4 ms·

The thing is, there's probably not much you can do. Now that the reportable threshold for 1099-k is so much lower, it's just going to be something people learn

The thing is, there's probably not much you can do. Now that the reportable threshold for 1099-k is so much lower, it's just going to be something people learn to deal with, or they won't. I'm not sure quite what your business does, but I've seen this personally where my family no longer wants to sell their stuff (which is not really a taxable kind of transaction, but they don't understand how they can report it to the IRS as such) on eBay because they don't want to be taxed on any money they get from it. The issue is that US taxes are so complex and punitive, and that Americans are so afraid of the IRS. Unfortunately your business won't be able to change that.

HWR_14 4y ago
US taxes may be complex, but they aren't punitive. Frankly, it seems like it should be trivial to make the tax code simpler, but then we would need to move a lot of subsidies into other, harder to navigate, programs. Meanwhile, I assume you mean "the stuff they want to sell on eBay is at a lower price than their cost basis". If there's some other way to avoid taxes on sales, I'm all ears!
- noodlesUK 4y ago
  > US taxes may be complex, but they aren't punitive. The taxes aren't, but compliance certainly feels like it is. I owned a dormant UK company that I set up when I was living in the UK. The reporting for that as a US citizen is nightmarish (look up form 5471). People who are any sort of edge case who want to be tax compliant pretty much just can't be without spending mega $$$ on accountants. The only thing that is reasonably straightforward is for people with a single employer on w2 income. And even then, other countries put the US to shame for that circumstance, most don't even require filing anything to their tax authority. > "the stuff they want to sell on eBay is at a lower price than their cost basis" Yes, this is exactly what I'm describing. Many people I know use eBay as a sort of garage sale online. All their inventory is used items that are worth less than the original price they paid for it. They may make $1k or so across the year at best. They'd rather just not sell online, not make the money, and not worry about tax reporting when platforms start throwing terms like 1099-k around.
- thaeli 4y ago
  The scary part for a lot of people is that this new $600 threshold puts a reporting burden on low value personal property that few people bother documenting their basis in. Until very recently, this didn't matter, because it was very unlikely someone would hit the $20k threshold from these sorts of ordinary "garage sale" activities. Most Americans are scared of being audited. Whether or not that's a rational fear, it drives a lot of consumer behavior.
  - noodlesUK 4y ago
    > Most Americans are scared of being audited. Whether or not that's a rational fear, it drives a lot of consumer behavior. This is so true. I'm terrified of the IRS in a way I'm simply not terrified of HMRC. I don't think it's rational at all, but going through the rigmarole of "file these papers you don't really understand, if you screw up, your life is going to get turned upside down" every year for their entire adult lives definitely plays into it.
    - orwin 4y ago
      I don't know how the IRS work in the us, but if it's the same as in my country, they basically do the accounting for you, send you a letter that read 'you owe us XXX for 2015 and XXXX for 2017, please send the money to this address or contact us via mail so we can etch a repayment plan. I would be more afraid of our poorly trained cops firing guns near me.
      - aaaaaaaaata 4y ago
        It is not, and they do not. You send them a guess, and if it's wrong, they mail you back, possibly with a fine or other punishment threatened.
- jsmith45 4y ago
  It does not help that some of the complications in the tax system are actually intended to make things simpler for most people. For example the 401k and IRA rules basically exist to encourage people putting money into retirement investment accounts. The idea being that having to account for all the capital gains, divendends, etc would otherwise discourage such investments. But of course the current rules for these are a bit of a mess, with nonsense like the backdoor Roth IRA being possible. another example of a simplification that actually mostly works is the exception to capital gains on the sale of your primary residence. Indeed, unless you get a Form 1099-S or have exceeded the the $250k ($500k married) gain, you don’t need to report the sale in any way on your tax forms. That absolutely simplifies taxes for most people who are selling their home, but it simultaneously makes the tax system as a whole more complex. Similarly there are a lot of weird rules and exceptions over on the business side to try to better align things with Generally Accepted Accounting Principals, in order to avoid the need for businesses to have to keep two sets of books, one for taxes, one for everything else. This adds an obscene amount of complexity to the tax code, especially since not only are special exceptions to the normal tax rules granted for GAAP, but there are a bunch of extra rules intended to prevent specific ways of trying to abuse this. Scrapping all of that could majorly simplify the tax code. But it would actually makes taxes a lot more complicated for many businesses. None of this is to say that all the complexity is there for this reason. There is a lot of use of the tax code to create weird subsidies for certain industries. There is even cruft like some special rules whose benefit to taxpayers is far outweighed by the extra work needed to use those exceptions. Rules defined by court cases that were never codified due to a weird exclusion in the codification, and much more.
sicp-enjoyer 4y ago
It is extremely difficult to get a hold of a human being at the IRS who has the power to help you (especially post 2020), if you have a miscommunication or problem. People often accept mistakes and just pay out of fear.

HWR_14 4y ago

US taxes may be complex, but they aren't punitive. Frankly, it seems like it should be trivial to make the tax code simpler, but then we would need to move a lot of subsidies into other, harder to navigate, programs. Meanwhile, I assume you mean "the stuff they want to sell on eBay is at a lower price than their cost basis". If there's some other way to avoid taxes on sales, I'm all ears!

noodlesUK 4y ago
> US taxes may be complex, but they aren't punitive. The taxes aren't, but compliance certainly feels like it is. I owned a dormant UK company that I set up when I was living in the UK. The reporting for that as a US citizen is nightmarish (look up form 5471). People who are any sort of edge case who want to be tax compliant pretty much just can't be without spending mega $$$ on accountants. The only thing that is reasonably straightforward is for people with a single employer on w2 income. And even then, other countries put the US to shame for that circumstance, most don't even require filing anything to their tax authority. > "the stuff they want to sell on eBay is at a lower price than their cost basis" Yes, this is exactly what I'm describing. Many people I know use eBay as a sort of garage sale online. All their inventory is used items that are worth less than the original price they paid for it. They may make $1k or so across the year at best. They'd rather just not sell online, not make the money, and not worry about tax reporting when platforms start throwing terms like 1099-k around.
thaeli 4y ago
The scary part for a lot of people is that this new $600 threshold puts a reporting burden on low value personal property that few people bother documenting their basis in. Until very recently, this didn't matter, because it was very unlikely someone would hit the $20k threshold from these sorts of ordinary "garage sale" activities. Most Americans are scared of being audited. Whether or not that's a rational fear, it drives a lot of consumer behavior.
- noodlesUK 4y ago
  > Most Americans are scared of being audited. Whether or not that's a rational fear, it drives a lot of consumer behavior. This is so true. I'm terrified of the IRS in a way I'm simply not terrified of HMRC. I don't think it's rational at all, but going through the rigmarole of "file these papers you don't really understand, if you screw up, your life is going to get turned upside down" every year for their entire adult lives definitely plays into it.
  - orwin 4y ago
    I don't know how the IRS work in the us, but if it's the same as in my country, they basically do the accounting for you, send you a letter that read 'you owe us XXX for 2015 and XXXX for 2017, please send the money to this address or contact us via mail so we can etch a repayment plan. I would be more afraid of our poorly trained cops firing guns near me.
    - aaaaaaaaata 4y ago
      It is not, and they do not. You send them a guess, and if it's wrong, they mail you back, possibly with a fine or other punishment threatened.
jsmith45 4y ago
It does not help that some of the complications in the tax system are actually intended to make things simpler for most people. For example the 401k and IRA rules basically exist to encourage people putting money into retirement investment accounts. The idea being that having to account for all the capital gains, divendends, etc would otherwise discourage such investments. But of course the current rules for these are a bit of a mess, with nonsense like the backdoor Roth IRA being possible. another example of a simplification that actually mostly works is the exception to capital gains on the sale of your primary residence. Indeed, unless you get a Form 1099-S or have exceeded the the $250k ($500k married) gain, you don’t need to report the sale in any way on your tax forms. That absolutely simplifies taxes for most people who are selling their home, but it simultaneously makes the tax system as a whole more complex. Similarly there are a lot of weird rules and exceptions over on the business side to try to better align things with Generally Accepted Accounting Principals, in order to avoid the need for businesses to have to keep two sets of books, one for taxes, one for everything else. This adds an obscene amount of complexity to the tax code, especially since not only are special exceptions to the normal tax rules granted for GAAP, but there are a bunch of extra rules intended to prevent specific ways of trying to abuse this. Scrapping all of that could majorly simplify the tax code. But it would actually makes taxes a lot more complicated for many businesses. None of this is to say that all the complexity is there for this reason. There is a lot of use of the tax code to create weird subsidies for certain industries. There is even cruft like some special rules whose benefit to taxpayers is far outweighed by the extra work needed to use those exceptions. Rules defined by court cases that were never codified due to a weird exclusion in the codification, and much more.

sicp-enjoyer 4y ago

It is extremely difficult to get a hold of a human being at the IRS who has the power to help you (especially post 2020), if you have a miscommunication or problem. People often accept mistakes and just pay out of fear.