Paying taxes on consigned items advice

[Chanbal]

It's been a while since I consigned a bag, and I would appreciate your help/advice with this issue. For example, it appears that PayPal is now requesting a tax ID to allow money for a consigned item to be transferred to your account. Is this correct?

Do we now have to report sales of consigned items? These are often expensive items that are being sold well below their original purchase price.

It doesn't seem right to lose money on consignments and still pay taxes on it. So I would really appreciate your help in understanding the current situation.

I want to downsize my bag collection (mainly Chanel). I don't have some of the original receipts from when I purchased the bags, so what's the best way to do this?

If this issue has already beed addressed, Mods please move my question to the right forum.

Big thanks!!!

 

[True Religion]

Not an accountant or tax expert, but I have sold items >$600 that would get reported for 1099-K.

If you sell your items at a profit, then the amount of profit is taxable. However if you re-sell items for no profit or at a loss, you do not need to pay additional taxes. Note that a loss is NOT tax deductible (you cannot reduce your tax liability) but you can report that the personal items were sold at a loss so it doesn't result in additional taxes. It is covered on the IRS website here under "Is the gain or loss on the sale of a personal item used to compute my taxable income? Is that reported on a Form 1099-K?".

 

[Chanbal]

Not an accountant or tax expert, but I have sold items >$600 that would get reported for 1099-K.

If you sell your items at a profit, then the amount of profit is taxable. However if you re-sell items for no profit or at a loss, you do not need to pay additional taxes. Note that a loss is NOT tax deductible (you cannot reduce your tax liability) but you can report that the personal items were sold at a loss so it doesn't result in additional taxes. It is covered on the IRS website here under "Is the gain or loss on the sale of a personal item used to compute my taxable income? Is that reported on a Form 1099-K?".

Thank you so very much!!!! I have no problem with not reducing the tax liability with a loss, my concern is how to calculate the profit without the original receipts. Would you know the best a way to estimate the original price?

For example, the price of a Chanel flap from 2010 was about 2.8K + tax (Google search). Would I use that figure to calculate the profit?

 

[True Religion]

Thank you so very much!!!! I have no problem with not reducing the tax liability with a loss, my concern is how to calculate the profit without the original receipts. Would you know the best a way to estimate the original price?

For example, the price of a Chanel flap from 2010 was about 2.8K + tax (Google search). Would I use that figure to calculate the profit?

There's a discussion on the TurboTax forum about this: https://ttlc.intuit.com/community/taxes/discussion/receipts-for-items/00/3091316

tl;dr:

• If audited, you have the obligation to prove the sales proceeds are not taxable.
• If you don't have receipts for everything, you can/should still create a log (spreadsheet) that keeps track of all the items and the time frame they were acquired, the cost you acquired them at, etc
• Consistency is important and you should do this now for when you file your taxes and not create this log only after you get audited
• You would use the cost basis of the item from when you originally purchased them. If the item is inherited, I believe you can use Fair Market Value of the date the item was acquired.

Edit:
If you're selling all Chanel classic flaps, you'll probably end up with a profit, and you'd be expected to pay taxes on that profit. But I would imagine that even if you take a profit from that Chanel flap, you will probably be selling other items at a loss, and likely your tax liability in the end will be minimal or zero (if the losses from your other sales cancels out any profit you would make).

Again not tax professional. This is from what I plan to do with any 1099-Ks I receive (I expect some from Ticketmaster, for tickets I sold at a loss 😬)

 

[Chanbal]

There's a discussion on the TurboTax forum about this: https://ttlc.intuit.com/community/taxes/discussion/receipts-for-items/00/3091316

tl;dr:

• If audited, you have the obligation to prove the sales proceeds are not taxable.
• If you don't have receipts for everything, you can/should still create a log (spreadsheet) that keeps track of all the items and the time frame they were acquired, the cost you acquired them at, etc
• Consistency is important and you should do this now for when you file your taxes and not create this log only after you get audited
• You would use the cost basis of the item from when you originally purchased them. If the item is inherited, I believe you can use Fair Market Value of the date the item was acquired.

Edit:
If you're selling all Chanel classic flaps, you'll probably end up with a profit, and you'd be expected to pay taxes on that profit. But I would imagine that even if you take a profit from that Chanel flap, you will probably be selling other items at a loss, and likely your tax liability in the end will be minimal or zero (if the losses from your other sales cancels out any profit you would make).

Again not tax professional. This is from what I plan to do with any 1099-Ks I receive (I expect some from Ticketmaster, for tickets I sold at a loss 😬)

Thank you so much for the detailed and very useful information. I'm in 'desperate' need to declutter. It's not just bags... I plan on donating several items this year, but it would be nice to recoup some money on at least a few bags.

 

[westkygal]

Never had that problem. I do have a problem paying taxes on consigned/thrifted items. Tax was paid originally, shouldn't have to pay taxes again on the same item.

 

[Chanbal]

Never had that problem. I do have a problem paying taxes on consigned/thrifted items. Tax was paid originally, shouldn't have to pay taxes again on the same item.

I agree with you. It appears that we have to pay taxes on the profit without accounting for inflation since the bag was originally purchased and most of the original receipts fade over time.

 

[renee_nyc]

Does this mean that 3rd party platforms are only required to report $600+ transactions in a 1099 if the seller’s total amount is $5000 or more? At least for 2024?

IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation | Internal Revenue Service

IR-2023-221, Nov. 21, 2023 — Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74 announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement...

www.irs.gov

 

[onlyk]

Does this mean that 3rd party platforms are only required to report $600+ transactions in a 1099 if the seller’s total amount is $5000 or more? At least for 2024?

IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation | Internal Revenue Service

IR-2023-221, Nov. 21, 2023 — Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74 announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement...

www.irs.gov

from what I roughly read online, some states still require report over $600, some over $1,000, you may need to check with your local state policy too.

and ebay, Paypal have been reporting over $600 since several years ago I belive

 

[renee_nyc]

from what I roughly read online, some states still require report over $600, some over $1,000, you may need to check with your local state policy too.

and ebay, Paypal have been reporting over $600 since several years ago I belive

It’s not the clearest, is it? Thank you!

 

[onlyk]

It’s not the clearest, is it? Thank you!

just my understanding, (I suggest you consult with professional), if selling things less than $600 , I don't think you need to worry about it, if selling under $5,000 and lose money on that $5,000 amount, report it, and find transition or receipts of original purchases and keep them aside, if made money, better to report it, if selling more than $5,000, report it.

 

[Chanbal]

just my understanding, (I suggest you consult with professional), if selling things less than $600 , I don't think you need to worry about it, if selling under $5,000 and lose money on that $5,000 amount, report it, and find transition or receipts of original purchases and keep them aside, if made money, better to report it, if selling more than $5,000, report it.

It's very difficult to have original receipts for purchases made several years ago. I wouldn't be happy to pay taxes on the full sales price if I don't find the original receipts.
I've never bought a bag with the intention of selling it, but I've accumulated too many and would like to downsize. However, at this point, I'm almost tempted to not consign them anymore. The process sounds like a headache.

 

[onlyk]

It's very difficult to have original receipts for purchases made several years ago. I wouldn't be happy to pay taxes on the full sales price if I don't find the original receipts.
I've never bought a bag with the intention of selling it, but I've accumulated too many and would like to downsize. However, at this point, I'm almost tempted to not consign them anymore. The process sounds like a headache.

As right now, I'm not selling any of high price items if I can't find receipts or transition records. for low price items, if I can't find records, I just don't sell them, or I will donate them or give away ( if they are brand new), or keep them till later to decide.

 

[Chanbal]

As right now, I'm not selling any of high price items if I can't find receipts or transition records. for low price items, if I can't find records, I just don't sell them, or I will donate them or give away ( if they are brand new), or keep them till later to decide.

I hear you. I usually donate a ton of stuff every year, like many people do. It's only bags like the Reissue 227 that I'd like to consign. I paid a lot of money for them, including taxes, so it would be nice to get some money back. Who keeps original receipts for 10 years? Too much clutter!

 

[DavinaE]

I hear you. I usually donate a ton of stuff every year, like many people do. It's only bags like the Reissue 227 that I'd like to consign. I paid a lot of money for them, including taxes, so it would be nice to get some money back. Who keeps original receipts for 10 years? Too much clutter!

Same here, the only pieces where I keep my receipts are Chanel or Hermes, I recently sold Chanel flats that I bought about 18 years ago, I didn't keep the receipt that long obviously. I had them listed on Vestiaire but when they changed the commission, tried to relist them, the same shoes they had no problem with 3 months ago all of a sudden they wanted the receipt, so I put them on eBay, the lady was absolutely delighted with them.