Buying/Selling Watches as Hobby & 1099-K

[SN2354]

Hi all

I am definitely no tax expert, but my wife just received a 1099-K form selling some old shoes on Poshmark. The amount is not large, but over $600 so that is why the form came.

I did not make any moves with my watch collection in 2022, but I am curious how this affects our hobby. I love to try new watches out, which usually leads to me selling something to fund. I could do this a few times in a year, and at the current rate of watch prices it could easily push 6 figures!

Now how does this affect me as far as taxes go? Will the government think of these 6 figures as income? I sell at break-even, or sometimes at a small loss as I am just in it for the love of watches, not making money it is a hobby after all.

I usually sell to a trusted dealer, or to members of C24 etc. I get paid via wire transfer most times, and once in the past (when prices were lower) via Paypal (friends/family)

Will I be getting 1099-K from my bank or TD Ameritrade accounts that I use? Am I going to find myself with a huge bill come April 2023?

Thank you in advance for any assistance!

[Booth9999]

As long as you can show what you paid/sold it for that should offset the capital gains or at least minimize tax liabilities to just the profit.

[SN2354]

Originally Posted by Booth9999

As long as you can show what you paid/sold it for that should offset the capital gains or at least minimize tax liabilities to just the profit.

How would they know what I bought/sold?

I can get a receipt from the dealer when I buy let's say a 116610, but when selling to a member or a dealer, they just send a wire when they get the watch, it does not have any notation of what the model is etc.

[Time Out]

The way I understand it is if you bought for 10k and sold for 1k, you still have to report the 1k as income and its taxed. You cannot write off losses on personal items.

Family/Friends paypal wont trigger the 1099.

I mean, who in the past has ever paid or reported on their hobby gains ?

[airchitect]

I honestly don’t know a soul that’s ever reported a watch sale who wasn’t a dealer.


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[HHIslander]

Originally Posted by Time Out

The way I understand it is if you bought for 10k and sold for 1k, you still have to report the 1k as income and its taxed. You cannot write off losses on personal items.

Family/Friends paypal wont trigger the 1099.

I mean, who in the past has ever paid or reported on their hobby gains ?

In the US, you only have to pay tax on the gains above your cost basis. Pretty sure most other countries are the same. The cost you use is the cost you or the person who gave it to you paid. If that’s not available it can get complicated.

A 1099 lets the IRS know about the revenue, the taxpayer can deduct costs against that revenue in the tax return.

OP, you won’t be getting any 1099 from your bank for private transactions. Your wife got one from poshmark because she used that platform to sell shoes. If you sold your watch on chrono24, you could get a 1099.

[Booth9999]

Originally Posted by SN2354

How would they know what I bought/sold?

I can get a receipt from the dealer when I buy let's say a 116610, but when selling to a member or a dealer, they just send a wire when they get the watch, it does not have any notation of what the model is etc.

I know nothing of tax fraud, especially on a public forum. That being said it wouldn’t hurt to keep the wire transfer receipts just in case you get audited.The likelihood is low but you need to look at your own taxes and decide how much risk you are willing to take on for a minimal tax obligation. No big deal to some while others would rather not invite the extra scrutiny.

[albertf]

I'd file a schedule C with income that matches the 1099-K and record the appropriate amount as cost of goods sold. That should result in a smaller chance of an audit since the IRS will be expecting to see revenue figures that match or exceed the 1099-K on your return. You're more likely to have to respond to IRS letters if they don't see any type of income/revenue figures anywhere on your return.

Keep documentation should it ever get questioned.

If you're collectively selling watches as a loss but don't want to try to claim the loss as a business type expense, just have your revenue = COGS so it zeroes out. You'll still have your documentation should you ever need to defend yourself.

[SN2354]

Thank you all. Will just keep records of what I buy/sell, and I did see I am able to file Schedule C if I do get any 1099's.

Just out of curiosity, if a payment is made to me by paypal (friends/family) are amounts even over $20k not reported? The way I read these new laws that if it is a business transaction (aka one that is paid goods/services)

[Tools]

Using Pay Pal to attempt to bypass reporting and taxes is one of the faster ways to end up in an audit.

In the US, Capital Gains is a fact of life and taxes. The latest laws are an attempt to get to those doing what many here seem to be suggesting- let them find you. It's a risk that you choose to either take or not take.

Profit from a hobby is still profit in the eyes of the tax man.

[SN2354]

Originally Posted by Tools

Using Pay Pal to attempt to bypass reporting and taxes is one of the faster ways to end up in an audit.

In the US, Capital Gains is a fact of life and taxes. The latest laws are an attempt to get to those doing what many here seem to be suggesting- let them find you. It's a risk that you choose to either take or not take.

Profit from a hobby is still profit in the eyes of the tax man.

No not at all, I was curious if they will give a 1099 form for using PP friends/family.

I totally understand the implications involved, and trying to make sure I am doing the right thing when it comes time to put together a return.

As per previous posts, I just need to keep records of what I am buying and selling, and make sure everything coincides.

[train-time]

From what I understand all of the payment clearing sources used by internet selling vehicles will be reporting sale proceeds on a 1099-K so you will have to keep records of the basis (cost) of items sold in order to report a gain or loss. Takes for fun out of getting rid of unused items. Time to go to community yard sales!

[Time Out]

The IRS couldn't even keep track of the PPP money that went out..

That's all I'm going to say for now.

[Trouble15]

Originally Posted by Time Out

The IRS couldn't even keep track of the PPP money that went out..

That's all I'm going to say for now.

If you Google PPP loans and prison there are a lot more than a few out there. The government may know more than you think.