1099 for used clothing consignment

Forum|Forum|2 years ago
January 18, 2024
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I've been combing thru responses to similar questions.

I have a client with a brick & mortar clothing consignment shop.

I'm getting the impression that each "consigner" paid over $600 should receive a 1099 MISC. But I'm wondering WHY? There's likely NO GAIN! It's USED CLOTHING.

So I buy clothing thru ought my career at full retail over many years/decades. I retire. I consign my business wardrobe. NOT one piece is worth what I originally paid for it, even given in today's inflation. But I receive $625.00 in total. Again, that's NOT a "gain".

Can someone please explain this in a way that will satisfy my client who has to commit to handing a W9 to every human that drops off articles on the OFF CHANCE that throughout the year, they'll make $600+.

Again....................there's no gain on used clothing, so what's the catch?????

TY!!

Opus 17

Employee

The short answer is, because the regulations require it.

https://www.irs.gov/instructions/i1099mec#en_US_202401_publink1000276527

(Note that if the store is buying the items for resale, a 1099 is not required. But a 1099 is required for items sold on consignment.)

The longer answer is that IRS regulations assume all income is taxable unless the taxpayer proves otherwise.

Deductions from income are a matter of legislative grace and the burden of clearly
showing the right to the claimed deduction is on the taxpayer. INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992)

Each of your client's customers has their own individual obligation to keep accurate records and prove to the IRS, if audited, that all their items were sold for less than their cost basis. Your client can't assume that burden for them.