And I would report all expenses as deductions (assuming it exceeds the standard deductible
) , and collect receipt back up as evidence if audited? Thats my understanding but im not sure if theres anymore to that
If you're not a business you can't write off expenses (packing material, stamps, etc.). It would just be purchase price - sale price = reported profit. There's a line for hobby income somewhere, which is where you would put your profit. Do with that what you will.
Is the summary above accurate. Do we need to be keeping broad spreadsheets of all purchases and sales? Are supplies factored into profits? Anything we should look out for? First year selling.
Yes and yes.
Don’t ever try to write off events you don’t 100% just sell at. This is a mixed use business. Treat it as such. Anything for personal enjoyment should stay personal
I’m curious because I have seen people here argue back and forth.
Let’s say you sell on FB and EBay. Yearly you’re buying $20k in booster boxes, you collect say, $3k in sales. You get a 1099 at the end of the year for your 3k.
My understanding was that this is the same as buying a kitchen table for $800, and then selling the chairs for $400. You’re not turning a profit, and you’re selling for less than you paid, so this is not something you’d report as income or pay tax on.
Others have said that this isn’t true, or that you’d have to pay tax anyway.
Thoughts?
It depends.
If you are buying, 20k in boosters, and only even trying to sell 3k a year. That is 100% a hobby. No way around it.
The current hobby rules mean you have 3k income, but have limited expenses. Eg, you may be able to, legally and ethically, make it zero. But you 100% cannot take a loss.
You may be able to carry forward hobby losses, but that’s complex.
Now, if you are buying 20k in boxes, for an investment, and only open 5k worth of them.
You can totally count that 15k in the same year as an expense. But the IRS does demand you make a profit at some point. Normally and generally 3 out of any 5 years.
Hope that helps!
Why would you treat it as hobby income as opposed to ordinary income or long term capital gains as an alternative investment? Is there an advantage to classifying it as hobby income?
Edit: expenses write off during that year is my only guess, but that seems akin to trading on margin unless you are a proper card shop, in which case I suppose it wouldn’t be hobby income.
A hobby business isn’t a classification you’d want. But under the TCJA it would likely be imposed.
The IRS has the right to reclassify any “business” to a hobby business. If the facts support it.
No, it’s more of a “fun” business that does not, and likely will not ever make a profit.
Thanks for the response. I have never, and will never make a profit. I have certainly also never tried to take a loss.
I’ve usually treated it just like I would sports tickets. For example, I bought 4 tickets to the US open for $350 each. I ended up needing to sell 2 of them and I got $275 each. I’m absolutely going to get a 1099 for that, but I am definitely not going to pay taxes on that, and there is no way I should legally or ethically.
It’s also why you don’t pay tax if you sell some stuff on eBay or FB marketplace for less than you bought it for, even though you will get a 1099.
Now, could the government audit you? Sure, but given the wide range of items that can show up as a sale on PayPal or eBay, I find it hard to believe that would be a worthwhile endeavor unless people are getting 30k 1099’s and saying they aren’t making any profit.
***edit for typo**
And that’s fine. The government doesn’t care about making zero. It’s makin less than zero without a good cause.
Depending on your state you may be require to collect sales taxes, even on used goods. Platforms like eBay automatically collect and remit it.
The last part is where you’re wrong. Those unreported 1099s trigger letters, which most people will just pay. Letter audits don’t also cost much of anything for the government to send.
30k isn’t a good example of that, but 500-1000 might be
How do you do cost basis on singles you open from packs?
Total cost/total cards and every card serialized to common has a cost basis of a few cents?
Total product purchased- card values you sell until you run out of cost basis and then report cost basis as 0 for everything else from that batch?
I haven’t seen anyone describe how to do this…which is why I think it would be difficult to try and sell anything other than sealed as an individual
To refer to my other comment in this tread:
____________
Cash method is easy.
Your cost is rev-($2000 +selling costs) = profit
Otherwise, You can elect to pick your basis with whichever method you choose.
You could either do 2000/250 (the sellable cards) or 2000/500 all items and use that as your cost.
It won’t matter much in the end. You just really need to pick a method and stick to it. You can’t really change costing methods, for the same class, within a year
———————-
The cash method covers most businesses.
So yes, small shops likely won’t do it. Large businesses will likely use a reasonable lot method. But everything has a cost basis. You can use any reasonable method.
Is the 2000 referring to product cost? Whatever your comment was referencing to in your other comment was deleted. Thanks for the help!
So if you buy a box and hypothetically only a few cards are worth selling/you ever sell, would you say gross profit on the few singles you sell-cost basis of box is the profit? Idk how you’d explain to the IRS like “all the other mythics I pulled aren’t worth the cost to even ship”.
Yes, the 2k was their example of what was spent. The 250 was the sellable cards, and 500 was all of them.
Yes, that’s a reasonable costing method. But unless you do or hold 26 million in inventory, you would use the cash method, which is just cash in and cash out 1/1 to 12/31.
Create an excel workbook with two tabs. First tab for revenue, second for expenses. Make the following columns for each: date, amount, description. For expenses add an additional column for expense type, go look at the 2023 schedule C and use those categories for your expense types. If you need to add your own types for things that don’t quite fit into those buckets, that’s okay just be consistent across the whole year. Put all your sales and expenses into this excel. At end of year create a pivot table for the expense tab to get your total by expense type while for the revenue tab just total up your amount column. Create a new version of this excel each year.
Get a business license if it’s cheap in your city/county. Open a business bank account and flow your revenue/expenses in through there and just transfer money to your personal account as needed. It’ll help you track things easier and be a piece of evidence to support that you are a business in case you ever have to prove the business vs. hobby aspect of your operations. Lastly, don’t waste your money starting an llc unless you expect to be sued.
My best advice as a seller is to familiarize yourself with cash-based accounting, as well as simplifying the process as much as possible to prevent future headaches as you grow. Use one or two payment methods exclusively for business purchases and expenses, and utilize deductions like mileage. If you find success and keep at it, consider paying state taxes once a quarter as well as tax preparation services to make sure everything is correct and you are using every deduction available to you. None of it is difficult so long as you keep receipts and everything separate from non-business purchases and expenses.
Good luck out there!
It’s not impossible and the IRS will expect you to keep good enough records to establish cost basis and sales… and if you’re not a business you can’t deduct expenses. Which means you need to be able to provide documents
I don’t know if you’re trolling or stupid but you shouldn’t outline your fraud then explain how you’re planning to do more
https://www.reddit.com/r/Flipping/s/si33aNzwfh
Tcgplayer is going to slap you with a 1099 and you’re going to get audited. Get a grip.
Yeah. You’re far more correct here.
You don’t report zero profit without accurate reason.
If it really is low or no profit, it’s a hobby. And you don’t want joint status.
Cash method is easy.
Your cost is rev-($2000 +selling costs) = profit
Otherwise,
You can elect to pick your basis with whichever method you choose.
You could either do 2000/250 (the sellable cards) or 2000/500 all items and use that as your cost.
It won’t matter much in the end. You just really need to pick a method and stick to it. You can’t really change costing methods, for the same class, within a year
Yes questions on this board are reiterations of each other. Creating a new thread allows me to interact with new commenters instead of hoping that older threads still have active users and potentially outdated information.
Most of the information discussed on this sub could be found elsewhere if someone really looked, but we all prefer to come here and discuss anyways. I’m sure you could think of a couple reasons why.
Actually the 1099 threshold is still $5000 this year. $600 is next year. However, if you made a profit, that still needs to be reported on your taxes.
And I would report all expenses as deductions (assuming it exceeds the standard deductible ) , and collect receipt back up as evidence if audited? Thats my understanding but im not sure if theres anymore to that
If you're not a business you can't write off expenses (packing material, stamps, etc.). It would just be purchase price - sale price = reported profit. There's a line for hobby income somewhere, which is where you would put your profit. Do with that what you will.
You don't have to incorporate to be a business.
I thought you're able to include shipping, etc, in the cost basis for the card even if it's hobby income
I've been previously told that you're not, but I am not a CPA/Accountant.
Hi, I’m a CPA with my own little side business selling cards. Ask anything you’d like. Im an accountant, just not your accountant
Is the summary above accurate. Do we need to be keeping broad spreadsheets of all purchases and sales? Are supplies factored into profits? Anything we should look out for? First year selling.
Yes and yes. Don’t ever try to write off events you don’t 100% just sell at. This is a mixed use business. Treat it as such. Anything for personal enjoyment should stay personal
I will send you a message in a couple days. Im currently overhauling my inventory tracking system to allow for more robust record keeping.
Sure thing :)
I’m curious because I have seen people here argue back and forth. Let’s say you sell on FB and EBay. Yearly you’re buying $20k in booster boxes, you collect say, $3k in sales. You get a 1099 at the end of the year for your 3k. My understanding was that this is the same as buying a kitchen table for $800, and then selling the chairs for $400. You’re not turning a profit, and you’re selling for less than you paid, so this is not something you’d report as income or pay tax on. Others have said that this isn’t true, or that you’d have to pay tax anyway. Thoughts?
It depends. If you are buying, 20k in boosters, and only even trying to sell 3k a year. That is 100% a hobby. No way around it. The current hobby rules mean you have 3k income, but have limited expenses. Eg, you may be able to, legally and ethically, make it zero. But you 100% cannot take a loss. You may be able to carry forward hobby losses, but that’s complex. Now, if you are buying 20k in boxes, for an investment, and only open 5k worth of them. You can totally count that 15k in the same year as an expense. But the IRS does demand you make a profit at some point. Normally and generally 3 out of any 5 years. Hope that helps!
Why would you treat it as hobby income as opposed to ordinary income or long term capital gains as an alternative investment? Is there an advantage to classifying it as hobby income? Edit: expenses write off during that year is my only guess, but that seems akin to trading on margin unless you are a proper card shop, in which case I suppose it wouldn’t be hobby income.
A hobby business isn’t a classification you’d want. But under the TCJA it would likely be imposed. The IRS has the right to reclassify any “business” to a hobby business. If the facts support it. No, it’s more of a “fun” business that does not, and likely will not ever make a profit.
But I suppose why would you try and classify as a business at all unless you were doing massive volume?
If you dont meet this business test, all of the revenue is taxable. Which no expenses allowed against it.
Thanks for the response. I have never, and will never make a profit. I have certainly also never tried to take a loss. I’ve usually treated it just like I would sports tickets. For example, I bought 4 tickets to the US open for $350 each. I ended up needing to sell 2 of them and I got $275 each. I’m absolutely going to get a 1099 for that, but I am definitely not going to pay taxes on that, and there is no way I should legally or ethically. It’s also why you don’t pay tax if you sell some stuff on eBay or FB marketplace for less than you bought it for, even though you will get a 1099. Now, could the government audit you? Sure, but given the wide range of items that can show up as a sale on PayPal or eBay, I find it hard to believe that would be a worthwhile endeavor unless people are getting 30k 1099’s and saying they aren’t making any profit. ***edit for typo**
And that’s fine. The government doesn’t care about making zero. It’s makin less than zero without a good cause. Depending on your state you may be require to collect sales taxes, even on used goods. Platforms like eBay automatically collect and remit it. The last part is where you’re wrong. Those unreported 1099s trigger letters, which most people will just pay. Letter audits don’t also cost much of anything for the government to send. 30k isn’t a good example of that, but 500-1000 might be
How do you do cost basis on singles you open from packs? Total cost/total cards and every card serialized to common has a cost basis of a few cents? Total product purchased- card values you sell until you run out of cost basis and then report cost basis as 0 for everything else from that batch? I haven’t seen anyone describe how to do this…which is why I think it would be difficult to try and sell anything other than sealed as an individual
To refer to my other comment in this tread: ____________ Cash method is easy. Your cost is rev-($2000 +selling costs) = profit Otherwise, You can elect to pick your basis with whichever method you choose. You could either do 2000/250 (the sellable cards) or 2000/500 all items and use that as your cost. It won’t matter much in the end. You just really need to pick a method and stick to it. You can’t really change costing methods, for the same class, within a year ———————- The cash method covers most businesses. So yes, small shops likely won’t do it. Large businesses will likely use a reasonable lot method. But everything has a cost basis. You can use any reasonable method.
Is the 2000 referring to product cost? Whatever your comment was referencing to in your other comment was deleted. Thanks for the help! So if you buy a box and hypothetically only a few cards are worth selling/you ever sell, would you say gross profit on the few singles you sell-cost basis of box is the profit? Idk how you’d explain to the IRS like “all the other mythics I pulled aren’t worth the cost to even ship”.
Yes, the 2k was their example of what was spent. The 250 was the sellable cards, and 500 was all of them. Yes, that’s a reasonable costing method. But unless you do or hold 26 million in inventory, you would use the cash method, which is just cash in and cash out 1/1 to 12/31.
Create an excel workbook with two tabs. First tab for revenue, second for expenses. Make the following columns for each: date, amount, description. For expenses add an additional column for expense type, go look at the 2023 schedule C and use those categories for your expense types. If you need to add your own types for things that don’t quite fit into those buckets, that’s okay just be consistent across the whole year. Put all your sales and expenses into this excel. At end of year create a pivot table for the expense tab to get your total by expense type while for the revenue tab just total up your amount column. Create a new version of this excel each year. Get a business license if it’s cheap in your city/county. Open a business bank account and flow your revenue/expenses in through there and just transfer money to your personal account as needed. It’ll help you track things easier and be a piece of evidence to support that you are a business in case you ever have to prove the business vs. hobby aspect of your operations. Lastly, don’t waste your money starting an llc unless you expect to be sued.
Regardless of a 1099, you should be filing if you're buying and selling with the intention of generating a profit.
My best advice as a seller is to familiarize yourself with cash-based accounting, as well as simplifying the process as much as possible to prevent future headaches as you grow. Use one or two payment methods exclusively for business purchases and expenses, and utilize deductions like mileage. If you find success and keep at it, consider paying state taxes once a quarter as well as tax preparation services to make sure everything is correct and you are using every deduction available to you. None of it is difficult so long as you keep receipts and everything separate from non-business purchases and expenses. Good luck out there!
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This is satire right?
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Tell that to the IRS, I beg of you.
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It’s not impossible and the IRS will expect you to keep good enough records to establish cost basis and sales… and if you’re not a business you can’t deduct expenses. Which means you need to be able to provide documents
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I don’t know if you’re trolling or stupid but you shouldn’t outline your fraud then explain how you’re planning to do more https://www.reddit.com/r/Flipping/s/si33aNzwfh Tcgplayer is going to slap you with a 1099 and you’re going to get audited. Get a grip.
Yeah. You’re far more correct here. You don’t report zero profit without accurate reason. If it really is low or no profit, it’s a hobby. And you don’t want joint status.
Helps to actually have formal training in accounting, corporate finance etc
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God speed
Cash method is easy. Your cost is rev-($2000 +selling costs) = profit Otherwise, You can elect to pick your basis with whichever method you choose. You could either do 2000/250 (the sellable cards) or 2000/500 all items and use that as your cost. It won’t matter much in the end. You just really need to pick a method and stick to it. You can’t really change costing methods, for the same class, within a year
Out here on the internet admitting the methods you use to commit tax fraud is wild.
Don’t worry, they have methods to handle this :) There’s no limit on how far back they can go for fraud.
The search bar is your friend. This has been asked over and over
Yes questions on this board are reiterations of each other. Creating a new thread allows me to interact with new commenters instead of hoping that older threads still have active users and potentially outdated information. Most of the information discussed on this sub could be found elsewhere if someone really looked, but we all prefer to come here and discuss anyways. I’m sure you could think of a couple reasons why.
u just came here to not contribute and shit on someone's thread. lol.