Expanded 1099-K Reporting
You get a 1099-K, and you get 1099-K, and…
Starting this year, ecommerce platforms are required to submit Form 1099-K for business sellers paid more than $600 during the year. While the requirement itself isn’t new, the dollar threshold has changed. It was previously a much higher $20,000.
One copy of the 1099-K goes to the seller. The other copy goes to the IRS. The IRS will match its own copy against tax returns filed by sellers. Discrepancies will result in at least a few tax notices.
If you’re selling items on eBay, Etsy, OfferUp, etc. or accepting payments through Venmo or similar, know that it’s possible your 2022 tax returns filed next year will need to include that activity.
You may be:
✅ Regularly selling at a net profit. You may be running a business. You will likely receive a 1099-K from eBay, etc. If you weren’t already reporting your business activity on your tax returns, the lower 1099-K threshold may be a reason to start.
✅Regularly selling at a net loss. The IRS could consider this a hobby, which is what tax professionals call a “bad answer”. Through 2025, hobby expenses are not allowed to offset hobby revenue. Depending on how you’ve reported your “status” to the platform - business vs personal - you may or may not receive a 1099-K. Be careful here.
✅Occasionally selling personal-use items at a net profit. You bought your kids’ laptop for $1,200 and are selling it for $2,400. That’s probably not going to happen too often, but when it does, the transaction will likely be treated as some sort of capital gain. If your platform account is labeled personal and not business, you probably will NOT receive a 1099-K, but should still disclose any realized gains.
✅Occasionally sell personal-use items at a net loss. You bought a designer purse for $3,000 and are selling it gently-used for $800. There’s no tax benefit for the “loss” on the sale as it’s a personal-use item. If your platform account is labeled personal and not business, you probably will NOT receive a 1099-K. In this instance, there’s nothing for you to report on your tax return. However, if you DO receive a 1099-K, the go-to move would likely be to report the sale on your tax return for IRS matching purposes and then back it out as non-deductible so your tax return doesn’t improperly reflect a tax benefit.
Unsure if you’ll receive a 1099-K? Scared of filing your tax return and the IRS later sends you a “love letter”? Solution: extend your tax return, pull your IRS wage & income transcript over the summer (no, this still isn’t done in real time), and see if any 1099-Ks show up.
Be aware there’s been significant pushback on this legislation. It’s possible the $600 threshold reverts back to $20,000 or lands at some number in the middle.