usmsci

yeah Comic Connect doesnt send a 1099-K or anything, so it's all on me to report and how. I guess HA does?

I talked to a CPA and its clear that its a long term capital gain. The question is, is it a collectible? She wasn't completely sure because theres no, what they call, "long-standing" in the market. After the original Super Marios Bros that sold for $100k two years ago, did that automatically make all other sealed video games collectible? Was that game that sold collectible, just out of the blue? The other thing is, is that we pretty much know how many original Van Goghs or Mona Lisas there are in the world or a particular 1920 Gold coin that was only minted for one year but we don't know the rarity of all video games. Supposedly theres only one sealed 2nd production of Super Mario known (the one on Pawn Stars). What about the others? If everything that people sell, goes for a lot of money, or people buy and trade things online for the purpose of hanging it on their wall or putting it in a showcase then by that definition, everything is collectible and the IRS shouldn't bother with their 'collectible' list.

another question to ask is, is just because we all sell some special game, does that make the entire video game market a 'collectible' market. Obviously the IRS hasnt specifically outlined that videos game are collectibles but really this insanity has only been going on a few years. With art, rugs, precious metals or whatever has firm foundations of collectibility because of rarity of all those categories. Does a few unique Super Mario Bros games make the entire genre collectible? If thats the case, the IRS could make anything collectible it wants just because someone made a big pay day on one item. Also, theres no way in the world I am going to have a receipt for the game when I bought it on Ebay 20+ years ago. I didnt even think about it because I wasnt planning on reselling it. It was just a hobby to collect a sealed game. The person who sold it to me honestly probably never even considered, just as I did, the rarity of a specific production run. I also bought a bunch of other games that were sealed that probably havent changed value that much since then.

no that is specifically for short term capital gains. thats why I am confused as well. I have a free consultation with a local CPA here on Monday. Will let you know. Lets say someone who is dirt poor discovers their great grannies long lost diamond ring and sells it for $50,000 at auction. Now the government wants $14k out of that when that person might need that money for like paying bills or getting out of debt or poverty or something. Thats why it seems strange that the tax would be 28% no matter how poor or rich you are. Reading articles about why they instituted the 28% really points to the wealthy people who naturally innovate, hire people, have businesses, etc. I don't think they ever considered 'normal' people having access to high dollar collectibles. If its not based on taxable income - it should be.

why does the IRS (on their own link above) say that 28% is a maximum? That means thats the most you will pay on it. Which means that it can be less than that. Its not totally clear, other than some places mentioning taxable income, how much less that can be. Maybe that means its 28% maximum because you are making $3 million for the year you still pay the 28%. I think that was a bit of an oversight when making those rules. If someone who is dirt poor has a windfall of selling something valuable and needs that money to survive on - then thats pretty harsh to take 28% vs someone who is very wealthy to begin with (which this rule targets the wealthy).

OK I will let you know. The key word in that IRS document is maximum. Ive noticed other articles also out there just say you'll pay 28% no matter what. Some others says 28% (or lower depending on ordinary income) which I think is in line with what the IRS says above in their own link. I feel like if it was straight up 28% they would say it, instead inferring that there is a number below maximum that you'll pay on collectibles.

I am 100% self-employed as well but I don’t think that makes a difference. The 28% is a maximum just like regular long term capital gains. (But at 20%, if you make more than 496,600 MFJ). At least that’s what the IRS says. If there is a maximum then there has to be a minimum tax on it. They don't specify directly in the link below however, so I assume it depends on your taxable income. https://www.irs.gov/taxtopics/tc409

What was your taxable income with the sale ? Even if you count the sale as added to your income that still puts me in the 15% bracket. You may have paid too much. The maximum tax rate is 28%. Thats the difference between capital gains taxes on collectibles and regular capital gains taxes, (which is 20% max) but they both get taxed off of your ordinary income. Maybe @arch_8ngelcan verify.

yeah the way it works is that you make $X amount of money. After all deductions you have what is called Taxable Income. If you have capital gains tax to calculate. the first $80k is taxed at 0%. So if you make $200K on game and your taxable income is $50k, $30K will be taxed at 0% and $170K would be taxed at 15%, which would be $25,500. If your Taxable Income is already of $80k then the full amount would be taxed at 15% (200,000 * .15) which is $30,000. thats the way I understand it anyway. Its 28% unless you ordinary tax income bracket is lower. So if you made $1 Million(40% tax income bracket) your rate on the capital gains would be 28%. https://1040return.com/collectibles-tax-collector/ Collectibles tax rate good or bad. The 28 percent capital gain tax on collectibles is the maximum tax rate. For example, if you are in the 15 percent income tax range, your collectible gain is taxed at that rate. If your income tax bracket is higher than 28 percent, the collectibles tax rate is capped at 28 percent. This results in a potentially lower tax rate versus ordinary income taxes. Acutally it looks like I might be in the 12% tax bracket (Married Filing Jointly) with a taxable income less than $81,050, including calculating QBI. https://www.kiplinger.com/taxes/tax-brackets/602222/what-are-the-income-tax-brackets-for-2021-vs-2020

Thanks! 28% is the max for capital gains but you are ultimately taxed on your taxable income bracket. So I will probably make enough this year to be in the 15% tax bracket so it will be about 15% maybe a tad less depending other deductions but thats about right. probably $28k or so.

@RH Thanks! Oh I will. I am going to contribute the full amount allowed into an IRA (which will help tax time a little) and the rest in an online savings account - which the interest rates on those are about 5-8x times higher than your normal banks or credit unions.

I just sold it at Comic Connect. Been working with them every few days. https://www.comicconnect.com/item/919370

@arch_8ngel yeah thats what I had looked at. looks like my capital gains will be $28k counting my additional income. Thats not counting my "costs" associated with storing it, getting it graded, mailing it back and forth or whatever. I have no idea what I paid for it on ebay 20 years ago, so if the IRS wants a receipt, they are going to be out of luck. I never bought it with the intention of re-selling it. No one on earth thought SMB carts were going to be 6 figure sales. At least some child tax credits will offset some of that (its $3k per child this year instead $2k).

I don’t own a business. I’m a simple sole proprietor. Yeah I’ll have to ask CC. Does heritage send out 1099-ks?

Doesn't the bank just report it to the IRS so the feds can track you or make sure that the trail of money doesnt lead to smuggling drug money? I thought that was the only reason for it. I mean people with really good jobs deposit more than $10k per month in the bank just from employment (the magic number here is $10k for the bank to report by law). The IRS doesnt start writing them letters asking them where they are getting all this money.