eBay warned sellers that the IRS will require it to report all annual sales over $600 using Form 1099-K beginning with tax year 2022 and said the new requirement is causing confusion. "This change will impact millions of casual and small business sellers on eBay," it said in an announcement this week
"It has raised concerns in our selling community and we're working to bring these concerns to Congress.
"We believe this new legislation will cause confusion, over-reporting of non-taxable income, and privacy concerns for millions of Americans who are just trying to get by. We are continuing to highlight the undue impact this increase will have on small sellers on eBay, and are urging an increase to the reporting threshold."
We wrote about the new legislation in March ("New Bill Puts Micro Sellers in Crosshairs of the IRS
"), noting it was not a new tax in any way, but rather, a way to make sure that people who owe taxes pay taxes. But as many readers are aware, the amounts companies like eBay and PayPal must report to the IRS are the total
amount processed on sellers behalf. That means line items like refunds are not deducted - so the 1099K figure is unlikely to match the gross revenue sellers report to the IRS.
wrote about the issue in October, quoting tax guru and small-business expert Barbara Weltman, an occasional contributor to EcommerceBytes. She pointed out the onus is on payment processors to file the 1099-K form and said taxpayers were always required to report their income and pay federal income tax on it. "For people who are doing the right thing, it makes no difference."
But as far as eBay is concerned, it seems worried that casual sellers may curb their activity on its marketplace.
"Many sales on eBay aren't taxable, so if your sales are over the $600 threshold it doesn't necessarily mean you will be taxed on those sales. Only goods that are sold for a profit are considered taxable, so you won't owe any taxes on something you sell for less than what you paid for it. For example, if you bought a bike for $1,000 a few years ago, and then sold it on eBay today for $700, that $700 you made generally would not be subject to income tax.
"But you will now need to report these sales as part of your tax return and we'll continue to share updates that will help you prepare for these changes."
Three described three concerns it had in particular:
- Overly complicated tax forms for smaller transactions.
- Targets casual sellers who are not set up to handle this kind of tax reporting.
- Doesn't take into account the selling of used goods, which are rarely taxable income as they are sold at a price below the original purchase price.
While eBay said the requirement previously only applied to sellers with at least 200 transactions and over $20,000 in sales each year, some states had already lowered the amount to $600, including Massachusetts and Vermont.