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Thu Sept 9 2021 16:44:14

Will 1099-K Reporting Requirement Drop to $600?

By: Reader

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Dear Ina,
I currently sell on eBay and read your article from March 2021 regarding the new tax law requiring online platforms to report seller's income over $600. 

You said in the article that the bill had to be sent back to the house for approval before being signed into law. I can't find any information regarding the current status of this bill online. 

I contacted eBay several times and the CS reps are still telling me the threshold is 200/20K. eBay's website regarding 1099K for sellers is also stating the same. there is no mention either on eBay's website or with their CS reps that the law might or will be changing in 2022. 

I wrote to Mercari and was told "Mercari will be obligated to report gross payments that exceed $600 starting when the new law takes effect in calendar year 2022."

Do you have any idea as to what is going on with this new legislation?
Thank you!
JC

Note from the editor: The American Rescue Plan Act of 2021 became law March 11, 2021 with SEC. 9674 intact, where it states the $600 reporting requirement applies to returns for calendar years beginning after December 31, 2021. (What's a 1099-K? Check out this column from February published before the amendment to the law was added.)

Comments (17) | Leave Comment | Permalink
Readers Comments

Perminate Link for Will 1099-K Reporting Requirement Drop to $600?   Will 1099-K Reporting Requirement Drop to $600?

by: Kiramis This user has validated their user name.

Fri Sep 10 10:05:33 2021

It really doesn't matter.  You are supposed to report any income and pay any taxes owed regardless of whether you get a 1099 or not.  Once the new reporting kicks in they can potentially go back to previous years and look at them if they think you weren't reporting all of your income.  

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This user has validated their user name. by: iheartjacksparrow

Fri Sep 10 11:11:54 2021

Kiramis is correct. You make the money, you report the money. I've had Stripe process my payments for years, and it wasn't until this year that I received a 1099 for my sales in 2020.  

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

Fri Sep 10 20:59:05 2021

Kiramis is correct. Any income over $600 is to be reported on a federal tax return. This should not be of any concern to those who have been reporting their income whether they received a 1099 or not. It was bound to happen eventually. People thought they were being clever by maintaining multiple user id's under different names to earn their income while not reporting taxes. Should be interesting. One does not go from zero to multiples of $20k without getting the attention of revenue investigators.

I do find it a little funny that congress inserted this into the very bill that gave people $2,000.

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

Sat Sep 11 09:45:08 2021

eBay will lose TONS of sellers with the result of much less competition for those of us who are left!  Been hoping for this for years.  Unfortunately, the result of this will be even more creative fee increases due to the lost revenue.  If they go overboard though, this could be the straw that finally breaks the camels back.  

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This user has validated their user name. by: RKTOYS

Sat Sep 11 13:50:44 2021

You were already taxed when you earned the money to buy stuff you're selling off years later.  This is just our dopey government doing the bidding of the rich as usual.  People will just have to get more creative to keep from being taxed for more wars, more illegals, more bailouts, etc.

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This user has validated their user name. by: Marie

Sun Sep 12 02:09:51 2021

@Old School Seller

Why would that only apply to Ebay sellers.  The laws isn't just for Ebay sellers.  Personally I think you are hoping for something that isn't likely to happen.  As many sellers won't know that the threshold dropped to $600 until they get theirs in 2023.

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This user has validated their user name. by: Marie

Sun Sep 12 02:11:23 2021

I agree with the others.  This just should not be of concern to anyone.  Well anyone that has been claiming their income appropriately to the IRS for your online sales in previous years.  For those that have been doing that, this is just one more piece of paper to make sure you reconcile for the year.  It just isn't a big deal at all.

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This user has validated their user name. by: Lightning

Sun Sep 12 21:19:11 2021

@RKTOYS
''You were already taxed when you earned the money to buy stuff you're selling off years later.''

Yes, and you are allowed to deduct that purchase amount from the proceeds of your sale.  The rest is your PROFIT, probably considered income, and like all Americans, you owe taxes on it.  If this is your thought process, I guess you're one of the dodgers.

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by: Snapped This user has validated their user name.

Sun Sep 12 22:35:10 2021

“ You were already taxed when you earned the money to buy stuff you're selling off years later.  This is just our dopey government doing the bidding of the rich as usual.”

True dat.  Just so….that tax is added to the cost (basis) of the item when one deducts that cost (“..of goods sold”) from any sale price.  Along with all the other overhead elements.   If the ‘resale’ then exceeds the original sale, that excess is deemed the ‘income’ upon which tax is assessed.  So…no ‘double tax’ really.

Collectively then, PP will show the IRS a total of one’s sale(s).  It will be up to each seller to deduct the cost(s) incurred to make those sales.  Neither PP nor the IRS has a clue what those might be.  Transaction by transaction, sometimes you win (profit) and sometimes you lose (loss).  When all those ‘sometimes’ are abacused together, tax may be owed on overall profit, depending on how…creative…one can be to deduct any other costs incurred to sell.  

Which for eBay, might need to include the cost of head examinations too.

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by: smallstuff This user has validated their user name.

Mon Sep 13 01:09:46 2021

Massachusetts has always required a 1099K for anyone who had a gross receipts  total of $600 or more and several other states do as well.  It is just another way for the IRS to cross check to see if you are reporting the correct sales.  It has nothing to do with your profit which is what you pay income tax on.  And, the tax cuts implemented in 2019 (Trump Tax Cut) included a 20% tax break for small businesses - meaning you get to reduce those profits further by 20%.

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by: TiredOfSellingCircus This user has validated their user name.

Mon Sep 13 02:29:35 2021

And not only do they plan to examine all payment services, they also are proposing reviewing your bank accounts to see if you have any excessive deposits in them that are unexplainable.  I guess that means cash sales, too, on local websites.  So I guess if a relative gives me $100 cash as a birthday present and I deposit it into my checking account, I'm going to have to pay taxes on it.

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by: skl3255 This user has validated their user name.

Mon Sep 13 04:03:33 2021

"So I guess if a relative gives me $100 cash as a birthday present and I deposit it into my checking account, I'm going to have to pay taxes on it."

Cash gifts from relatives are not subject to taxation per IRS rules.  Of course there is a limit on the amount per year.  

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by: TiredOfSellingCircus This user has validated their user name.

Mon Sep 13 15:33:34 2021

And  how will the IRS know whether the cash was from a relative or a local sale?  Either way I wouldn't have a paper trail.

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by: gyanarthi This user has validated their user name.

Tue Sep 14 19:09:47 2021

I have 2 etsy shops and use quickbooks  self employed to handle the data. Etsy folded paypal payments directly into etsy so they are transparent to me. I'm retired and the Etrsy sales are my only business,.I file w IRS yearly even though I don't owe any taxes.
My sports card transactions on Paypal are a hobby... the cards I sell are from my personal collection dating back to the 1950's.  How are hobby sales dealt with?  It's never been a concern because there's never been much involved... but it's over the $600 limit this year... and will get much higher as i sell them off.
Guess I've got to check this with an accountant.  
I thought life would be getting simpler in retirement... but it just gets more and more complicated as i get less and less capable of dealing with it.

Perminate Link for Will 1099-K Reporting Requirement Drop to $600?   Will 1099-K Reporting Requirement Drop to $600?

by: TiredOfSellingCircus This user has validated their user name.

Tue Sep 14 20:53:10 2021

I was under the impression that if you sold your former stuff for less than what you originally paid for it, that there was no profit.   Sort of like a garage sale item.   For instance, if I purchased a book for $32 and sold it for $8.  Where's the profit to pay taxes on?  I sell a few things on Bonanza (about once a month, if even that) and include shipping.  So the IRS is saying I should pay taxes on the included shipping, too?  BTW I am nowhere near $600 in sales anywhere.  What is scary is that I read that the IRS is trying to figure out how to peruse my bank account for deposits other than my Social Security.  Would they rather I be collecting welfare?

Perminate Link for Will 1099-K Reporting Requirement Drop to $600?   Will 1099-K Reporting Requirement Drop to $600?

by: gyanarthi This user has validated their user name.

Tue Sep 14 21:34:58 2021

''Tired of Selling Circus''
Since posting my comment i've found put how to enter hobby income/expenses on the 1040 form.  A little bit of extra work because QuickBooks Self Employed can only track hobbies as personal income/expense and downloadable as an excel file... a pain, but doable... I love how IRS goes after the little guys just trying to survive, and leave the big ones alone because it costs too much to audit them. Anyhow the $600 limit doesn't go into effect until after 2001, and who knows what will be happening then... This all goes in my ''glad I'm old file'' <3

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by: gyanarthi This user has validated their user name.

Tue Sep 14 21:36:19 2021

haha  make that 2021 :)



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