Episode 168 - Watch flipping With the New ”PayPal Tax”

Published on Wed, 12 Jan 2022 20:43:54 -0800

Synopsis

This episode discusses some new tax reporting rules for payment apps like PayPal and Venmo, and how they may impact the watch collecting hobby. The hosts explain that starting in 2022, these apps will report transactions over $600 to the IRS, requiring sellers to pay taxes on any profits from selling personal items like watches. They advise listeners to keep detailed records of purchase prices and sale prices to properly report any taxable gains. The hosts also speculate on whether these rules could dampen speculative watch flipping or have other effects on the secondary watch market. Additionally, they discuss new colorways of the Brew Watches Metric chronograph, an affordable knife brand called Coolina, and one host's experience building a custom mechanical keyboard.

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Transcript

Speaker
Andrew	Hello fellow watch lovers, nerds, enthusiasts, or however you identify. You're listening to 40 in 20, the Watch Clicker podcast with your hosts, Andrew and my good friend Everett. Here, we talk about watches, food, drinks, life, and other things we like.
Everett	How are you? You know, I'm good. The music seemed like it was slower tonight when we came in.
Andrew	It did seem slower. Are you listening to us on 1x?
Everett	I guess so. Yeah, it seemed like the music was slower. Um, yeah, no, I'm fine. It's been just a normal week. Nothing special. I am excited to get into this. Truly that you've brought me tonight.
Andrew	They smell delightful. I got the berry mix pack from the store. And I opened up the blueberry and acai and couldn't even contain myself. If you didn't hear it, you can back up a few seconds and you'll hear me say, Ooh, that smells good. It's super aromatic.
Everett	It's very aromatic. Uh, I, I do believe that it's pronounced Akai. Is it? Yeah. Okay. Yeah. Just saying.
Andrew	Breville. Yeah. We are known for our pronunciation here, so we just take our pick. We just go with what sounds and feels right at the moment.
Everett	And tonight it's blueberry and a guy. A guy. Blueberry and a guy. Andrew, how are you doing?
Andrew	Good. I'm a little worn out. My kids have been just kind of in a bit of a mood the last six years. Really just the last couple weeks just kind of catching up with me. I had a really productive weekend thus far. Um, I don't recall what I did yesterday, but it was all stuff that really needed to get done. Today I finished getting the Christmas decorations down. I took the Christmas trees to the recycling center.
Everett	And by that he means his Christmas tree and my Christmas tree.
Andrew	Yes. And thank you for doing that. Your Christmas tree was too long for me to close. My Christmas tree was too long for me to close my bed, but I could bend it. Yours was still like, So sturdy and hardy. I had to go into my garage and get a saw and cut three and a half feet off the bottom of it and then stuff it down into the bed of the truck. So I didn't have to tie anything down.
Everett	Yeah. I mean, I would have done more, uh, to help with the process if I didn't know when it was happening, but I didn't. And so I didn't. Yeah. That's okay. Yeah. It was $2 to $2 a piece, right?
Andrew	Yeah. $2 a tree. I think that's even less than the Boy Scouts charge. So I owe you $4.
Everett	Yeah, I guess so. Yeah. I told you if you hauled, I'd pay.
Andrew	Yeah. And the guy told me $4 and I was like, that was the first thing I thought of. I was like, why would anybody pay back $4?
Everett	Well, and actually I think their minimum dumping fee is usually five bucks. So it's a good deal, man. He charged me for money. That's a good deal. And you guys heard it here, a declaration and evidence of the contract as between Andrew and I and in the debt. which by statute accrues 9% in the state of Oregon.
Unknown	Yeah.
Andrew	Minute, like by minute. So it's actually going to be a nice sum at the end of the day.
Everett	Yeah. Uh, yeah, yeah, no, that's good. I'm glad that you did that. Me too. I'm glad that you did that. It really, you get rid of the Christmas tree and it really hammers at home that we're no longer in the holidays.
Andrew	Yeah. And our Christmas tree hasn't even had decorations on it for like the last five days. It's just been,
Everett	A sad, naked, drooping tree. Yeah. Well, we've kind of got a packed episode here. We do. We've kind of got a packed episode. I'm going to prepare some of you guys right now. So we're going to talk about kind of a weird topic tonight. At least at least a fair chunk of this episode will be sort of ancillary to watches, uh, but specifically about the watch collecting hobby. And, and this is more of a practical episode than some of our, uh, typical navel gazing. So feel free to go to two times, two X as it were, or, or I don't know what the speeds are.
Andrew	I've never done that before, but most people listen to us, I think on half speed. But there's the option of a quarter, a half, a full, one and a quarter, one and a half.
Everett	Do people listen to podcasts slower than the standard speed?
Andrew	Is that a real thing? There has to be someone who does, otherwise those speed options wouldn't be available.
Everett	Maybe it's for like really information dense, which is not us.
Andrew	No, it is us.
Everett	Information dense?
Andrew	Especially on nights like tonight. But yeah, no, I'd actually be interested to hear how many of you listen to us on standard speed versus accelerated speeds.
Everett	But before we get into the main topic, we've got a couple other things I want to talk about. One, and this isn't really part of a topic or even one of our topics, but I noticed that Jonathan Ferrer at Brew Watches released this week three new colorways of the Brewmetric chronograph. Did you see that?
Andrew	I did see it. And they went like hot cakes, hot, hot, hot, hot cakes gone, right? They're gone. They're gone. I don't know if, I don't know when he expects another, uh, another shipment, but they are, they're not available right now.
Everett	Hey, Hey you guys, this is Edward from the future. Uh, we screwed this up. You're about to hear us talk about how the three new colors of the Brewmetric are sold out. And that's not true. You'll just have to take my word that we had good reason for the mistake. In any event, the three new colors of the Brewmetric are not sold out. They go on sale Friday, January 14th. So check out Brew's Instagram page and or the website for more information. But if you're listening to this on Thursday or perhaps even on Friday, all three watches will still be available for $395 on brewwatches.com. I apologize for this interruption and back to your regularly scheduled podcast. You know, John is, uh, I was at wind up hanging out with John when his last brew metric went live. And I think it sold out in a matter of moments and people were, some people were frustrated and you know, that guy really, uh, really cares. Like people were frustrated and he really took it to heart. So. Um, I know that he wants to make enough watches to satisfy people, but the demand for those dang things is just so high that I don't know that he practically can.
Andrew	Yeah. I know. And I don't know if he could ever make enough. Yeah.
Everett	Even, even with unlimited funds backing it, I don't know that he could, he could capture the, I mean, obviously there's some number, right. But, but whether that number is something achievable, I don't know. You know, it seems at some point like, you know, you take a short term loan or something. I don't know. You know, no, no, I've been in trouble recently for judging other people's business practices.
Andrew	So, and we're going to judge John hard tonight. So buckle up, John, let us tell something to do. These watches are killer, man. Great colorways. And I, and I've said it before, I, after, after the retro Matic came out, I, I kinda, I was a little nervous for what would come next. Uh, cause I didn't see really the direction because all of his designs are so unique. Uh, they're all really well thought out. They're all really well balanced. They're, they're neither familiar nor novel. He he's found this really magical design language and I wasn't sure how he was going to continue it.
Everett	It's sort of a retro magical design.
Andrew	Yeah. And the metric came out and I was like, Oh yeah, no, there he goes. He did it. Way to go. Nothing I ever would have expected. And I absolutely love it. It's that very, very vintage inspired, but very well updated. And the colorways that he now has are terrific. So he's got a steel dial. Blued hands? Yeah, they're blued. Or maybe blue. Doesn't matter. Blue hands. He's got a blue dial. A navy, which is nearer to black. The green, which is a really, really pretty, like, jade, emerald-y, metallic green. And then the retro dial, which kind of reminds me of Pac-Man.
Everett	Yeah, the retro dial's cool, man. The retro dial is something else. Of these, do you have a preference?
Andrew	Retro. All retro all the way. That's a great color scheme. Yeah.
Everett	You know, I think that my favorite may be the navy dial. Do you think? I do think. Yeah. Something about it just sort of Screams at me.
Andrew	Um, yeah, it to me is the most. Espresso timery appearing. I don't know what about that color scheme just screams smooth jazz and a single shot of espresso and like as poorly lit sort of damp day, but like poorly lit like candles flickering room. It just looks like a... Yeah, this looks like Coffee House, man.
Everett	Dave Brubeck riff. Yeah. Yeah, so that's the Brewmetric. Check them out. You can't buy them.
Andrew	Maybe again soon. John does a good job announcing when he's going to have inventory.
Everett	He seems to pretty much always have something in stock or coming back.
Andrew	You can get some... blue, black, or burgundy retro magics right now. You can also get the 8-bit brew.
Everett	Yeah, that's the retro graph, but like a sort of 8-bit, unsurprisingly, motif.
Andrew	Which is fun.
Everett	Sort of NES, coffeehouse vibes. Or perhaps even Atari. Well, good. Enough for that. Enough.
Andrew	Make more watches. So that we can buy them.
Everett	So we've got some big news tonight. Uh, and, and we're going to tuck it in here. We're going to tuck it in, slip it in. I think it's what you're looking for. Sneak it in. Um, and there'll be some links in the show notes. Some of you guys are going to have questions. Um, but this is a big deal for us. It's, it's a big deal for watch clicker as an organization. It's a big deal for, for Andrew and I as, as, uh, you know, our podcast project that we started well over three years ago at this point. Um, we have our very first sort of sponsor affiliate type relationship. And from, I believe that this is also the first such type relationship for this brand. So some of you guys will know one of our very favorite brands in the world is notice watches for, for any number of reasons, a, we love the watches. B, we love Wes and Colin, uh, super good dudes. Always, always sort of been willing to come on and talk about whatever, whether it's their watches or even not their watches. Um, we have, uh, we have signed up with Notice as their very first ever affiliate partner. So what that means is starting today for you, if you use the code Clicker, C-L-I-C-K-E-R, just like you'd expect. At checkout on the Notice website, you will save 10% on any purchases. We do get some money from that. Yes. This is the important bit of this.
Andrew	This is a win-win-win all around.
Everett	And I think that some people are not going to like this. And, um, you know, obviously that is sort of part and parcel with this kind of arrangement.
Andrew	Yeah. Feel free to not use the code. Feel free to pay full price.
Everett	We, you know, no part of this includes any onus for us to be nicer on a notice watch than any other. In fact, I'm reviewing a notice watch right now, and I've got some things to say about it. I love the watch, uh, but I've got some things to say about it. So this is, there's no quid pro quo, there's no pay to play. Um, but because notice is such an awesome company, um, they do offer that for, for organizations like us. So I think it's important if you have something to, to ask about this or any questions, go to the notice website, link will be in the show notes, read what they have to say about it. We are more than happy to take all of your questions about this topic as well. Um, But yeah, that's exciting. I'm super pumped about it. I think both us as an organization and Notice, both Notice and us are a little, neither one of us really know how to talk about this yet because it's brand new for both of us. So yeah, more to come on that, I guess, or maybe not. But if you go to the Notice website right now until through February.
Andrew	Yep. So two, well, almost two full months.
Everett	Almost two full months. enter clicker at checkout, you will receive 10% off any watch in the store. So that's roughly a 40 or $50 savings depending on what you're buying.
Andrew	Yeah. It's awesome. We're excited about it. We're pleased to be able to be in kind of a collaborative partnership with a brand that we know, we know we like, we believe in and, and fits into right into what we're doing here.
Everett	Right. What right into what we've been doing since the beginning. Yeah. If it was a Rolex deal, it might be less sensical.
Andrew	Yeah, probably wouldn't make a whole lot of sense. But we're also excited to get you a discount on some watches.
Everett	Discount on watches.
Andrew	So that being said, we should perhaps dive into The meat and gravy.
Everett	Meat and gravy. Are you feeling nervous about this topic at all?
Andrew	I am a little bit and I told you in my text, I don't know shit about shit. So that's why I'm a little nervous about this topic. I'm also nervous about this topic because it's new. It's a change of the landscape and we're going to sit here and we're going to make some predictions that are inevitably going to be wrong. We're going to wonder about things that turn out to be nothing burgers, but I think this is a topic that needs to be at least on some level addressed if for no other reason than as a PSA. Yeah.
Everett	And, and we need to say right now, um, nothing you're going to hear, nothing you're going to hear in this episode is or should be construed as legal advice. So, uh, I ethically speaking, have to say those things, right? Because I, as some of you guys know, I am an attorney and I practice this type of law even. With that said, you should not be getting legal advice from a podcast.
Andrew	Especially a watch podcast.
Everett	Which is, so although I am legally qualified to talk about these things, This is not really my main practice of law. And to the extent if I were practicing directly in this area, I would be working side by side with the CPA. So even if you hired me to be your lawyer, I'd say we need to bring a CPA in to be part of this conversation and help with these decisions. So all that to say, take everything you hear tonight with a grain of salt and make your own decisions. And please, for the love of God, utilize professionals to the extent you're making decisions about your finances, your taxes, et cetera. Some people don't. Um, and, and that's fine, right? Uh, it's sort of written into our legal system that you have the right to do these things to yourself. With that said, I'd strongly recommend if you're dabbling in the things we're going to talk about tonight, you get a lawyer and, or a CPA to help you make these decisions, at least for a consultation. So in 20, 21 Congress passed a, I think it's called the American recovery plan.
Andrew	Yeah. ARPA the American recovery plan act or something like that.
Everett	Yeah, that's right. So shorthand is ARP or ARP. Um, but basically what this is was, uh, a series of sort of stimulus type, um, provisions, uh, money and other tax code reliefs. for individuals and small businesses that have lower income or slower income or less productivity related to the COVID-19 pandemic. And sort of as a weird aside to the ARP, there's this kind of quiet little provision that not a lot of people were talking about until January 1st, where they required basically third party payment apps. So that includes PayPal, Venmo, Cash App, uh, but also Etsy, eBay, any sort of what we call PSEs, but payment, payment support, uh, companies basically. Um, it changed their reporting thresholds. They're reporting to the IRS threshold for transactions. So in the olden days in the wild west, um, Basically, PayPal didn't have to record, report anything to the IRS. So 20,000 bucks was the threshold. So if you're doing more than $20,000 in PayPal transactions, you know it and you're aware, but, but basically everybody else.
Andrew	Is that a single transaction or is it in the aggregate?
Everett	So the, the old recording guidelines, reporting guidelines, excuse me, for, uh, most states, and it wasn't true for every state. I think there was like five or six outliers, but most states was 20,000 transactions and italicized and 200 transactions. So $20,000, 200 transactions, which is just a ton, right? Yeah, that's a business. It's a business. They've changed it now to an incredibly low threshold. So $600 over any amount of transactions in a single year. So if you receive more than $600 via PayPal in a single year for goods and services, you PayPal, Venmo, whoever it is, eBay, Etsy, they will issue a 1099K. They'll send that to the IRS and you'll get a copy of it as well. So now the IRS will have a report that you made income. Gotcha. Yeah, yeah. Now they don't do this with friends and family transactions and And so I think people heard this and the initial reaction that everybody had was, well, if I'm just, if I'm going to sell a watch to someone, I'm going to sell it as friends and family. I'm not going to do any more goods and services transactions. I'll tell people they can look at my history, my reputation, and they can buy it as friends and family. And, and that I think theoretically will serve the purpose of avoiding this 1099 K reporting.
Andrew	So is there a drop down on these platforms to say friends and family or?
Everett	Yeah, there there usually is you select it when you make the payment. So now I think that that is a that's a practical solution to this. And I think a lot of people will do that. What I'll say, and I'll just say this one time, because I don't want to make any accusations or make anybody feel bad about what they want to do. I think that there is at least some risk that if you were to sell a watch to someone that you didn't know and require them to say friends and family, that one or both people in that transaction are technically committing tax fraud. So, uh, that's not an accusation. I don't know the facts of your situation. Don't at me, but just something to think about. That's at least a possibility. So, so be aware. That's all I'll say about that.
Andrew	And thank you for joining us. Okay, so we've got, we've got this friends and family drop down option, which is basically, which is covering, it's the umbrella of what Venmo was kind of originally, or Venmo and Cash App, all these platforms were originally intended to do of, hey, you got dinner, I'm gonna give you, you know, the 20 bucks I owe you. Everett's gonna cash out me the $4 he owes me. I think maybe live just to demonstrate this, this, this practice. But that's all under this protected umbrella of
Everett	friends and family non-taxable um yeah i'm paying you back for for paying for dinner reimbursement type that is a true friends and family transaction yes yeah uh with that said fantasy football losses and winnings and if you were to post something on craigslist that person came over and said hey i really do like your segway scooter or whatever you said well it's just 600 bucks, and they PayPal'd you that, and you said, but it's got to be friends and family. I don't, again, this isn't really my area of expertise, but I think there's at least some risk that that could be a fraudulent characterization.
Andrew	What is the risk out of a fraudulent characterization? Beyond that, or is there any?
Everett	What is the pragmatic risk?
Andrew	Yeah, if it's beyond that, beyond just a, like, Oh yeah, no, we're friends. He had a beer at my house. Or is that what it's going to come to when people make Craigslist purchases, they also share a beer to become friends and family.
Everett	And it's, you know, yeah, practically speaking, I mean, it's case to case. I would never want to say, you know, you have higher, low risk in that regard. I think if you got audited and they, you know, and someone found out that transaction or, you know, there's any, any number of ways that the appropriate authorities could find that out it as unlikely as it is, I wouldn't want to have to try to explain that.
Andrew	So that's that's the risk. The risk is simply being audited or something coming up. There is no other. It's not like that's right. The person has access to your bank information or anything. I mean, people say we're going to make it a friends and family transaction. It's it's a purely quotational.
Everett	As a buyer, you've got as a buyer, you've got quite a bit less protection with friends and family purchase, too. So that's something else to think about.
Andrew	Interesting. Well, is that.
Everett	Um, I think there's lower fees and they just don't support it the same way. They assume as a friends and family purchase that there's not going to be returns and that sort of thing. So, um, if it's goods and services, then you initiate the, the like sort of PayPal buyer protection process. So, you know, you, you pay someone a PayPal, you don't get what you're supposed to get and you can say, Hey PayPal, I didn't get this thing. Yeah. But if it's friends and family, you don't have that. So. if you're sight unseen buying a watch from someone, um, just realize if it's a friends and family purchase, you don't have those same protections.
Andrew	And if that person lists it, say is like brand new in box and they get it and there's maybe a scratch on the case, you're maybe at their mercy as opposed to the mercy of the governing body. Yeah.
Everett	And, and that's sort of, that's sort of the, you know, this is really kind of an aside because I think, The reason that most people who have expressed concern about this thing to me are worried about this is not because of that, right? I'm not, they're not worried about, they're not, nobody's worried about committing tax fraud. Um, because that's not the kind of thing that people worry about. I think what more people are worried about is, oh my gosh, I sell 10 to 20 watches every year and now I'm going to have this 1099. What am I going to do? Uh, I, I talked to our firm CPA today about this because I was kind of trying to sort this out. Well, you know, practically speaking, what do you, the individual do, um, when you get this 1099? Uh, first it's important to note, there are no changes in the taxes that you're required to pay as a result of this reporting. So you were not required before this new rule. This change to the internal revenue code, that's actually what's happened here. You were not required before this rule to pay taxes on the sale of personal property for a loss, right? Most of the time when you have personal property, you sell it for less than you bought it for. It's just like the way it goes, right? I bought a skateboard, I used the skateboard, I sold the skateboard.
Andrew	To goodwill for free.
Everett	That's right. For less money. Um that is that's the normal way and you're not required to pay taxes on that even if you get the 1099k. You however are required to pay both before and after this rule change required to pay taxes on the gain you get from selling personal property for more than you bought it for.
Andrew	What's the timeline for it to phase out of it being like capital gains tax? Yeah, it's a house you live in it for two years and you're you're absolved of that on personal property, personal property, there's no timeline, right?
Everett	So like, if you bought an air cooled Porsche for 8000 bucks in 1998. And that air cooled Porsche is now worth 65 or $70,000 quite a bit. You've got a, you know, $60,000 gain. And there's no Um, there is no, you, you drove it for two out of the last five years or, or whatever rule to allow you to avoid that capital gain. That is a taxable gain. Every cent above your basis that you make on that thing. Same is true for watches, right? If you buy a John Mayer G shock from Hodinke on day one for whatever they are, 180 bucks and sell it on day two for Sell it on day one, the afternoon of day one. 400 bucks. You've got a $220 gain. That's increase in the basis and that's taxable.
Andrew	If you buy a $5,000 Explorer and you sell it for $12,000.
Everett	Some taxes. That's taxes. That's right. And so that's not changed here. That's not changed. What has changed is the IRS's awareness of the transaction to the extent you use PayPal or Venmo. And, and I don't think it's that that's made people frustrated, because it's like, okay, well, it's a taxable event. They didn't know about it before, and now they do. What's made people frustrated is this feeling, and justified or not, this feeling that I think a lot of people have that there's no way I'm going to be able to track this such that I'd be able to satisfy an audit. I think that's really what people are fired up about here. And I think for a very, very tiny fraction of people, that may be true-ish. But when I say a very tiny fraction of people, I mean, I am talking about almost no one, right?
Andrew	People who are watch dealers but are not watch dealers.
Everett	We're talking about people who maybe buy and sell 50 to 100 watches a year. Those people are going to have more trouble. But this isn't rocket science. So what you're required to pay is, there's a couple of things that have happened here, right? So first, let's just know that you used to be able to write off losses from a hobby. And they changed in 2017 with the tax, what was it? Cut Act? Yeah, whatever it was. Yeah, they changed that. deduction. They eliminated that deduction for seven years. So from 2018 to 2025, so unless that gets, unless that elimination gets renewed beyond 2025, that'll come back, but we don't have it right now. So you cannot deduct losses from a hobby. So that means if you buy and sell 10 watches and you sell nine of them for a loss, so you've bought a whole bunch of micro brands and sold them for 50 to a hundred dollars less a piece and you buy one Rolex, and sell it for $1,000 more. So you've got nine watches for $100 loss, $900, and then one Rolex, we'll just say for a $900 increase. That's a net zero. But you cannot deduct hobby losses anymore. So you cannot net that out. You've got nine watches at a loss, that's a zero, it goes away. It's big nothing, yep. one gain of $900 and you pay tax on every bit of that $900. Sucks to suck. That's right. And that is, that has nothing to do with this rule. That's a different rule. Um, but it's all of a sudden very, very important, but that's it. That is everything you need to pay taxes on. So how do I account for the other, you know, I've now gotten this $10,000, 1099. Um, I'll tell you too. I'll tell you. So I don't think it makes sense for us to get in the nuts and bolts, but I'll just say this. I think if you're selling a watch, you should in a ledger, try to find what you paid for that watch. If you can find the actual receipt, that's the gold standard. Go, go through your eBay, go through your Craigslist, go through your Reddit, go through your PayPal. That's right. Go through your PayPal, whatever you paid for that watch, print up the closest thing to a receipt, you can, if you can not find a receipt for that watch, let's say you bought it, wind up and you paid cash. You can't remember what you spent, put the closest, your best, most reasonable guess. That watch is a $450 watch. You got a 10% discount cause you bought it at wind up and the guy was really nice. That's a 400 and you know, whatever, $10 purchase. And you just put purchased on such and such date for $410. And then when you sell it, If you sell it for less than that, there's no gain. There's no taxes. And you need to record that personally. You need to privately, for your own posterity, have a record of that on both ends of that transaction. Because you've got $400 basis, you've got $400 sales, zero, zero, there's no profit. Receipts, the better you can, the more accurate you can be, the better. But you need to be right now, any watch you sell, any, not just watches, right? Pocket knives. scarves, whatever it is that you collect and sell, you need to be tracking those things. Because when you get audited, you're gonna have to prove that. There's also, what do I do in February and March when I'm preparing my taxes? How do I actually fill this out on my 1040? And there's a few ways you can do this. So let's just assume you're not a business. You're not going to be a business. There's some of you that, you know, that might be a reasonable thing to do. You don't have to be an LLC or a corporation, but you may want to consider treating this like a business and trying to make a profit on your watches. I'm not suggesting you try to make a profit, but it's something to at least think about because that takes care of a lot of these problems. But if you're just a Joe Schmo, there's a couple of ways you can account for this on the 1040. I'm not going to get into the details on this because I'm not a CPA. And when I talked to my CPA today, my CPA was like, I don't really like this and I don't have a good answer for you. Um, that's encouraging. Yeah. So she actually thinks that at some point in 2022 there'll be guidance issued on this because she said it was, this is going to be a huge problem. Every single CPA in the country is going to be like, I don't know what to do. And the IRS is going to get a rash of these things. And if people aren't reporting them the same way, it's going to be a mess. So there's, there's a couple of ways to, typically you'd report 1099 income on your taxes in schedule one, in schedule one, and then you just put a comment on it. So if it was a 1099, that wasn't actually like a reimbursement or something, um, You'd just comment, this is just a reimbursement. This is an income. It's a reimbursement. You'd put a comment and you wouldn't pay taxes. Same thing is true here. You can do it that way. And in fact, I suggest most people will probably do it that way. They'll just enter the full amount, list it as erroneous, you know, sale of personal goods, no income. My CPA also, her preferred method is to do this by way of a Schedule C. So just separate miscellaneous Schedule C income. You still can't deduct your losses, but you can certainly pull that back as to your basis and any amounts of money that weren't a profit sale. Okay. I can dig that. Yeah. So I, I think two things. So, so, so just, I'm sorry, you were about to say something. I had a follow on question, but continue. I think two things are going to happen. One, I think that the IRS is going to issue guidance and two, I think apps like PayPal or not PayPal,
Andrew	What's the... Cash app and Venmo and... No, TurboTax is what I'm thinking.
Everett	So Intuit is going to be prepared a year from now when everybody and their mother is like, what the fuck do I do here? So I would say keep records. That is the sole... That is all you need to know right now. Keep records and just know if you sell a watch for a profit, that's taxable income. Everything above your basis is taxable. deal with the reporting part next January. You've got a year before you have to worry about this.
Andrew	This also creates a cool opportunity for a collection journal. When I was smoking a lot of cigars, I used to have a, I got a nice journal and I lined out a place to tape down the band.
Unknown	Yeah.
Andrew	And then I, Like wrote when, obviously I had my date, what I liked about it, what I didn't like about it. If I drank something with it, what I drank with it. And I just had this journal of pages and pages and pages of, of cigar bands, bands, rappers. They're not rappers. Yeah. Band. I think that's right. Labels.
Everett	Everybody knows what you're talking about.
Andrew	Yeah. But I think that this is a cool opportunity for people who do have a quite a bit of watch transactions. to do something like that in the way of a sentimental value, but also have a really very real tangible, I need this for tax purposes. Yeah. And I think it'll be interesting to see, number one, if this sticks around, because this could turn into a greater shit show than the IRS is prepared to handle. And see if they increase the threshold, because this is a very low threshold. I think there are a few people who use these reimbursement and payment apps who are not going to exceed $600.
Everett	Yeah. No, I think that you're going to see, you're going to see a bit of a, of a, I don't know, bottleneck perhaps next tax season with people trying to figure this out.
Andrew	And I wonder if we're going to see an increase in brokers and consignment sales and, and centralizing of sales so people can try to wash it like that. Get paid by a check as opposed to a payment app.
Everett	Yeah. Yeah. And well through a watch seller, it's a really, I mean, so that company may have to issue you a 1099 if you exceed their threshold. So, so this ostensibly this doesn't relate to this law that we're talking about doesn't relate to, like, for instance, a brokerage. But they do also have reporting requirements. The thresholds are different. So it may change the individuals. But I don't think that's how most people engage with the hobby. So at this point, maybe that's how maybe we segue into that. Do you do you think that this is going to have any effect on the hobby, Andrew?
Andrew	I think it's going to turn into a big nothing burger. I think people who sell 25 watches a year are going to be frustrated by it. I don't think it's going to affect their watch consumption and divestment. I think people this year, I think maybe we'll see a slowdown. What I'm hoping to see is a little bit of controlling of that purchasing of limited edition runs and then a quadrupling of the price, the moment that they're sold out. Yeah. Because people don't want to pay taxes on that because they're suddenly going to be on the hook for that capital gain. I'm wondering if we'll see some stabilization in the, in the secondary market.
Everett	Yeah, I think, I think that's a real possibility actually. Um, I've, I've heard some, I've heard some folks, Agree with that sentiment. I've also heard folks say absolutely not. This is not gonna have any effect on those people I don't know. I don't know you know Whether or not the general population will a follow these rules And and be whether or not it will Temper that expectation do those people just say okay? Well now I'm a business. I'm making money, and I'll just pay taxes and mark up those secondhand prices likewise. I don't know.
Andrew	Yeah, they'll pass on the cost to the consumer.
Everett	Yeah, I would like to expect that those prices, you know, it's always supply and demand, right? All of these prices, all of these day two or afternoon of day one prices are more or less sort of set by demand. There's some arbitrary stuff That happens in the first few hours, but, you know, within, you know, 72 hours or so, those prices are kind of set in, you know, like we know how much the, for instance, John Mayer G-Shock costs on day three or whatever, because everybody's buying them and selling them for the same amount. So does that number go down? I think it might, I don't have any really good researcher data to back that up, but, but I think it might, I don't think it'll be as big as. It's not going to go down to zero. No, it's not. Yeah, you're not going to be buying it at cost, but you may just have fewer sort of casual lucky buyers interested in that transaction because now all of a sudden it's a giant pain in the ass. If it's 10% fewer of that type of person, does that make a difference on the price? I suggest it probably does. I think there'll probably be a noticeable decrease. in scarcity and thus in the end of the end of the day price, because more people will be able to get them at the register or register the point of sale, whatever, when the release happens. And there'll be fewer people dying to have one. And so the people that have one to sell it, we'll have fewer buyers. And, you know, this is supply and demand economics, right?
Andrew	I think there's a risk though, that there are, that the people who are in it for business, who are in it for that that retail markup who are operating as a business, get more of it. As opposed to the casual buyer who's like, I mean, I got lucky. I bought one, you know, I'll wear it for a few weeks and I'll sell it for, you know, however much and make a little bit of money on the top. I think those people will be less inclined to buy and flip than the business.
Everett	The person who buys to flip, it'll just be shifting the middleman. Yeah. I think to the buy to flip people. Yeah. Well, we'll see. I mean, time will tell on all of this stuff, right? But yeah, this is a pretty serious thing for a hobbyist right now.
Andrew	I think it's maybe more serious than people give it credit for. Because everyone's already talking about the loopholes and the ways around, as opposed to taking an honest look at the actual repercussions.
Everett	Yeah. Well, I guess I want to say one thing on that, because I think it's both more serious and more impactful and less serious and less impactful than the conversation. I think for the average buyer with pretty simple records and a few visits to the Intuit forums, you will be able to figure this out. You'll have little to no additional tax liability and your audit risk will not substantially go up. It may go up a little bit. But I think your overall audit risk will not go up incredibly. So for most people, this is going to have a very low effect. With that said, you probably do need to start taking better records. So the person who will get sideways on this deal is the person who does nothing. If you are taking good records, you know how much you paid or approximately how much you paid, right? That's going to be a problem for people. Like, I don't know what I bought this SKX on Reddit for 10 years ago. I don't have any clue. You know, you're going to have to make a guess. It's going to have to be a reasonable guess. And there is a potential liability there, a potential underpayment. If for whatever reason, the IRS finds that you can't substantiate the price you paid because the price you said you paid wasn't reasonable. You know, if you say, I bought an SNK in 2012 for 300 bucks. You're lying. And you under report your income on that because you've now sold it for, you know, whatever. That could be a problem for people. So as long as those numbers are reasonable and, and, and look, the IRS has to be able to prove with some burden of proof that you under reported your income. The onus is on them, but it will very much in that audit or at that time feel like the onus is on you.
Andrew	And don't ruin it for all of us. Right? Don't, don't be the one to make the case law.
Everett	So as long as you keep good records, I think most people are going to be fine. It's the people who don't pay any attention that are going to get sideways on this.
Andrew	Yeah. And then have a, have a bucket load of transactions. and get themselves into a position where there's $10,000 of poorly reported income that they can do nothing to substantiate.
Everett	And so I talked to a few people earlier in the day today, and I said, well, if there's no income, you don't have to report it. I've revised that. You do need to report it. You need to account for it. So if I told you that when we spoke earlier, that's not true. Or if you heard that, whatever it says this, that's not true. You do it. So I met with my CPA and she said, that's a possibility. You could do it. There's no actual income, so there's nothing to be penalized on, but that's not, that's probably not the best solution here.
Andrew	It looks like you're hiding something. Yeah, that's right.
Everett	That's right. Yeah. Uh, yeah. So new tax rules, keep records. That's it. Keep records. Know how much you paid for it. Know how much you sold it for. have records if you can, PDF your, you know, screenshot and PDF your transactions, right? Yeah. You should be doing that anyway. Yeah. I mean, I can, I can tell you right now, the very first watch I ever bought, I can tell you exactly what day I bought it, exactly how much I paid. Cause I bought it via Amazon.
Unknown	Yeah.
Everett	So, so that's not going to be true for you for every watch. Someone said to me today, well, I've, I've bought a bunch of custom watches. There's no records of that shit.
Unknown	Well,
Everett	Maybe not. Check your PayPal, check your transactions, try to remember what you did. And if you can't, make the best guess you can. You know, find Reddit posts, make the best. But if you're selling something, do everything you can to know with a reasonable degree of certainty how much you paid for it. And that's it. And how much you're selling it for. Well, that's obvious. Yes. Yeah. Yeah.
Andrew	Yeah. Because it's easy. This is the easiest problem you could face.
Everett	One more point on this. If you are selling things, it probably makes sense for you to sell via the same service. So if you're gliding between Cash App and Venmo and PayPal, you are gonna get three 1099s to the extent you exceed 600 on each of those.
Andrew	And if you're gliding between the three selling watches, you will exceed 600 in each of those. Perhaps.
Everett	Perhaps. So something to think about. And it's, there's maybe going to be some competition between those companies there. You don't have to worry about this if you're buying, right? You just have to grab your receipt and put it in your little ledger. But if you're selling, it may make sense to dedicate your sales through one purchase. Platform. Through one platform. Yeah. I don't really have anything else to say about this. We've kind of droned.
Andrew	Is this going to affect the way you sell watches?
Everett	Me? Yeah. Zero effect on the way I sell watches. Why? Because I don't sell watches. Samesies. Yeah. No. And, and so that's a little bit, uh, that's a little bit flip, but you know, I think most people are close to where we are. There's, you know, uh, maybe a hundred people that we interact with or have interacted with in the last three years that this is going to have a meaningful effect on. And, and, you know, maybe a thousand people in our community, which is, feels like a lot. It's a drop in the bucket. But this is not a huge amount of people this will affect.
Andrew	Just think about all those Instagram influencers who are getting Venmo to their account from dudes. Think about how shitty their day is about to get.
Everett	Yeah. I mean, like these people that go to Goodwill and buy like All the backpacks, backpacks and dresses and, you know, that's who this is really targeting. That's, that's who's really, you know, gig economy folks, people being paid as, you know, side hustles, Etsy resellers, folks that have not up to now had to report income. Um, I I've read some estimates. This is like an eight and a half billion dollar anticipated gain. Um, which means there's a lot of unreported income out there.
Andrew	A lot of, I mean, think about it. Everyone has seen all the videos of people going to TJ Maxx and to Marshall's or Ross or take your pick of, of store and then selling it on their eBay store for four or five times what they paid for it. And that's all coming through PayPal or Venmo and is wholly unreported business income. So this is not a nothing burger. It is for us in the watch world. Yeah. And in the way of consumer transactional person to person sales. Yeah. Just be responsible. You're not who they're looking for. Big Brother is looking for someone and it's certainly not you. Andrew.
Everett	Other things. What do you got? I got another thing.
Andrew	You always do. Well, sometimes I don't. Sometimes I'm looking it up while I say I got another thing. My wife for Christmas got me a cleaver knife. And it's from this company called Kalina. K-O-O-L-I-N-A.
Everett	Kalina.
Andrew	Yeah. And I, so I'd seen their ads. You see them on, if you haven't, after listening to this episode, you're going to start seeing them on social media platforms. Um, but they do all these kind of really big sales and I was always unsure of them. Cause it's like, Oh, it's, it's like a, you know, this knife is $280. It's on sale for 90. They are all the whole line is supposed to be, um, Serbian, like traditional Serbian cutlery inspired. Supposedly handmade. Honestly, I had kind of, I never bought one despite their low price because I was like, there's got to be something. They just, they just can't be.
Everett	Did you say Culino with a K? C. C. Okay.
Andrew	I heard K. I may have said K, but it's with a C. But I always just kind of had low expectations of them and I obviously never talked to my wife about it, but then she, she got me this because she saw the targeted ads and Uh, she got it and I was, I was like, Oh, awesome. I'm going to finally have to try this out and had not have had to have a guilty conversation of like, I kind of want to try this thing. It might be trash, but I might like it. Who knows? Turns out I like it. The steel is, and I read quite a few reviews since getting it, which is definitely not the time to be reading reviews. Um, cause there's a lot of negative reviews out there, but I think a lot of the negative reviews come from people who just want to shit on things. right? Because reviewers are inherently shitty of things that they're a little bit suspicious of. This is by no means a world class quality knife. It's certainly not hand forged. Just can't be.
Everett	Yeah. And it definitely has that appearance, right? They definitely want you to think that.
Andrew	Yeah, they call them handmade. There's got to be some component of hand making for them to call it handmade, I assume. But I don't know.
Everett	Yeah, it says carefully handmade using ancient techniques by master artists and bladesmiths. That's a lot of very specific marketing language.
Andrew	So it's a big statement. I don't think I accept it. But what I will say is that the steel. Is of sufficient quality to sharpen and hold an edge. From what I can read, it has to be carefully maintained. You got to oil it and hand wash it and care for it, which you should do because it looks like a carbon steel. Yeah, it's a decent carbon steel. What I really liked about it is that it's one of the best balanced, real utility knives. I mean, a cleaver's a no bullshit blade, and it's hard to get a comfortable balance in it. It's a full tank knife. It's a really comfortable handle, nicely balanced. I've used it for a variety of tasks in the kitchen that a cleaver is not intended for, but I wanted to put the the blade to materials. It's holding its edge nicely. It's comfortable in the hand. And if you're looking to kind of try out some new, this is now for me a good test it brand. If you're looking for a blade type and you're not looking to drop several hundred dollars because that's about the price you should be looking to pay for truly high quality, non-Dexter Russell, non-Hugs and Kisses blades, This is I'm I'm down with it. Yeah, this was a good flyer that my wife took and I think she maybe thought she was getting killer like a screaming deal on something that should be 80 to $150 and not $275. Yeah, I'm good with it.
Everett	Yeah, I think that I think it does have that it does have that look to something more expensive. They do describe the type of steel they don't give you any specifics but It's made with good steel. It's obviously carbon steel, carbon steel. If you've never used carbon steel, really nice to cut with, usually easy to sharp. So.
Andrew	Easy to sharpen, holds a good edge. Yeah.
Everett	This looks like a nice, it looks like a nice, a nice purchase. And the price is not terrible.
Andrew	No, it's 86. So $89.99 shipped. The shipping disc did seem to take a while. I don't know when she ordered it, but it came like about a week after Christmas. Yeah. I think they've got a good line of functional blades. They kind of mark it as like this utility that you can buy leather sheaths for them. I think the intent is for them to be like your go-to outdoors mini knife. Sure. Um, it looks like a kitchen knife to me and not a, no, but if you look at their whole lineup of, of knives, I think they're all kind of, I mean, they've got their camping collection and, um, but I, I was, I was, very pleasantly surprised on what I would call an Instagram brand, what the, what they're delivering in there.
Everett	And it says, it says designed in Europe, which means it's almost certainly made somewhere else in China and Asia. Yeah. So, so they're, you know, they're able to take advantage of those lower production costs. Yes. That's cool. I'd be curious to know more about what they're actually, how they're actually making these.
Andrew	Yeah. And I'm going to put it through some more, some more trials and I'm going to try to process some animals with it this year and, and see, but it, it just my, my couple of weeks of using it in the kitchen for most tasks. I mean, there's a few things that I use it. I've been using my chef's knife for just because that's, this is just a poor tool for that job, but yeah, it's, it's held up. And for an Instagram brand, it's pleasantly surprised. Coolina knives.
Unknown	Coolina.
Everett	Super cool. Coolina. I've got another thing. Do me. So I, I finally did it. You know, we, we talk about watch people are also knife. People are also light.
Andrew	People are also, yeah, we're serial hobbyists. It's a, it's an addiction. We all share it. It's a problem. Hi, my name is Andrew and I am an addict to things.
Everett	So I very much fit in that mold. Uh, I finally decided I'm going to build a mechanical keyboard. I've used a mechanical keyboard for many years. I purchased a keyboard probably in like 2016. It was kind of cheap. I think I probably paid a hundred bucks for it. It was a fully built Cherry Switch. You know, Cherry's kind of the old school maker of switches and, you know, one of the companies that was kind of responsible for the keyboard craze. Um, and so I have this mechanical keyboard. It's not, I don't love it, uh, but it's fine. Um, but I didn't build it. I swapped out some key caps on it and, um, yeah, I liked it, but I was like, you know, this isn't really, it's a big, like it's a big keyboard. It's got a 10 key, you know, mechanical keyboards oftentimes are small. They're either. 10 keyless or even smaller, 60 or 65% are the terms that get used as you get smaller and smaller. They get rid of more and more, you have fewer and fewer keys. Like a stenographer keyboard. Yeah, that's right, you know. And so I was like, I'm going to do it. So I started researching probably December, like what do I want to get? what brands should I be looking at, watching a bunch of YouTube videos, you know, uh, and right around Christmas, I was, uh, my wife was like, Hey, I haven't really gotten you a Christmas present. What do you want? And I was like, well, I was about to pull the trigger on this keyboard stuff. And she was like, well, let's do it. Let's do it. That'll be your Christmas present. So of course, this is all Aliexpress. I've bought everything, you know, you can buy mechanical keyboards have sort of in the last five years really boomed like like other things, watches, knives, etc. And what was just a few years ago really a craft industry has now become, you know, hugely widely marketable. There's people making extremely high-end keyboards, cases, PCBs, everything. And with that, you've got the side industry of like really inexpensive things that are available via China. There's some clone stuff. Um, so you, you know, if you care about that, it's something to be aware of, but you can find really cool, good stuff. So is there all wood options?
Andrew	I think there might be. Yeah. It's gotta be a wooden key and cover set.
Everett	So I went with a 65% keyboard. uh, which still, you still have arrow keys. You still have like a little page up, page down, uh, set on the right side, which I need for my work. Um, but it gets rid of, you know, you don't have any 10 key group. Um, there's also no vowels there. There's no F row. Yeah. Um, there's no till day till day.
Andrew	You don't need a till day. You don't use that all the time. Why is that on every motherfucking keyboard? It's a whole key dedicated to a key that people don't use.
Everett	And so I went with that. It's pretty small. The one I have, it's a TM680 or a Tom680 if you look this up. It's a plastic, you know, they're pretty cheap. It's like 70 bucks for the PCB in the case. Of course, you have to buy your switches separate. You have to buy your key caps. You know, there's little parts that you can upgrade, stabilizers and whatever. I kind of went whole hog. I spent about $150 and today was the day. Today, literally before I came over, I put this thing together. Some people don't want that. I wanted that process. I could have spent not a ton more and got a keyboard that somebody else had built that I would just get shipped to me. But that's not fun, right? That's not what I wanted. I wanted to do this whole thing. So I bought switches. I had to go like figure out what switch I wanted. You can buy any switch.
Andrew	Is this the switch being the as actuated when you press the key?
Everett	Yeah. So there's so there's the way this works. You got a PCB and on top of the PCB you plug in a switch. Traditionally these things were soldered and a handful of years ago a few companies started making hot swap sockets, basically, which get plugged into the back of the PCB. And so you can take a switch and just sort of pull it in and out. It actually grabs the switch.
Andrew	No more solder. It seems silly that that's only a couple of year old technology for how long like.
Everett	Fuses have existed, that's just it's a it may be the technology may not be new, but I think it's sort of new to keyboards anyway. It makes really the process super, super simple. But, you know, you get a, there's tons of switches on the market. It's not like a few years ago where there was a handful of switches, you know, this probably, I don't know, 50 to a hundred readily available, different switches, actuation forces. Do you want to click, do you not want to click, you know, and you want to squeak. And the, and for me, the answer is, I don't know. So I kind of tried to figure out what I want. Um, yeah, and I put it all together and turned it on, everything worked.
Andrew	Did you have to use a map to make sure all your keys were in the right place?
Everett	Uh, I did have to use a photograph. Yeah, I did have to use a photograph. There's another, there's another nuance for me, which is that I use Mac and the key cap sets that you can get are all, you know, windy windows ANSI based. So, um, haven't quite figured out what I'm going to do with there. I'll have to get into the software and kind of map the keys out. But, um, yeah, yeah. So that's done and it's really cool. I'm really excited. It was one of those things where I got it all finished and I cased it all up and I started typing and I was like, ah, I get it. You know, um, just the sounds it makes and the way it feels. And even just looking at it, I was like, yep, I totally, I totally get this thing. And it was just a blast. The whole process was fun. Picking the stuff was fun. Didn't cost a lot of money. I mean, it's not for a keyboard. It's a lot of money, but, um, You know, because I think of a keyboard, I think of go to Best Buy, spend, you know, Office Max, spend 40, 50 bucks. So it's more than that, certainly. But at the end of the day, it's so much fun building.
Andrew	It's also a fully custom electronic product that makes it look like now in front of your computer, an eight year old belongs there.
Everett	Exactly correct. Yes, exactly correct. Yeah. So that's cool. Happy to show you pictures if you want. Just ping us on Instagram.
Andrew	You're going to see it in the backdrop of a lot of watch shots.
Everett	I imagine that could happen. Yeah. I, I, I don't know. I haven't considered that yet, but yeah, that might happen.
Andrew	That's certainly going to happen.
Everett	Your current keyboards in the, whatever. Uh, yeah, that's all I got, dude. Well, we're out of things. What a day. It's always a nice place to be like, yeah, we did it. We did all the things we were supposed to do.
Andrew	I always, I always lament a little bit when we, look down at our notes from like, well, we got to a thing.
Everett	Hey, so I just want to thank real quick before we go into our typical, uh, outro. I just want to thank notice for notice watch company for supporting watch clicker and supporting 40 and 20. They're the first ones that have done it. And it's an amazing thing you can right now, as of hearing this podcast, go to notice.com purchase any watch in their inventory, use the code CLICKER at checkout and get 10% off of that watch purchase. So you can and should do that. And thank you so much to Wes and Collin and Otis for, uh, for giving us this opportunity. And thank you for joining us for this episode of 40 in 20, the watch clicker podcast. Please check us out on Instagram at watch clicker at 40 and 20. Check us out on our website, right? There's a whole article about the things we've talked about today. So if you have questions, It's there in the article, check it out. If you want to support us, you can do that at patreon.com slash 40 and 20. We'd love to have you there. We've got a discord. You can come talk to us. It's how we get all of our money for Andrew's Christmas tree disposal projects. Very expensive. And don't forget to check us out next Thursday for another hour of watches, food, drinks, life, and other things we like.
Unknown	Bye-bye.
Unknown	Oh.