So a couple months back I was let go from my job! In order to stay afloat, I had to sell (And continue to buy&sell) to be able to live my everyday life!
So my question is, how should I go about this with taxes? Should I even worry? I planned on keeping track next year with how serious the numbers have gotten this year(For me at least). Vaguely the amount that I’ve received would be in the 10k-15k range, which isn’t all profit since I bought the cards for a certain amount. Plus I had a decent paying full time job for the first 7 months of the year, and just got a new job for the rest of the year.
Any advice would be great!
Second Question
I had a buddy recently invest in some cards and decided to sell them, the buyer trusted me and I did all the work, I was the middleman of the 15k transaction, does anyone know if there’s a way going about so that I can show I was purely a middleman?
Not a tax expert so take with a grain of salt. It’s my understanding that PayPal doesn’t report anything until your account passes 20k. Legally, the uncle sam wants you to report after you’ve passed $600 in revenue with your endeavors.
I’d recommend using turbo tax for small business. It will prompt all the questions to get you in the right place. If you run through it this time, you’ll be better equipped to handle it next year if you go full on with merchant sales.
You could label that transaction under capital gains. Just the net profit would be taxed and it most likely would be labeled as a long-term investment. I don’t know how long you have had the cards, but if you have had it for over a year then it can qualify as a long-term investment (a year, long term, lol, I know) and then the tax rate would be 0%. This is compared to the tax rate on short term investments which would be 10% to 15%, depending on net profit.
Hope this help!
P.S. Sadly, I am not a tax expert (yet!, maybe one day) so please correct me if I have made any errors. Thank you
I believe any transaction under 10k you should be good but if you transferred all 15k in one transaction you will most likely have to pay taxes. The tax rate idk sorry!
200 transactions AND $20k is what triggers a paypal 1099-k. If you get this, then paypal will send it along to the IRS and you must fill out the proper paper work with your taxes or you’ll be getting a call from tax man. They’ll want you to pay taxes on all gross reciepts unless you submit the proper profit/loss statements tracking gross sales, COGS, deducting fees and costs etc. You only have to pay taxes on the net gains. Federal and potentially state. Depending on your state you may likely have sales tax collecting requirements. In NY I have to collect and remit sales tax on an annual basis for all NY residents but only NY residents at their local county rate.
Anything less than the 200 trans. And $20k. will likely not be reported. Meaning you likely wont get caught by not claiming the profits on your taxes, but legally you are still required to. That is all with regards to paypal only. If you middle manned a 15k transaction it is very likely you triggered some flagging with your bank as I believe $10k is a common threshold there. I have no experience with it so cannot really comment on that end.
You would ideally consult with a local tax professional to have these conversations as nobody knows your exact situation.
I’m sorry to hear about you financial situation. Regarding taxes, your are technically required to report the taxes. But only the profit- If you bought a Pikachu Illustrator for $1.00 and sold it for $5.50, you would have to report $4.50(minus ebay fees, shipping costs
It would be taxed at a 28% rate. This is because it is a collectible.(art, gold coins, cars, ect.) If you google Schedule D, you’ll see that line 18 on the back side has a line and some instructions. This is what the IRS wants you to do.
Charmander guy was right- a $10000 bank account balance raises flags with the IRS. If they saw a termination of employment in April, and saw your bank account increased by $10000, that would raise a flag in a potential audit.
Contrary, to other posts, it would be incorrect claim as a capital gain. Once Al Gore, the former Vice President, claimed a painting he displayed in his house he sold for $30000 was a capital gain. The IRS rejected his position and forced him to be taxed at a collectible. The exception to this is if you could claim you do it in the ordinary course of business(its your inventory) and claimed profit for 3 of the past 5 years. This is how an art dealer or antique shop owner would avoid the surtax of collectibles.
In the event of you being a middle man in a transaction, that would simply be reported as income received from providing services. (Schedule C- Line 1). Understand that earnings reported on schedule C in excess of $400 would be subject to an additional 15.3% self employment tax.
Would the self employeement tax still apply to the middle man services even if I don’t keep any of the money? Like, what if I simply just received the money and sent it to a friend since I was a trusted source the money could first be sent to?
Also I was reading somewhere that Interantional Bank Transfers under 100k don’t need to be reported? Know anything about that?
Because all the transactions have been international
Forgive me for misunderstanding you. If you simply received money and then forwarded it to another person, that does not constitute taxable income. Just like depositing money into a bank account isn’t taxable income to the bank. However, if you took a small cut of the transaction, then you’d only report that.
International bank transactions makes it more interesting. If you sold a Pikachu Illustrator for $4.50 profit, you’d report it as income no matter if they buyer is in the US or Japan.
As for bank transfers and the regulations and requirements international banks have, that is a whole new game. I don’t know the rules.
