Online shopping sites like Etsy, and eBay, and payment network PayPal, among other companies want Congress to change the new $600 reporting threshold for IRS Form 1099-K. The rule, which won't apply for 2023 due to a recent delay from the IRS, affects millions of people who sell on sites like Etsy and Poshmark and get paid through third-party networks like PayPal, Square, and CashApp.
Previously, to receive a 1099-K, you had to have at least 200 third-party payment network transactions totaling more than $20,000 in gross payments. However, due to a tax law change, a single transaction on a payment network of just $600 could trigger a 1099-K. Some people call this the “600 rule.” The IRS delayed the rule Implementation last year, but that change and the most recent 1099-K delay for the 2023 tax year continue to cause confusion.
The Coalition for 1099-K Fairness (a group of online marketplaces that oppose the new rule) has urged Congress to get involved. The goal is to have bipartisan legislation that raises the 1099-K threshold, giving relief to “casual sellers.” That includes millions of people who are paid smaller amounts through third-party networks and haven’t received 1099-K forms in the past.
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More: IRS Form 1099-K: When You Might Get One From Venmo, PayPal, or Cash App
Is the IRS unfairly targeting casual sellers?
PayPal, eBay, and Etsy are among several members of the 1099-K Fairness Coalition that want Congress to ensure that casual online sellers aren’t burdened with the IRS 1099-K form. The organization cites a national survey of sellers where:
- 70% of respondents said they would be deterred from selling online because of the $600 IRS 1099-K reporting requirement.
- 85% percent of those surveyed didn’t think that the IRS should be “targeting people who only occasionally sell online,” according to the survey.
Members of the Coalition for 1099-K Fairness include Aribnb, Bikelist, eBay, Eventbrite, Block, Inc. (for Square and CashApp), ETA, Etsy, Goldin, Kidizen, Mercari, Noihsaf Bazaar, OfferUp, PayPal, Poshmark, Inc., Reverb, Rover, Sports Fan Coalition, StubHub, TechNet, and Tradesy
According to the Coalition, many transactions casual sellers have “involve the sale of used goods that do not create any tax liability.” (Some of those goods are often sold for less than what the seller initially paid). The organization says on its website that a $600 1099-K threshold would disproportionately burden some taxpayers, who could be at risk of over-reporting their income or “forced to hire a tax professional” to ensure compliance with the reporting requirement.
The Coalition also points out that economic hardship is another factor for nearly 40% of online sellers. The majority (close to 75%) said they sell online to help pay for necessary personal expenses.
1099-K: What could Congress do?
The Coalition for 1099-K Fairness wants Congress to pass legislation that would increase the 1099-K reporting threshold. If Congress doesn’t act, the organization says millions of people with relatively small online businesses will receive 1099-Ks for the 2023 tax year. The coalition contends that could cause significant confusion and administrative challenges–not only for networks and sellers but also for the IRS.
In Congress, the Saving Gig Economy Taxpayers Act was reintroduced in the U.S. House of Representatives with bipartisan sponsorship.
- The legislation would repeal the IRS 1099-K $600 rule and restore the previous $20,000/200 transaction threshold.
- It’s unclear right now what will happen with the legislation, which is similar to proposals circulated in Congress in the past but failed to gain enough support to pass.
For now? The IRS in November, announced that the $600 1099-K reporting rule won't apply for the 2023 tax year. But remember that the IRS expects you to report all taxable income on your federal return, whether you receive a 1099-K or not.
Related
- Another Big IRS Tax Change for Online Sellers
- IRS Form 1099-K: When You Might Get One From Venmo, PayPal, or Cash App
- Hobby Income: What It Is and How It's Taxed
FAQs
Contact Etsy Support: Reach out to Etsy customer support to inquire about the status of your 1099-K. Report Your Income Regardless: Whether you receive the form or not, you're still responsible for reporting all your income. Maintain thorough records of all sales and related expenses.
What is the IRS rule on $600 on eBay? ›
Here's what you need to know
For 2023, all sellers who reach the $600 threshold must provide a Social Security number (SSN) or Individual Tax Identification Number (ITIN) to access any blocked funds.
How to report eBay income without 1099-K? ›
Given the type of items you sell, I assume these are not personal possessions you are selling, so you will be reporting your sales on schedule C as self employment income. You can deduct all of your selling costs to arrive at taxable income.
Why didn't I get a 1099-K from PayPal? ›
Note: We won't issue a Form 1099-K if you don't meet the reporting thresholds. Here's how to locate your tax documents: Personal accounts go to the PayPal Statements & Tax Center. Business accounts go to the Tax Statement page.
How do I report Etsy income without 1099? ›
You will report this self-employment income on Schedule C of your tax return. The IRS considers self-employment income as a business, so you will also be able to deduct common business expenses from your income.
How do I report income if I didn't receive a 1099-K? ›
Generally speaking, self-employment income not reported on a 1099-NEC, 1099-MISC, or 1099-K form will be reported on the Other Income and Returns Expense page of the Business Income (Schedule C) portion of the software.
How much can I sell on eBay in 2024 without getting a 1099? ›
Once you reach the sale threshold — $20,000 and over 200 transactions for 2023 or $5,000 in 2024 — eBay will ask you to provide your TIN to comply with IRS reporting requirements. MAke sure to confirm that the information you provide to eBay is accurate and matches what the IRS has on file for you or your business.
Do I have to report eBay sales under $20,000? ›
If you have more than $20,000 in sales, your total sales from eBay will be reported to you on Form 1099-K, a tax form that specifically covers credit, debit, and third-party online transactions. If you have less than $20,000 in third-party transactions, you will not receive a Form 1099-K for the 2023 tax year.
How much do you have to sell on eBay to get a 1099-K? ›
The requirements to receive an IRS Form 1099-K is if: eBay sent you $20,000 or more in payment and... You had 200 or more payment transactions through eBay.
How much can I sell on eBay without paying income tax? ›
Key takeaways
Whether or not you have to pay income taxes on eBay sales depends on the nature of your sales. If your eBay sales add up to more than $5,000 in a year, eBay will send you a Form 1099-K, which lists the total amount of payments you received throughout the year.
eBay has sent the 1099-K to the IRS, and they expect you to report that income. If you don't report it, they will just automatically send you a bill based on your marginal tax rate, plus interest and penalties. Take a look at Schedule C and its instructions to see how the IRS looks at this.
Does eBay 1099-K include refunds? ›
Your Form 1099-K includes the gross amount of all reportable payment transactions and does not include any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts.
Can the IRS see your PayPal account? ›
If you meet the IRS threshold in a given calendar year, PayPal will send you a Form 1099-K in January of the following year, and file this form with the IRS by the required due date.
What is the $600 rule? ›
The new ”$600 rule”
Under the new rules set forth by the IRS, if you got paid more than $600 for the transaction of goods and services through third-party payment platforms, you will receive a 1099-K for reporting the income.
What is the threshold for PayPal 1099-K? ›
Frequently Asked Questions about PayPal 1099 Forms
Beginning with the 2023 tax season, you will receive a 1099-K from PayPal for over $600 in payments for goods and services on the platform. Financial gifts or reimbursem*nts received from family and friends do not count toward these thresholds.
What happens if you don't have a 1099-K? ›
Whether or not you receive a Form 1099-K, you must still report any income on your tax return. This includes payments for any: Goods you sell, including personal items such as clothing or furniture. Services you provide.
Where do I get my 1099-K from Etsy? ›
On Etsy.com, sign in and go to Shop Manager. Go to Finances. Go to Legal and tax information. Select Download 1099-K.
Do I have to claim Etsy sales on my taxes? ›
You're required to report Etsy income on your income tax return.
Do I have to worry about sales tax on Etsy? ›
For the most part, Etsy is required to collect and remit sales tax on behalf of its retailers. But this requirement only applies to sales made on the platform. Any additional sales, whether made in person or through other online sites, must be managed by the seller.
