Selling online $600 tax rule

[ThinkPad560X]

I have a few old machines I'd like to sell and even thought of getting back into buying damaged "ThinkPads Only". Restore them and resale them as I miss repairing for IBM "Didn't do board repair, only replaced warranty damaged parts on machines or full motherboard swap". But if I would do this and make $600 or more then I would be considered a business instead of a hobby and would have to file 1099 "This is in the U.S. by the way" It used to be I think if you made $20,000,00 then you had to report it, but then they lowered all the way down to $600.

I am asking this because I do have machines that will add up way above $600 if I would sell them. So am I stuck with them minus throwing them away, giving them away or recycling them? It just seems your not allowed to make money now.

[theterminator93]

In terms of the law, the law has always stated that you need to report sales of any goods or services as income. Only recently has the industry started lowering the thresholds for reporting of "goods and services" transactions to the IRS to ensure the law is applied and enforced. This doesn't apply to just annual sales of $600 or more, $20,000 or more, or whatever... it's all sales. It does not apply to "gift" money transfer transactions - e.g. a family member paying you back for their portion of splitting the cost of a meal.

If you make money selling something, just consider what tax bracket your sales will fall into in and set it aside for later.

E.G. if your AGI puts you somewhere in the middle of the 24% tax bracket, any additional income you made (up to the threshold of the 32% tax bracket) would be taxed at 24%. So if you sold $2000 worth of machines, expect to owe the feds about $480 in extra taxes from that income. Plan for it in advance.

[ThinkPad560X]

I guess I'm not selling my machines.

[RealBlackStuff]

Doesn't this only apply to eBay/Paypal transactions?

[ThinkPad560X]

I think it is any online marketplace now as it is law for them to report to the IRS about sales. I don't own business and just want to sell a few things here and there. Now if I made what it used to be $20,000,00 or more then thats a chunk of money. But they moved the bar all the way to if you make $600 or more out of the year. And this includes yard sales. If you make $600 or more the IRS considers you a business.

From what I read if it is a transaction between a friend or family then that is still fine.

[theterminator93]

Yes, "friends and family" transactions are not affected.

The rule applies to all sales, business or not. It's all "income" as far as the IRS is concerned, and all of it needs to be self-reported. The new rules merely lower the requirement of financial institutions to report cumulative transactions exceeding $600 to the IRS to help enforce it. As far as the law is concerned, you should be reporting everything over $1.

[MisterB]

Enforcement of the $600 rule has been suspended since the first year. I can't remember who lobbied for this but I only got a 1090 one year several years ago. I don't sell a lot on eBay these days but I've sold over $600 several years since then. The first year, I was notified by eBay when I sold a camera lens for $650 since then, I haven't got any messages about exceeding $600. I have other 1090 income that I file for but I don't get any 1090s from eBay. As I remember, the threshold is quite a bit higher these days. If you do sell enough to get a 1090, I think you can reduce it quite a bit on your taxes by deducting what you paid for what you're selling. For me that would be a yard sale or thrift price for most of what I sell. If you bought the Thinkpads new, you would be losing money on the sale. You could probably deduct your eBay fees too.

[TPFanatic]

You’re supposed to reported even $1 of income.

There’s rules about tax owed on sales of personal items. https://www.irs.gov/businesses/what-to- ... k#personal

Personal items sold at a loss

A loss on the sale of a personal item can't be deducted from your taxes. But you can zero out the reported gross income so you don't pay taxes on it.

[theterminator93]

Guys, guys...

Don't be confused by the laws surrounding the mandatory reporting of transactions and sales by financial institutions to the IRS, and the laws surrounding your responsibility to do the same.

Banks are now being required to report cumulative transactions over $600 to the IRS. This is down from $20,000 for 2022 and immediately prior, and $5000 for 2023.

You are required to report all sales to the IRS, regardless of how much. This has not changed.

Only in recent years have laws been changed to require financial institutions to start reporting your transactions (down from 20k to 600) to the IRS. Why? Because essentially everyone was (possibly unknowingly) breaking the law regarding the item above. The lowering of the reporting threshold makes it harder to skip out on paying taxes that have always been required, but collection of which has historically not been well enforced.

Kind of like how an online retailer didn't used to charge you sales tax - them not doing so didn't mean you didn't have to pay it; it just meant you had to pay it when you filed your state taxes. Now many states/retailers are charging sales tax for online purchases. Again, because not everyone was following the law.

The law requiring all sales to be reported as income hasn't changed... only the law dropping the dollar amount at which point the banks are required to tell the IRS when you're breaking the law have.