Post by bodega on Mar 24, 2023 1:32:57 GMT -8
IRS: If you ever resell an item online, keep your receipt
www.irs.gov/pub/taxpros/fs-2023-06.pdf
The Internal Revenue Service issued updated guidance this week as online payment services such as Venmo and PayPal will send out 1099-K forms next tax season.
The updated guidance comes after the IRS delayed the implementation of sending these forms to taxpayers. Originally, these forms were going to be sent out this tax season for 2022. Instead, 1099-K forms are only being sent out by electronic transaction companies if the total amount of income exceeded $20,000 and came from 200 transactions.
If you receive more than $600 in transactions in 2023 through an online transaction website, you will likely receive a 1099-K form.
In its updated guidance, the IRS lays out the process of reselling items through online transaction services. It says that if you sell an item for less than you paid for it, you won’t have to pay taxes on it, assuming you can prove how much you originally paid for the item. Conversely, you won’t be able to claim it as a loss, either.
For instance, if you buy a refrigerator for $1,000 but only sell it for $600, the net loss of $400 should be reported on Form 1099-K, Personal Item Sold at a Loss.
If the same person buys concert tickets for $500 and resells them for $900, that person gains $400 in taxable income. Because that person also sold a personal item at a loss, those too can negate each other, the IRS said, meaning the taxpayer wouldn’t owe taxes for selling the concert tickets at a profit.
One key thing to remember is to hang on to receipts for big-ticket items you may resell. In the above case, hanging onto the receipts is a $1,500 difference in taxable income.
“You should keep accurate records for personal items you may sell,” the IRS said. “If your records are lost, destroyed, or are not available due to circumstances beyond your control and your return is audited, examiners may allow you to present reconstructed records. Additionally, examiners may accept oral testimony when records do not exist.”
The updated guidance is on the IRS website.
The updated guidance comes after the IRS delayed the implementation of sending these forms to taxpayers. Originally, these forms were going to be sent out this tax season for 2022. Instead, 1099-K forms are only being sent out by electronic transaction companies if the total amount of income exceeded $20,000 and came from 200 transactions.
If you receive more than $600 in transactions in 2023 through an online transaction website, you will likely receive a 1099-K form.
In its updated guidance, the IRS lays out the process of reselling items through online transaction services. It says that if you sell an item for less than you paid for it, you won’t have to pay taxes on it, assuming you can prove how much you originally paid for the item. Conversely, you won’t be able to claim it as a loss, either.
For instance, if you buy a refrigerator for $1,000 but only sell it for $600, the net loss of $400 should be reported on Form 1099-K, Personal Item Sold at a Loss.
If the same person buys concert tickets for $500 and resells them for $900, that person gains $400 in taxable income. Because that person also sold a personal item at a loss, those too can negate each other, the IRS said, meaning the taxpayer wouldn’t owe taxes for selling the concert tickets at a profit.
One key thing to remember is to hang on to receipts for big-ticket items you may resell. In the above case, hanging onto the receipts is a $1,500 difference in taxable income.
“You should keep accurate records for personal items you may sell,” the IRS said. “If your records are lost, destroyed, or are not available due to circumstances beyond your control and your return is audited, examiners may allow you to present reconstructed records. Additionally, examiners may accept oral testimony when records do not exist.”
The updated guidance is on the IRS website.
www.irs.gov/pub/taxpros/fs-2023-06.pdf
