Do I need to pay taxes on proceeds from a garage sale if I take payments with a Square reader?
So if I get a Square reader for my garage sale items, the money goes into the account I set it up with and then I must pay taxes to the IRS for that money collected whether it is or 000, say if I sold the bulldozer? Is this correct? Do I need to label each sale for what it is? Plus Square gets their 2.75%. Thank you in advance.
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Payment gateways such as Square do not normally withhold tax. It is up to you to pay the appropriate tax at tax time. That having been said, Square does report your payments to the IRS on a form 1099-K if your payments are large enough. According to Square, you'll get a 1099-K from them if your total payments for the year add up to ,000 AND more than 200 transactions.
Whether or not they report on a 1099-K, you are required to pay the appropriate taxes on your income.
So now the question becomes, "Do I have to pay income tax on the proceeds from my garage sale?" And the answer to that question is usually not.
When you sell something that you previously purchased, if you sell it for more than you paid for it, you have a capital gain and need to pay tax on that. However, generally you sell things in a garage sale at a loss, meaning that there is no tax due.
If you make more than ,000 at your garage sale and the IRS gets a 1099-K, the IRS might be curious as to how you did that with no capital gain. So if you sell any big ticket items (a bulldozer, for example), you should keep a record of what you paid for it, so you can show the loss to the IRS in the event of an audit.
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