Comeuppance
Fixed Blade EDC Emisssary
- Joined
- Jan 12, 2013
- Messages
- 4,765
Popping back on here after being gone for a while. School and WoW ate all of my brain cells and free time for a while.
I'm here to share a recent event that happened to me: I received a notice in the mail from the IRS (which is always fun times) stating proposed corrections to my 2016 tax return.
The proposed changes: That I had under-reported my 2016 taxes by $50,156, as PayPal told them I had earned in 2016 through their mandatory 1099-K form. The IRS requested that I either refute the proposed changes (with backing documentation) or send them a little over $20,000 in interest, fees, and income tax.
This was no error on their part. In 2016, I was very active on eBay and the forum exchanges, buying and selling knives almost every day. I functionally had a rotating knife collection where I would buy knives, handle / inspect / admire them, discuss them on forums, and then sell them within a week or so unless I felt a really strong connection (like my Cold Steel Master Tanto in 3V that I will take to my grave). I generally waited until I found the knife I wanted at a very good price, and would sell just enough above what I paid that I wouldn't lose money after shipping and fees.
Luckily, PayPal has downloadable records for date ranges you can specify, and I sorted through the 2000+ transactions (I also used my PayPal card for day-to-day living expenses and minor interpersonal transactions) and narrowed it down to the relevant ones. It was a lengthy process.
After deducting all the original purchasing costs, shipping fees, and eBay fees, my net profit for 2016 - after 389 transactions and involving over $50k in knives - was... wait for it...
$110.12
This means my average profit for a transaction was about 28 cents.
(As an aside, it was very gratifying to learn that I had handled $50k+ in 2016 given that my maximum budget for how much I would allow myself to have tied up in knives was about $700.)
Long story short: If you buy, sell, and trade actively, do yourself a favor and keep detailed records - or you might end up in a very stressful and potentially costly situation. I was lucky in that it was all through PayPal and I was able to identify all the relevant transactions by deleting the obviously irrelevant ones, a helpful person on the IRS help line told me what form I needed to fill out (1040-C), and my brother has some accounting experience and helped me navigate excel and devise ways to organize/filter the data.
I'm here to share a recent event that happened to me: I received a notice in the mail from the IRS (which is always fun times) stating proposed corrections to my 2016 tax return.
The proposed changes: That I had under-reported my 2016 taxes by $50,156, as PayPal told them I had earned in 2016 through their mandatory 1099-K form. The IRS requested that I either refute the proposed changes (with backing documentation) or send them a little over $20,000 in interest, fees, and income tax.
This was no error on their part. In 2016, I was very active on eBay and the forum exchanges, buying and selling knives almost every day. I functionally had a rotating knife collection where I would buy knives, handle / inspect / admire them, discuss them on forums, and then sell them within a week or so unless I felt a really strong connection (like my Cold Steel Master Tanto in 3V that I will take to my grave). I generally waited until I found the knife I wanted at a very good price, and would sell just enough above what I paid that I wouldn't lose money after shipping and fees.
Luckily, PayPal has downloadable records for date ranges you can specify, and I sorted through the 2000+ transactions (I also used my PayPal card for day-to-day living expenses and minor interpersonal transactions) and narrowed it down to the relevant ones. It was a lengthy process.
After deducting all the original purchasing costs, shipping fees, and eBay fees, my net profit for 2016 - after 389 transactions and involving over $50k in knives - was... wait for it...
$110.12
This means my average profit for a transaction was about 28 cents.
(As an aside, it was very gratifying to learn that I had handled $50k+ in 2016 given that my maximum budget for how much I would allow myself to have tied up in knives was about $700.)
Long story short: If you buy, sell, and trade actively, do yourself a favor and keep detailed records - or you might end up in a very stressful and potentially costly situation. I was lucky in that it was all through PayPal and I was able to identify all the relevant transactions by deleting the obviously irrelevant ones, a helpful person on the IRS help line told me what form I needed to fill out (1040-C), and my brother has some accounting experience and helped me navigate excel and devise ways to organize/filter the data.
.
