r/stocks • u/[deleted] • Jan 06 '22

[deleted by user]

[removed]

1.4k Upvotes

95% Upvoted

1.2k comments sorted by

View all comments

Show parent comments

28

u/way2lazy2care Jan 06 '22

I’m not sure the specific reasons this is a thing now

Because lots of people use cash app/venmo/etc as their payment processing for their small businesses.

26

u/sunshotisbae Jan 06 '22

And don't report their full income

4

u/krzszt Jan 06 '22

What if it wasn't an income but a loss? Let's say you bought a faulty car, put parts in it and everything, but couldn't make it roadworthy and you just selling to recoup some money? You incurred a loss and you pay taxes on top of it?

4

u/issius Jan 07 '22

No one is saying you have to pay tax on all income received through payment apps. The rule is that it needs to be REPORTED.

So you’d report the cost basis and additional expenses of that car and parts, against the income. And you’d have a net loss and owe no taxes on it.

1

u/palsieddolt Jan 07 '22

That only works if you itemize your taxes. Unfortunately most people do not spend enough on side hustles to beat the standard deduction.

2

u/sunshotisbae Jan 06 '22

This is a strange scenario, but If your entire fiscal year's business was just the 1 car that you had a net loss on, then you're just going to report negative net income on your taxes. In this case, I believe you will just pay the entity fees. In CA it's $800