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Little tip from someone who sells stuff online regularly: Keep ALL your receipts for expensive purchases, even personal ones. Take photos of them and store them in the cloud. You never know when you might sell something and need to prove your cost basis. Also, PayPal only sends 1099-Ks if you exceed certain thresholds ($600 as of 2025). If you're selling personal items occasionally, it's not a business, but you still need to account for any 1099-Ks you receive.
Does anyone know if this would be different if I was selling things regularly? Like I sell my old electronics every year when I upgrade. Does that make it a "business" for tax purposes?
The distinction between hobby/personal sales and a business depends on several factors, not just frequency. The IRS looks at whether you're trying to make a profit, how much time you spend, how you conduct the activity, and if you depend on the income. If you're just selling your own used personal items (even if you do it yearly), that's generally not a business. You're just recouping some value from your personal property, especially if you're typically selling at a loss compared to what you paid. However, if you start buying items specifically to resell at a profit, that crosses into business territory.
Has anyone actually gotten audited over a 1099-K for personal items? I'm just wondering how serious the IRS is about these PayPal transactions.
One thing that wasn't mentioned yet - make sure you're tracking your AMT credit carryforward correctly. Form 8801 is used not just for calculating your current year credit but also for tracking credits from previous years that you couldn't use up. In your case with the stock options going from $3.50 to $14 (for AMT) and then selling at $1.15, you've got both an AMT credit situation AND a capital loss. Keep these separate in your documentation - they're related but handled differently on your tax forms.
Thanks for this! I'm a bit confused though - when I file the amended return for my 2023 taxes to claim the AMT credit I missed, do I also need to file Form 8801 for my 2024 return to track any unused credit? Or does the amended 2023 return take care of everything?
You'll need to file Form 8801 with your 2024 return to calculate how much of your AMT credit from 2023 you can use in 2024. The amended 2023 return establishes that you paid AMT and are entitled to the credit, but it doesn't automatically apply that credit to future years. Think of the amended 2023 return as creating the credit, and Form 8801 on your 2024 return as using (or tracking) that credit. If you can't use the entire credit in 2024, you'll file another Form 8801 with your 2025 return, and so on until you've used up the entire credit.
Has anyone used TurboTax to handle AMT credit carryforwards? I'm wondering if it properly tracks them year to year or if I need to manually keep records. I'm in the same boat with worthless stock options that triggered AMT.
TurboTax Premier and above do handle AMT credits and carryforwards if you use it consistently year to year. The key is importing your previous year's return so it can pull in the AMT information. In your first year claiming the credit, you may need to manually enter some information from your prior year return if you didn't use TurboTax before.
One thing nobody's mentioned is that you can deduct EITHER sales tax OR state income tax when itemizing - not both! Most people in states with income tax are better off deducting their state income tax unless they made huge purchases. Also, if you're a new homeowner, don't forget to include property taxes in your calculation. Property tax + mortgage interest + charitable donations + either sales OR income tax... these all add up and might push you over the standard deduction threshold, especially if you're in a high-tax state.
Thanks for mentioning this! I'm in Washington state so we don't have state income tax - would that make the sales tax deduction more valuable for me compared to someone in a state with income tax?
Yes, that makes a big difference! Since Washington has no state income tax, the sales tax deduction becomes much more valuable for you. Residents of states without income tax (like Washington, Florida, Texas, etc.) almost always benefit more from deducting sales tax. In your case, since you mentioned being a new homeowner with renovations and furniture purchases, you might actually be closer to making itemizing worthwhile than you think. Your property taxes alone could be substantial, and when combined with mortgage interest and your higher-than-average sales tax from major purchases, you might cross the threshold where itemizing beats the standard deduction.
Don't overthink this - I've been doing my own taxes for years and here's my simple rule: unless you have a mortgage over $400k or donate like 10% of your income to charity, just take the standard deduction and save yourself the headache. The tax law changes a few years back made the standard deduction so high that it rarely makes sense to itemize for most people.
This is oversimplified advice. It completely depends on your state's tax situation and individual circumstances. I have a modest mortgage but live in NJ with crazy property taxes, and itemizing saves me over $2000 compared to the standard deduction. Everyone's situation is different.
Has anyone tried FreeTaxUSA Pro? Their commercial version is only like $85 for unlimited federal returns. Not as fancy as Drake or ProSeries but it might be perfect for a student.
Just throwing this out there - make sure you understand the legal implications of preparing taxes for others, even if they're friends and family. Technically, you should register for a PTIN (Preparer Tax Identification Number) from the IRS if you're preparing returns for compensation, even if it's just a small amount.
Good point! I wasn't planning to charge anything since I'm just getting experience, but I'll look into getting a PTIN anyway to do things properly.
Muhammad Hobbs
Hear me out - you might actually qualify as a professional gambler if this wasn't just a lucky one-time thing. I've been filing as a professional gambler for 3 years now and can deduct all my research tools, subscriptions, even part of my internet and computer costs. The key is treating it like a business - keeping detailed records, betting regularly (not just occasionally), and approaching it as your livelihood or at least a significant income source. If you spent substantial time (20+ hours a week) on research and betting throughout the year, you might qualify. Talk to a tax pro who specializes in this area before deciding. It's not just about the amount you won, but how you approach your gambling activities.
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Noland Curtis
ā¢Have you ever been audited? I'm terrified of claiming professional gambler status and then getting slammed by the IRS. What kind of documentation do you keep to prove you're a pro?
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Muhammad Hobbs
ā¢I haven't been audited, but I'm prepared if it happens. I keep extensive records: a daily log of hours spent researching and betting, all transactions (wins AND losses), a business plan, separate bank accounts for gambling activities, and spreadsheets tracking performance by sport/bet type. The key is consistency and business-like conduct. I bet year-round, not just during certain seasons. I have evidence of pursuing expertise (subscriptions, courses, etc.). I can demonstrate that I approach this methodically, not just as entertainment. The IRS looks at factors like regularity, expertise, time committed, and whether you depend on the income. It's definitely not for casual bettors, but if you're serious and methodical about it, professional status can make financial sense.
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Diez Ellis
Slight tangent but be careful reporting gambling winnings this year. I won about $12k last year and reported it correctly but somehow the IRS still sent me a scary letter saying I underreported. Turns out the casino had reported my GROSS winnings (about $45k) without accounting for the $33k I had put in throughout the year. Took months to sort out. Make sure to keep ALL your betting records - deposits, withdrawals, everything. And remember the casinos/betting sites report to the IRS too, so their numbers need to match yours.
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Vanessa Figueroa
ā¢This happened to me too! The IRS compared the W-2G from the casino (showing just the wins) without considering my losses. Such a nightmare to fix.
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Abby Marshall
ā¢Is there a minimum amount that sportsbooks report to the IRS? I won about $3k total this year across DraftKings and FanDuel but haven't received any tax forms from them.
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