I have a question about profits from an app
So I got into this app called rips by triumph as a sorta fun thing because I love collecting Pokemon and other collectible cards but me being an idiot I didn’t know if I would get taxed as this is my first time doing this stuff, I’ve only withdrawn about $32.70 from the app, and over my time of usage I’ve deposited 75$ I’ve only had the app for about 2 months and everything else I’ve received from the card buyback feature outside of my 32$ withdrawal has been kept right in the app and spent to rip more packs
Thing is I have 1150 packs ripped already so I’m assuming a ton of currency has flowed through the account since I’ve started, so I’m wondering will the government tax my $32.70? Or will I get taxed based on the overall volume of money that’s been in the account altogether (money received from the “sell” button included)
Edit: I also must mention in the faq it states users are responsible for “gains related to the sale of card purchases” and that they will automatically collect information and freeze withdrawals if you exceed 600$, however my withdrawals have never been frozen as I’ve only made three altogether totaling to $32.70, so I’m wondering if that amount is taxed or if the government will want to tax me for the entire amount that’s been through my account all time
Someone please help me I’m new to being an adult and I have no clue what I’m doing as I’ve never been employed nor filled out a tax form in my life just yet. I’m stressing HEAVY about this now.
Answers
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Hi TheGUYS25,
First, take a breath -- based on what you've described, you likely don't owe any taxes at all, and here's why.
The IRS taxes your profit (called a "gain"), not the total amount of money that flows through an account. A gain means you sold something for more than you paid for it. In your case, you deposited $75 and only withdrew $32.70, which means you actually spent more than you got back. That's a net loss, not a gain -- so there's generally nothing taxable.
Here are the key IRS rules for collectible cards like Pokemon:
1. You are taxed on profit only -- that means the sale price minus what you originally paid (your "cost basis"). Total account volume doesn't matter.
2. The $600 threshold you saw in the app's FAQ refers to 1099-K reporting, which is when a platform is required to send a tax form to you and the IRS. Since your withdrawals are well under $600, you won't receive a 1099-K from this app.
3. Even if you did receive a 1099-K someday, that form shows gross sales -- not your profit. You'd still only owe tax on any actual gain after subtracting what you paid.
In-app credits that you spent on more packs without withdrawing are generally not considered income you received -- you never actually had that money in your hands.
So, in your situation, you deposited $75 and only got $32.70 back. You're down about $42. There's no taxable gain here.
For future reference, if you ever do sell cards for more than you paid, the IRS treats trading cards as collectibles. Gains on cards held less than a year are taxed as ordinary income, and gains on cards held more than a year are taxed at a maximum rate of 28%.0 -
Follow up to this question. If someone deposits $100,000 and withdraws $105,000, they would only owe taxes on the $5,000 they gained correct?
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Hello Liamdemitri! Yes, that's exactly right. If someone deposits $100,000 and withdraws $105,000, they would only owe taxes on the $5,000 gain -- not the full $105,000. The IRS taxes profit, not total volume.
To be a little more precise, the taxable gain on each transaction is calculated as the sale price minus the original cost of what was sold (the cost basis). So in practice, you'd want to track what you paid for specific cards and what you sold them for, rather than just looking at total deposits vs. total withdrawals.0
