping extremely good records of not only what they pay for something and what they sell it for, but all the other ancillary expenses related to "the hobby" if it may one day be considered a "business" for tax purposes, in this regard. Trips to watch shows, use of a vehicle/gas/maintenance if you drive anywhere that relates to the hobby. Internet/Phone/Cellular Phone usage that relates to the hobby. Expenses relating to TRF Get Togethers (well, they could certainly be considered "marketing" expenses). Equipment purchases relating to the hobby. Repairs, maintenance of the watches. Shipping costs. And pretty much any other "hobby" related expenditures, as I see it. In case one ends up selling an expensive watch and takes payment in a way that prompts a 1099K, then at least they would have good expense data to use to offset any potential income or capital gain that might arise.....and if a watch gets sold at a loss, then that could then be used to offset any other gains. Were I to be faced with a tax bill for selling a watch, you can bet I would expense out EVERYTHING related to that watch and my watch collecting hobby.....and let the IRS tell me they were denying any of those expenses, as my position would be: Treat my hobby as a "Business" for the purpose of taxing me, then I will also treat it as a business when it comes to expensing out my "cost of doing business".

So, if this ends up moving forward, a chat with your CPA might be in order.

Hope these ramblings of mine prove useful.......

G-d Bless America!!

My guess is that the payment processors are providing a service and not a product so they would be exempt. It would be the responsibility of the business selling the product to provide the 1099. Who knows....

[Grissom]

Originally Posted by rsg

My guess is that the payment processors are providing a service and not a product so they would be exempt. It would be the responsibility of the business selling the product to provide the 1099. Who knows....

That would make sense Richard, but unfortunately, the IRS does not want to trust us to "self report" anymore, so they have imposed those requirements on third party payment processors. Check out the link below:

http://blog.auctionbytes.com/cgi-bin...283997077.html

The new requirements now focus attention on those "buying" and mandate new reporting criteria, by the purchaser, in order to capture income that sellers/vendors/companies might not otherwise report. They will be using 1099s for reporting goods as well as services, now, and will "draft" disinterested third parties to report as well.....

[Timber Loftis]

Originally Posted by Grissom

The casual collector who buys and sells to support their "habit" may be caught up in this, such that they may end up getting 1099K'd should their activity with any one particular payment processing organization, meet or exceed the threshold. As such, I would encourage those who feel they may fit in, to begin keeping extremely good records of not only what they pay for something and what they sell it for, but all the other ancillary expenses related to "the hobby" if it may one day be considered a "business" for tax purposes, in this regard. Trips to watch shows, use of a vehicle/gas/maintenance if you drive anywhere that relates to the hobby. Internet/Phone/Cellular Phone usage that relates to the hobby. Expenses relating to TRF Get Togethers (well, they could certainly be considered "marketing" expenses). Equipment purchases relating to the hobby. Repairs, maintenance of the watches. Shipping costs. And pretty much any other "hobby" related expenditures, as I see it.

Were I to be faced with a tax bill for selling a watch, you can bet I would expense out EVERYTHING related to that watch and my watch collecting hobby.....and let the IRS tell me they were denying any of those expenses, as my position would be: Treat my hobby as a "Business" for the purpose of taxing me, then I will also treat it as a business when it comes to expensing out my "cost of doing business".

You can bet that this has been thought of long before now. In the old days it was the "hobby farm," i.e. treating your summer/country home as a business so yo could deduct the losses/expenditures on it. The IRS has an entire body of law on the "hobby loss." Here's a quick excerpt I googled up on the issue, but it is just an example, and I do not personally endorse the website that conjured up this summary, nor do I know whether or not it reflects the current state of the law on the issue.

Generally speaking, the tax code provides a lot of benefits to farmers and other people who own their own businesses. Many expenses such as mileage related to earning a living are deductible for small business owners but not for employees.

One of the biggest tax advantages for the self-employed is that they can deduct all their losses from a business that is engaged in trying to make a profit. But if the business does not make a profit or if the IRS determines that the owners are not really trying to make it profitable, they may conclude it is an “activity not engaged in for profit.”

This rule is commonly known as the “hobby loss rule.” Here are three examples of how the rule might apply:

1. Farmer Sue only farms—she has no other job. She starts growing ornamental flowers on her 20-acre farm. The first year she earns $2,000, and has expenses of $3,000; her net loss is $1,000. Since she has no income to tax, her losses should be fully deductible.
2. Farmer John grows the same crop with same results. But he has a job in town that earned him an additional $1,000. When he adds his $1,000 earnings to his $1,000 loss, he has zero income for the year, so he should get a refund.
3. Farmer Anne grows the same crop and gets the same result as Farmer Sue. However, the IRS examines her return and concludes she is not really trying to make a profit and the hobby loss rule applies to her. Even though she had expenses of $3,000, the IRS only allows her to deduct $2,000 because this is the amount of her profits. She had a job in town that paid $1,000 as well. But, she cannot offset all of that income with her full loss, so she has to pay income taxes on her in-town earnings.

Section 183 of the tax code governs “hobby losses.” This section of the tax code was passed so Congress could close down what it perceived as inappropriate farm and horse shelters. The law sets up a presumption that if an activity shows a profit in three out of five tax years, then the taxpayer is engaged in it to make a profit. In the case of horse operations, the business must show a profit in two out of seven tax years. Here are the factors the IRS uses to determine hobby farm losses:

1. The manner in which the taxpayer carries on the activity.
2. The expertise of the taxpayer or his or her advisors.
3. The time and effort expended by the taxpayer in carrying on the activity.
4. The expectations that the assets used in the activity may appreciate in value.
5. The success of the taxpayer in carrying on other similar or dissimilar activities.
6. The taxpayer’s history of income or losses with respect to the activity.
7. The amount of occasional profits, if any, which are earned.
8. The financial status of the taxpayer.
9. The elements of personal pleasure or recreation.

[Art161]

I wouldn't get too worked up about something really stupid that is sort of planned for the future. Like the IRS wants shoppers to report how much they spent on groceries at the supermarket? Not at all likely in my opinion.