PSA: Keep detailed records of your knife transactions

Boy this thread made me sweat this morning!
Thought for sure I was over the 200 transactions and 20K thresholds this year. Been doing a lot of downsizing in 2018.
But if the transaction summaries are to be believed, I am a bit over the 20K, but way under on the transactions. So I think I'm good by the criteria stated.
Not really worried that I would owe, as I am quite sure on the whole I lost out on a cost basis/sale price calculation. Just would be a nightmare to document it all. And probably scary to calculate just how much lost.

Probably had no reason to worry really. To achieve over 200 sales, you would have to sell something more than every other day! Thats hustling. Wouldn't have the time to keep that pace if I wanted to.
 
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BBuser said:
There is confusion here. The threshold requirement to submit an information form like a 1099 is not the same as the requirement to report income. For example banks will only send a 1099 at earnings over $10 but even $5 is reportable and taxable on the return. Subcontractors must be given a 1099 (and the equivalent 1096 sent to IRS) only above $600 but the whole amount is taxable/reportable.

In the case of self employment income gross sales high enough to generate self employment tax require reporting. This amount is a little above $400. In the OP's case all IRS knows is the gross of $50k reported on the 1096 transmittal form from PayPal. It's up to the taxpayer to add the expenses.

The difference between hobby income and self employment income is the self employment tax (social security & Medicare) is not applied to hobby income. But business loss is deductable against other income and hobby loss is not.

You want to see real confusion it's when people sell stocks they've held for years.
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This is correct as far as I know. There is a big difference between hobby income and self employment income in terms of the way it is handled by the IRS. There is confusion in this thread. Tis life when commenting about taxes.

The one thing to remember... income is income and is generally taxable. It is just that hobby income frequently is not trackable by the IRS because the transactions are frequently done face to face or with money orders and so forth. So, technically, if you sell a knife for $200 that you paid $100 for, that is income.
 
flat tax solves all this and make life real easy for everyone...even the govt.:)
 
I favor the flat tax approach. Keep things simple.

This is a lesson about Pay Pal and other means of accepting income like Square.... they record the transactions and report if above a certain limit. So, the IRS sees the gross sales information. I for one just prefer money orders even if I have to wait a bit for the money to arrive or the item to be shipped. Life is too short to worry about the small stuff.
 
jbmonkey said:
flat tax solves all this and make life real easy for everyone...even the govt.:)
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No it absolutely does not. You still have to compute net income. Unless you're going to tax gross income and make the OP pay tax on the $50k. All a flat tax does is eliminate percentage layers. It raises the minimum and reduces the maximum. One of those things that depends on whose ox is gored.
 
BBuser said:
No it absolutely does not. You still have to compute net income. Unless you're going to tax gross income and make the OP pay tax on the $50k. All a flat tax does is eliminate percentage layers. It raises the minimum and reduces the maximum. One of those things that depends on whose ox is gored.
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see that big smiley.....that was so this ^ didn't happen.........
 
Two suggestions to those of you who might fall into this situation:

Near year end take an inventory of your stock with valuations at what you paid. If you used it and it's worth less, use the less.

At year end record your odometer if you might want to deduct business use of your vehicle. One of the questions is total miles for the year. It's FREE to get that one right. The other questions are for commuting and business miles.
 
After this happened to me, any time I buy a knife, I record the item #(eBay) or PP transaction #, what I paid, shipping charges, etc on a spreadsheet. If I sell the item I then record all that info right next to it, so I know the exact difference, whether profit or loss. Since I already had to go thru this for 2017, makes it easier the next time, but still a pain, so I have cut way back on buying/selling as a result. Hoping I'm under the $600 for this year, but not sure, since I don't know how PP handles the different types of transactions. For example, if I buy something, and then return it for refund, do they count that refund as "income". If so, looks like I'll be going through this again for this year.
 
I don't think they do count that as a payment received, since when I run a report isolating just "payments received" transactions for any given month, the refunds don't show up. Rather, they show up only when I ask for "refunds" and/or "payments made."
Makes sense since PP actually recognizes them and relates them back to the original transaction as a "refund" of same.
 
If you made $110 flipping through $50K in knives then you are a genius - at least by hobbyist standards.
 
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