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when does this hobby become a liability?

  1. oddboy

    oddboy Zero to Grail+2998 In Six Months Mar 5, 2016

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    Yes, we're all nuts and spend way too much on watches.

    But is there a point at which there is risk of things like audit for selling watches? I don't sell many. Sold two last year, may sell one or two this year.. but some of them are over the magical $10K mark. Does receiving amounts of this size 'put you on a list'? Does this need to be declared as income or anything?

    I've certainly spent a lot, but haven't received as much and I'm curious.. (and I'm in Canada if that makes a difference)

    Any feedback or experiences to share?

    Thanks!
     
    Baz9614 likes this.
  2. al128

    al128 unsolicited co-moderation giverer Mar 5, 2016

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    waiting for the gator to pipe in
     
    oddboy likes this.
  3. YurRomeo1

    YurRomeo1 Mar 5, 2016

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    Well, I just got this from PayPal this week!

    "PayPal is committed to complying with its regulatory obligations, which includes ensuring that our customers are also in compliance with applicable regulations, such as Anti-Money Laundering (AML) regulations.

    Upon review of your PayPal account, we have found that you are operating or intend to operate as a retailer or dealer in jewels, precious metals, or precious stones. In order to determine whether your business meets dealer requirements for complying with Anti-Money Laundering (AML) laws and regulations, we need additional information from you."

    Wonder who is doing their reviews... :cautious: I definitely do not deal in jewels, precious metals, or precious stones.
     
  4. oddboy

    oddboy Zero to Grail+2998 In Six Months Mar 5, 2016

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    Interesting.. do you do a lot of high value transactions?

    Also wondering if it makes a difference using wire vs paypal. For high value items, I'd be asking for wire.

    Edit: though I know that wires over $10K are still subject to AML regulation and reporting.. I just don't know what that implies behind the scenes...
     
  5. YurRomeo1

    YurRomeo1 Mar 5, 2016

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    Yeah, many under 10K, but several over that per month. The thing is that watches, even when made out of gold or have diamonds do not count towards being a dealer as (definied by FinCEN) unless they derive more than 50% of their value from the metal or stones themselves.

    I sent them all the information and documents that they requested, which which was a long list that I know people that do it as a hobby would not have, but we will see what happens...

    Regarding wires, a lot of people prefer to pay with their credit cards for a variety of reasons. The fees just become the cost of doing business. I don't ask for wires unless I am asked if I would give a discount if paid by wire, which I do, but this is rare.
     
  6. Canuck

    Canuck Mar 5, 2016

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    I'm in Canada, as well. I just sold my Rolex Daytona Cosmograph model 6263, after owning it for 26 years. At my age, I decided that, should I leave this watch to my heirs, and they were to call someone about buying my collection, there would likely be a job lot offer on them all, by someone who recognized the Daytona for what it is, but lump it together with everything else. As to value, that Daytona has a monetary worth about equivalent to 1/3 of the value for my entire collection. I decided I could come close to realizing a decent price for it, where they might not! I haven't worn it for one year of the 29 I've owned it, and while it leaves a significant gap in my collection, I can live without it!
    I quit smoking 37 years ago, and I have far less invested in my collection than I would've spent on tobacco over those years. Liability? Not on your life!
     
    blubarb likes this.
  7. Kringkily

    Kringkily Omega Collector Mar 5, 2016

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    If you're doing more than 200 transactions a year PayPal will ask
     
    JohnSteed likes this.
  8. JohnSteed

    JohnSteed Mar 5, 2016

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    Good question Joel! I've been wondering about this, guess I will need to check with my tax guy. I like following the one in one out rule, so it really wouldn't (shouldn't) be a tax liability as I this I send out more cash than comes in, all told.
     
  9. Kringkily

    Kringkily Omega Collector Mar 5, 2016

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    Taxes are assessed at the time of sale if there is capital gains or regular gains. The final incoming watch would not counteract the profit already made.
     
  10. CdnWatchDoc

    CdnWatchDoc Mar 5, 2016

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    If you buy or sell something privately, the CRA will not take much notice. I am sure there is a limit to the price (i.e., anything over a certain price may trigger a look from the authorities) you can sell privately, as that money will likely be deposited somewhere. The US and other countries have limits to the amounts of cash deposited and thus a cash transaction, really in an effort to stop smuggling or drug dealing.
    Provincially, you may be cited for not charging/paying sales tax, but only if the buyer claims this as well.
    If you are buying and selling lots of watches, you could be seen as doing business, and for this you will need authorization, and go through all the usual business registration, etc.
    If you are importing without paying duties or taxes, CRA and Customs will come down on you hard. Anytime I have gone into the US to pick up a watch purchase, they question me about buying or selling Rolexs...not any other brand name.
    Is this a liability? Only if you let it get away from you, destroying your life...like any other addiction. "My name is P..., I am a watchaholic. My last watch purchase was 4 days, 3 hours and 26 minutes ago..."
     
  11. Tony C.

    Tony C. Ωf Jury member Mar 5, 2016

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    Sadly, you can be certain that governments around the world, and particularly the U.S., will continue to squeeze tighter and tighter in efforts to generate more tax revenues.

    Never mind that their crushing debt loads are self-inflicted – it will become much worse.

    Those who are paying attention may have noticed a recent rash of recommendations for banning large denomination notes from the likes of (the awful) Larry Summers and various bankers and politicians. The pretext is that large bills facilitate terrorism, and have little utility for the average person. The real reason is that TPTB want full control of your money, so that they can tax every transaction, and force you to accept negative interest rates, etc.
     
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  12. oddboy

    oddboy Zero to Grail+2998 In Six Months Mar 5, 2016

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    So if I sell one or two watches this year, each for over $10K, what do I need to worry about (if anything)? Income tax on any gain I've made?

    How do I need to track it or do I need to do anything to explain an incoming wire (likely from US) to anyone?
     
  13. CdnWatchDoc

    CdnWatchDoc Mar 5, 2016

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    So there is the Capital Gains rules in Canada; I don't know the details (that is why I hire an accountant), but if one sells stock and takes that money out of the portfolio, "50% of realized capital gains are taxable in Canada at an individual's tax rate. Some exceptions apply, such as selling one's primary residence which may be exempt from taxation. Capital gains made by investments in a Tax-Free Savings Account (TFSA) are not taxed." (sourced from Wikipedia).
    Once you are over the $10K hurdle, I think you should keep your receipts/emails/paperwork. You don't want the CRA come auditing you for unreported income; the penalties are pretty harsh (50% or more of the profit will be seized), and then there are the fines and late fees, and lawyer fees, and then the inevitable suing for divorce...you know;)
     
  14. Canuck

    Canuck Mar 5, 2016

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    Canadian capital gains rules may apply. My understanding is that you pay tax only on 50% of the capital gain.
     
  15. ulackfocus

    ulackfocus Mar 5, 2016

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    More than 200 transactions or more than $20,000 means Paypal reports you to the IRS.
     
  16. oddboy

    oddboy Zero to Grail+2998 In Six Months Mar 5, 2016

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    I did speak with my accountant and he said it was nothing to worry about and most people sell things without reporting (potential) gains as income.. maybe I should be more explicit with him about amounts and gains..
     
  17. LawBrk

    LawBrk Mar 5, 2016

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    Is that $20k both ways or only incoming funds?
     
  18. YurRomeo1

    YurRomeo1 Mar 5, 2016

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    Incoming
     
  19. ulackfocus

    ulackfocus Mar 5, 2016

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    Pretty sure it's incoming.
     
  20. Kringkily

    Kringkily Omega Collector Mar 5, 2016

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    It has to be both categories 200 AND +20k in sales for the 1099 to be auto-generated and sent at year end.
     
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