Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Thu Dec 2 2021 23:59:11

eBay Fears Tax Reporting May Curb Casual Selling

By: Ina Steiner

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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. 

Money Magazine 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.

You can learn more about Form 1099-K in this EcommerceBytes article by Barbara Weltman (published prior to the lower threshold taking effect).



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Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Silver Ice King This user has validated their user name.

Fri Dec 3 01:42:56 2021

This is not only going to create a ton of work for the Sellers but going to really cause a lot of work for Ebay, especially if they take the time to make sure the numbers are even close to correct, which we already know they are not capable of providing as things currently run.  Knowing Ebay they are going to somehow screw this reporting up much more than they already do with Sales Tax collection and reporting.

Ebay is looking out more for themselves and the extra work this is going to create as well as knowing this is going to further reduce sales on their site while  having to perform more work.  I am sure that Ebay is already looking for some legal loophole where they can charge sellers for having to supply this information as they try to monetize everything now.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Snapped This user has validated their user name.

Fri Dec 3 05:19:21 2021

“.. a ton of work for the Sellers….”

Maybe not so ‘taxing’ (sorry) as eBay wants to portray it with their crocodile tears though.  Like it would really concern them how the ‘little people’ are ‘struggling’.  How ‘hard’ it would be for their feeble and unprepared consumer clogged minds to work a calculator a few minutes a month.

The numbers betray their motives though.  While it would certainly be a eBay CPA nightmare to sign off on a sudden avalanche of paperwork, as noted they already do it for a 200/yr transaction minimum.  That’s like 17/mo average.  One every couple days.  Not exactly a stack there to begin with for those sellers.  These would be much less.

Because - For those under that threshold, but selling ‘for profit’, they are already (should be) accounting appropriately.  Any ‘extra’ work will come from them trying to reconcile the mess eBay will be making trying to get ‘their’ numbers straight on the (correct) forms - in the next 60 days no less.  And those sellers aren’t likely to be selling from their attics in enough volume to burden regarding taxable vs not.

As for those who ARE liquidating, their presence is a) likely temporary, and b) of no concern no matter what ‘form’ may say otherwise.  It’s not taxable.  And if they try a few yard sale flips, well, that’s profit, and taxable, true, always was.  And yes, may ‘discourage’ some who are ‘revenuer’ adverse.  Still, one every week or so, maybe a couple dozen all at one shot, then done?  Not so heavy a stack on a seller by seller basis.

Only in the aggregate.  Like ‘state taxes’ was.  Same argument by the way.  Didn’t work for them last time either.

And do remember this - since when did eBay ever give a wart off a toad’s booty about what was best for the ‘riff-raff’?  

Or could it be that it’s the estate-flip class of seller who is the most relatively heavier fee and penalty burdened, also most  likely to rely on other eBay ‘services’ like shipping.  And just think of all that potentially ‘lost’ promoted ad real estate!  

Alternately…so NOW they ‘care’?  Kinda makes your insides all squeezy doesn’t it?  Whooz yer daddy?

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: postbuster This user has validated their user name.

Fri Dec 3 05:43:22 2021

This announcement sounds more like a PR move from ebay.
As usual, they have no intention to fix anything and they have had years of (in)experience in this practice.

They knew about this for a year or longer, and only now (28 days before the rule is more enforced) do they make any mention of it.
MP and it's list of problems was worked on for years with no regard to how it disadvantaged sellers.

It also sounds like an easy way to point the finger at someone else for losing more sellers.  Any Real economist could have seen this coming and made better preparations to balance out some of the issues the tax reporting will create.

More than actual reporting, ebay will cook the books in their favor and dump the loss and discrepancies on the sellers lap to sort out with the IRS.
ebay (un)support has proven time after time how much they care about the sellers who bring in the money.
---
''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.''

More lip service...

With all due disrespect, I don't trust ebay to handle my order from an ice cream truck, let alone representation for my business.  They are continually ruining their own platform and losing sellers left and right.  What chance do they think we will believe that they are actually going to properly, and accurately represent sellers?
Letting them speak on your behalf only assumes them more power and ''right'' to disadvantage small and casual sellers for their own capital gain.
Similar to Sedgwick.

eBay's only concern is how they can steal more of your money.
They have made big profits on charging sales tax (and fees charged to the tax) for non taxable items by the state.
i.e. - clothing is not a taxable item in PA.  Yet they charge tax to the buyer, and fees to the seller for more money.  Multiply this by a few million purchases and now they have a large tax 'overpayment' and get a refund of money that is not theirs, but claimed and stamped to ebay from the State level IRS.

The level of distrust ebay has earned over all of these years doesn't convince me that they will suddenly do something right.  It's about time they take some lumps and OWN IT.  If they somehow raise the threshold, it won't change all of the theft that ebay allows from buyers and ebay itself.  

Don't worry about this problem ebay, I've already been telling others not to sell on your site.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: gimac This user has validated their user name.

Fri Dec 3 07:41:32 2021

What did ebay expect ??

Not want to be political but once socialists get in power, they will dip thier fingers everywhere they can.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Donkey This user has validated their user name.

Fri Dec 3 08:56:17 2021

There has not been much selling on ebay the past year.
Sales are way down from a year ago.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Old School Seller This user has validated their user name.

Fri Dec 3 10:03:56 2021

“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”.

True, but you will need to produce the original sales receipt for the bike.  The IRS will not just take your word for it.

From long term personal observation, I’m convinced that the vast majority of folks who sell on online marketplaces are doing so for profit and therefore operating a business. There are plenty of online resources available where you can learn how to properly keep the records necessary to run said business. It is NOT rocket science.  

There have always been ways to get rid of personal belongings no longer needed.  What happened to holding a garage sale, setting up at a flea market, or donating to a charity?  Maybe “casual” sellers would be better served by going those routes beginning in 2022!

There is no room for ignorance if you are profiting from your sales. Take the time to learn how to do it, then do it right.  If you refuse to do this, then go back to selling your goods privately like people have done successfully since the beginning of time.      

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: terry55 This user has validated their user name.

Fri Dec 3 11:12:16 2021

They forget to say its not taxable if you itemized your taxes, if you do a the standard deductions even if you have receipts you can't write off sales. Ebay's gonna take a HUGE hit next year with less sellers and USPS outrageous increase on packages over 20" and 30". I know my sales will drop around 50%, may not even survive if I can't find enough small items to replace my large items I won't be able to sell

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: DingDong This user has validated their user name.

Fri Dec 3 15:40:21 2021

I did write to the Senators and Congress people about reversing this. Do any of them know that to have just the business tax preparation is from $300-$400 to do and this added to your personal tax portion. That 600 dollar threshold was not thought out.

You are able to gift people up to $15,000 without the individual have to report it.

I could make up to $18,000 (having tax deductions from it) without loosing my Social Security.

Sorry, I still have 50 years of receipts and I CAN prove the value of my items. A friend's tax audit actually went well when we pulled his old receipts to prove the cost of the items. The IRS needed to send a refund to him now.  We argued even if it was sold used that he wasn't able to take depreciation on the items like regular business do.

Leave it as $20,000 and 200 transaction and go after the multi-millionaires and billionaires that are paying taxes as if they are making only $70,000. Too many tax loop holes for the rich.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: HappyOne This user has validated their user name.

Fri Dec 3 18:52:59 2021

I suspect some individuals have been flying under the $20,000 1099 by selling on several sites with other family members SS# to avoid losing SNAP (food stamps); rent subsidies and unemployment/social services. With the $600 limit some grossing over $40,000 will be “discovered”  

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Old School Seller This user has validated their user name.

Fri Dec 3 18:56:59 2021

@HappyOne

You are absolutely correct with everything you wrote, and I know, and have known, sellers who have been ''flying under the radar'' this way for years.

Once the IRS gets an idea of just what kind of money (billions) the government has been losing all this time, look for them to go sniffing through past income tax filings of some of these folks ''who all of a sudden'' are making gobs of money online.  There was a reason why this was attached to the last Covid hand out!  Somebody's got to pay for it!

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

This user has validated their user name. by: Ric

Fri Dec 3 21:17:52 2021

I would never sell again on eBay, not because of tax policies, but due to eBay policies.

The company's statement is nothing more than an excuse used to tamp down Wall Street expectations and disappointments in the marketplaces poor sales growth performance.  The company is using a forward looking statement to lower expectations of investors.

The reality is that casual sellers will abandon eBay because of eBay's onerous fee structure - not the IRS policy.  

eBay, and eBay alone is to blame for the fact that casual sellers are finding eBay to be a zero sum game and not worth the time, energy, effort or frustrations of dealing with the company.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Vigilant Eye On eBay This user has validated their user name.

Sat Dec 4 15:47:03 2021

Given what company executives have repeatedly stated to the press over the past year or so, with a corporate focus on high end goods (e.g., collector baseball cards, designer hand bags, sneakers, and watches) and the purchasers of these products, loosing their casual seller base should not be an issue.

As others have already noted, the $600.00 threshold for IRS reporting has been on the books for decades.

Enforcement has been long over due, as way too many individuals have intentionally avoided paying taxes on their gig or side hustle incomes because the 1099K filing requirement for payment processors did not match the previously established $600.00 threshold for reporting one's income to the IRS..

Now, congress needs to go after NFTs and cryptocurrency buyers, sellers, and miners who pay no taxes on the wealth they generate.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

This user has validated their user name. by: cfrphoto

Sat Dec 4 22:12:59 2021

Observations about the eBay 1099-K

Last year the eBay 1099-K matched the total of eBay orders paid in 2020. Some labor was required to extract expenses to determine if Managed Payments Payout totals plus deducted expenses equaled gross income. Sales and VAT taxes collected by eBay did not play any part in the calculation because the money was never handled of the seller. However, some states require that sellers report gross sale amount including eBay income on sales tax returns. The State of Washington includes eBay income in the Business & Occupation part of the sales tax return.

In 2020 it was possible to calculate eBay gross sales by tracking payouts and calculating the gross amount and fees amount for each payout. Unfortunately, eBay does not make it easy. Totals for gross sales and fees are not provided in the Payout detail. In 2021 some offshore sales were denominated in Euros or British Pounds. Can eBay convert foreign currency amounts to dollars while calculating gross income for the 2021 1099-K? Why should sellers pay B&O tax on fees collected by eBay, when eBay also pays a B&O tax on gross sales in the State of Washington?

Finally, why any professional seller in coins, stamps, or collectibles would not file a Schedule C? Who would not want to avoid higher tax rates associated with casual sale of appreciated collectibles?

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

This user has validated their user name. by: Rexford

Sun Dec 5 06:16:27 2021

I sell on many sites.  I fly under the $20K amount on many of them.  I still file and pay my taxes on all my earnings and I always have.   I would actually welcome 1099Ks from these sites, regardless of  the amount.  It ensures that what you calculate matches up with what the sites calculate.

Running a business can be expensive.  If you track your expenses the taxes you will pay on the amount that you actually earn won't be as bad as you think.  

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Geetar This user has validated their user name.

Sun Dec 5 07:58:53 2021

Ebay killed casual sellers years ago with their ridiculous auction fee's. So thats that. Now they want to complain about tax reporting? I think Ina may have had an article about the ridiculous auction fee's recently. Maybe they really hate this because they haven't found a way to make money off of it YET.

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Old School Seller This user has validated their user name.

Sun Dec 5 09:55:40 2021

There is only ONE reason why eBay is putting up a stink.  Bottom line is ALL online marketplaces WILL be LOSING MILLIONS of sellers once said sellers become aware that they are now on the hook with the IRS in a big way.  Since many people now a days don’t bother to read, they will be caught with their pants down in January 2023 when they receive notice of their 1099-K.  No receipts, no records, and totally clueless, they will kiss the marketplaces goodbye for good.  Hello Facebook Marketplace, Instagram, Craigslist, and all the new venues that will inevitably sprout up where people can transact locally in cash!  This eBay plea for help in Congress has NOTHING to do with any extra reporting work involved on their part, and EVERYTHING to do with their future survival.    

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: I Must be Crazy This user has validated their user name.

Sun Dec 5 17:04:13 2021

This will be another nail in the coffin for eBay. Collection of sales taxes had a negative effect on online sales. This change in reporting will have another similar effect. Professional sellers should already be reporting all incme derived from their sales, regardless of the venue. The fact that many sellers have been flying below the limit does not absolve them of the obligation to report their income. The threshold was set to lower the burden on sites like eBay having to report every sale through their site. I for one am not surprised to see this happen.

It will very likely be the end of casual selling on eBay. Nobody will want to bother with having to report and substantiate the sales of extra stuff they have laying around.  

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Mazdaman This user has validated their user name.

Mon Dec 6 00:17:29 2021

I was going to comment similarly to "@Vigilant Eye On eBay" about how ironic it is that eBay now seems to even CARE about "casual sellers", given Ianone's recent blather about how eBay is going to focus on high end sellers, but Vigilant beat me to it.

Basically, I think eBay is hosed now and needs every seller they can get; when they've announced that they're losing BUYERS (5% so far), you KNOW they're in a world of hurt, and it's only hiding what is REALLY happening that is much worse than they're saying.

A recent panel they held (NDA, sorry) seems to be just now concerned with the loss of buyers and sellers, though the losses of sellers started at LEAST back with John Donahoe's decision to hand the control of eBay to BUYERS by preventing honest opinions of buyer by sellers in the Feedback system.  That was the start of a long and continuing slide as sellers left; did eBay not grasp that when a buyer can't find what they USED TO BUY on eBay, they'll go somewhere else where they CAN find such items?

I'm continually amazed at how clueless eBay's management is; were all those MBAs simply printed out at Kwik Copy or were they actually from universities?  Having started and run several businesses in my 45-year career, there seems to be no one at eBay yet who grasps the concept at all!

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: thebobman This user has validated their user name.

Mon Dec 6 00:30:08 2021

>>>Hello Facebook Marketplace, Instagram, Craigslist, and all the new venues that will inevitably sprout up where people can transact locally in cash!

Local sales suck. Buyers show up late, or not at all, and expect something for nothing (ill give you $50 for that laptop you had listed for $200). Ive been bringing some stuff to the local auction place, and it sells for peanuts. Id be hard pressed to get $20k for the stuff i sell for $125k a year online.
I go to over 1,000 garage sales a year. I pick up so much stuff that sells for under $5 that can sell for $30-$50 online, but if i were to have a garage sale,it would sell for the same $4 i paid for it

Perminate Link for eBay Fears Tax Reporting May Curb Casual Selling   eBay Fears Tax Reporting May Curb Casual Selling

by: Small Potatoes This user has validated their user name.

Mon Dec 6 02:32:24 2021

I am one of those ''small potatoes'' casual sellers who will be limiting my sales starting next year--and perhaps trying etsy and other venues in addition to ebay--so as not to generate a 1099. Why? Because I have stuff around my house and that I inherited that I don't need anymore, but I don't have receipts or appraisals (in the case of the inherited items) for these small-dollar items. On the vast majority of these items, I'm not turning a profit, but I'm doing better than I would at a garage sale or flea market. I'm trying to sell the few items I have that are over $200 by the end of this year.

Can someone tell me what amounts get reported on the 1099? Ina's article says, ''the amounts companies like eBay and PayPal must report to the IRS are the total amount processed on sellers' behalf.'' Does just the sale price of the item get reported, or the sale price plus shipping, or plus shipping and taxes, or some other combination? I need to plan ahead, and this information would help quite a bit. Thanks, Ina, for all you do!

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