TaxAct has teamed up with eBay to help users understand the new requirements. Sellers should gather receipts or other documents that show the original cost of items they have sold, Mr. Only payments sent with the toggle on are tagged as goods and services for the recipient.Ĭash App says on its website that users with standard, personal accounts won’t receive the forms and that only users with business accounts will have transactions reported to the I.R.S. Payments are tagged “friends and family” by default when money is sent between two consumer accounts, the company says, but users can choose the “goods and services” button when making a purchase. Venmo and its parent, PayPal, allow users to designate transactions as personal or for purchases. Collins said, remind those sending you personal payments to designate transactions as such, and make a note of what the payment was for. Here are some questions and answers about the new 1099-K rules: What can I do to prepare for next year’s tax season? “If I can’t make it to the concert,” he said, he sells the tickets on StubHub, which is among the online marketplaces that have alerted users to the new rules. He likes to attend concerts, he said, but sometimes his plans change. Walters of Blucora said he might be among taxpayers receiving a 1099-K. “The change is going to cause confusion,” Ms. But some people could mistakenly receive forms anyway - say, if they get payments mislabeled as business transactions rather than “friends and family” payments, she said. The change is not meant to apply to people who are receiving payments as gifts or as reimbursements from friends after splitting the cost of a restaurant meal, said Erin Collins, the national taxpayer advocate, who heads an agency within the I.R.S. Taxpayers with normally simple tax profiles “may not know how to report this transaction” on their income tax return, the Congressional Research Service noted in a report. ![]() The company knows nothing about your initial purchase it’s up to you to document the original price to show that no tax is owed. a Form 1099-K, showing you were paid $1,000. Under the new rule, however, eBay will send both you and the I.R.S. Say you sold a used piano on eBay for $1,000, but you paid $2,500 when you bought it new. Used items generally don’t result in taxable income if they are resold for less than what the seller originally paid, he said. If you received $600 or more for the sale of goods or services, you may receive a 1099-K in early 2023 - even if you are just an occasional online seller of used household items or clothing.Ĭasual users of online platforms may receive the forms even if the payments don’t reflect taxable income, said Andrew Lautz, director of federal policy with the conservative National Taxpayers Union, which supports a higher reporting threshold. ![]() That threshold captured sellers running businesses, while excluding most people who were merely cleaning out their closets.īut this year, the income threshold dropped to $600, with no minimum number of transactions. Before this year, online companies that process payments - including marketplaces like eBay and Poshmark and payment services like PayPal and Venmo - were required to send 1099-Ks only to sellers who exceeded 200 transactions and $20,000 in income annually.
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