Millions of casual online sellers can breathe a sigh of relief since a confusing and concerning $600 IRS reporting rule won’t go into effect as planned for 2023. This is the second time the IRS has delayed implementing the 1099-K $600 tax reporting rule.
That rule required payment apps and online marketplaces (think PayPal, Venmo, Etsy, eBay, StubHub, etc.) to send 1099-K forms to anyone who received over $600 in payments for goods or services (even in a single transaction). Early estimates were that more than 40 million taxpayers would have received forms. Some taxpayers wouldn’t expect one, including some sellers without a tax obligation.
So, instead, for the 2023 tax year, a previous rule involving a much higher $20,000/200 transaction threshold applies.
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Here’s what else you need to know.
IRS $600 rule delayed for online salesin 2023
In response to corporate concerns over the 1099-K threshold and to avoid further confusing taxpayers, the IRS has postponed implementing the new Form 1099-K reporting threshold requirement for third-party payment organizations.
"We spent many months gathering feedback from third-party groups and others, and it became increasingly clear we need additional time to implement the new reporting requirements effectively," IRS Commissioner Danny Werfel said in a statement regarding the change.
Werfel added that a phased-in approach for the 1099-K threshold “is the right thing to do” and “prevents unnecessary confusion.”
So, what does this mean for you if you sell (and receive payment for) goods and services online?
- The 1099-K reporting threshold, initially set at $600 for the 2023 tax year, is now delayed.
- For 2023 (the federal income tax returns you’ll file in early 2024), a much higher $20,000/200 transaction 1099-K reporting threshold applies as it did for the 2022 tax year.
- The IRS plans to introduce a $5,000 threshold for the 2024 tax year for federal income tax returns usually filed in early 2025.
Note: It’s important to remember that these changes do not modify the tax law regarding income reporting. The IRS expects taxpayers to report all taxable income remains taxable regardless of whether a Form 1099-K is issued.
1099-K Form: Who will get one for 2023?
For the 2023 tax year, previous reporting thresholds remain intact. So, third-party payment apps and online marketplaces must issue 1099-K forms to individuals who, during 2023, received over $20,000 and have more than 200 transactions.
It's important to note that the 1099-K reporting requirement is for payments for goods or services. So, personal transactions like sharing the cost of a meal, ride, or giving a gift to celebrate a birthday or holiday, for example, shouldn’t be reported on a Form 1099-K.
However, the IRS says, “the casual sale of goods and services, including selling used personal items like clothing and furniture at a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.”
IRS 1099-K delay: What happens next?
The IRS will treat 2023 as a transition year.
- For the 2024 tax year (returns normally filed in early 2025), the agency says it’s planning a $5,000 1099-K reporting threshold.
- The $5,000 number is seen as a phase-in to implementing the $600 reporting threshold enacted in the American Rescue Plan.
- The IRS will also change Form 1040 to make the 1099-K reporting process more straightforward.
"The IRS will use this additional time to continue carefully crafting a way forward to minimize burden," Werfel said in a release, adding, "We want to make this as easy as possible for taxpayers.”
The agency says that the eventual change in the 1099-K reporting threshold can increase tax compliance, but the process must be managed carefully to ensure taxpayers know what to do with the forms.
If you are uncertain about your taxable income or whether you’ll receive a 1099-K, it’s wise to consult a qualified tax professional. You can also check out Kiplinger’s report on the 1099-K reporting requirements or visit the IRS website to learn more about the latest changes.
Related
- IRS 1099-K Tax Reporting: Everything You Need To Know
- What's the 2023 Standard Deduction?
- eBay, PayPal, Etsy, Ask Congress for 1099-K Relief
- IRS Audit Red Flags for the Self-Employed
FAQs
In 2024, you will receive Form 1099-K if you have any number of transactions that totaled $5,000 or more. That being said, you only need to pay taxes on any profits you make.
Why did the 1099-K threshold change? ›
On November 21, 2023, the IRS delayed the threshold change again, making 2023 another transition year. Why? To “reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn't expect one and may not have a tax obligation.”
What are the new tax rules for selling online? ›
IRS $600 rule delayed for online sales in 2023
- The 1099-K reporting threshold, initially set at $600 for the 2023 tax year, is now delayed.
- For 2023 (the federal income tax returns you'll file in early 2024), a much higher $20,000/200 transaction 1099-K reporting threshold applies as it did for the 2022 tax year.
If there's a similar ticket scenario in 2024, it's possible the transaction will meet the IRS's $5,000 threshold, causing the third-party settlement organizations to issue Form 1099-K to the taxpayer and file a copy with the IRS in 2025.
Do I have to pay taxes on reselling items in 2024? ›
Do you have to report income from selling used items? The same rule applies whether the items you resell are new or used: if you are selling items at a profit, you'll need to report your net income from those sales on your tax return.
What is the new rule for 1099-K? ›
Starting this year, earnings of $600 or more via online platforms like PayPal, Venmo and Etsy must be reported to the IRS on Form 1099-K. Legislation in 2021 dropped this threshold from $20,000. After years of delay, the change becomes effective for tax year 2024.
How much can I sell on Poshmark without paying tax in 2024? ›
For the 2024 tax year, you'll receive a 1099-K from Poshmark if you made $5,000 or more on the app. This is intended as a "phase-in" to an eventual $600 threshold, which the IRS plans to implement at some point.
How much can I sell on Mercari without paying taxes in 2024? ›
For the 2024 tax year (2025 tax filing season), the 1099-K reporting threshold has not been finalized, but the IRS announced that it is planning for a $5,000 threshold to phase in implementation of the $600 gross sales 1099-K reporting law.
How do I avoid paying 1099-K taxes? ›
Use your business account for business purposes and your personal account to receive payments for personal transactions. Otherwise, personal payments will end up on your business's Form 1099-K, and you or your tax professional will then have to sort out personal and business payments when preparing your tax return.
What is the IRS limit for online sales? ›
Reporting threshold
For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for personal or business accounts that receive over $20,000 in payments from over 200 transactions for goods or services. There are no changes to what counts as income or how tax is calculated.
Not necessarily. The 2023 federal reporting threshold of over $20,000 and 200 transactions is a reporting requirement for TPSOs, but companies may still send a Form 1099-K for payments for goods or services payments that are less than that amount.
Do you have to file taxes if you sell stuff online? ›
The income tax laws work exactly the same way when you sell something online (whether in an online auction or otherwise) as when you sell an item in the physical world. If you sell at a gain (that is, you get more than you paid for the item), you have income.
What is the threshold for 1099-K in 2024? ›
Who is likely to get the 1099-K form? For tax year 2024, the 1099-K form is for anyone who receives over $5,000 from at least one business transactions. So, think about whether you're a gig worker, freelancer, or self-employed.
What is the maximum amount for a 1099-K on eBay? ›
IRS regulations require all payers, including online marketplaces like eBay, to issue a Form 1099-K for all sellers who meet the reporting threshold, namely $20,000 and 200 transactions in 2023.
At what age is social security no longer taxed? ›
Social Security tax FAQs
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
What are the changes for 1099 for 2024? ›
Per the IRS, the payment amounts that trigger the 1099-K filing requirement is scheduled to drop to $5,000 for tax year 2024, and as low as $600 in the next few years.
What are the changes in the IRS in 2024? ›
For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year. Heads of households, or unmarried taxpayers who have dependents and pay for more the half of the expenses of a household, can take a standard deduction of $21,900 in 2024, an increase of $1,100 from 2023.
How much can you sell on eBay before you get a 1099 in 2024? ›
We'll provide a Form 1099-K to you by January 31, 2024 if: 1) you received more than $20,000 and had more than 200 transactions; or 2) you did not give us your SSN, ITIN, or EIN and we withheld on your payments; or 3) your payments were subject to withholding, even if you did not have available funds to cover your ...
