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IRS Delays $600 Gig-Tax Rule
IRS Delays $600 Gig-Tax Rule
The Internal Revenue Service on Friday announced they are delaying new tax-reporting requirements for millions of Americans who made more than $600 of income from e-commerce platforms such as Ebay, Etsy and AirBnB.
The one-year reprieve means that said e-commerce platforms will not give the tax agency information on users whose income exceeds the $600 level, nor will they be required to provide sellers with a blizzard of 1099-k tax forms in early 2023. As the Wall Street Journal notes, this also means that opponents of the $600 rule can push for a change in the law next year.
"The additional time will help reduce confusion during the coming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements," according to Acting IRS Commissioner Doug O'Donnell.
Congress passed the $600 threshold for Form 1099-K reports as part of the American Rescue Plan Act in March 2021, scheduling it to take effect for tax year 2022. Until the change, platforms had to report users’ income to the IRS if they had more than 200 transactions and $20,000 of revenue. Lawmakers lowered the threshold to boost tax compliance in an area where it is often lacking—unreported business income.
In the waning days of this year’s congressional session, lawmakers in both parties discussed raising the $600 threshold or delaying implementation. After those efforts failed this week, the IRS stepped in with the delay. Treasury and IRS officials said Friday that they hope to work with industry groups over the next year to make sure the forms go to the right taxpayers. -WSJ
The rule was set to affect millions of gig workers who are independent contractors and haven't been reporting income on their tax returns. What's more, the law didn't differentiate between people running a business, and those who are "casual" sellers who are cleaning out closets and attics.
What's more, the gross revenue on the form isn't necessarily all income depending on the cost basis of the items being sold, or whether the items were inherited and are now worth less than their value on the date of the death.
The delay doesn't change what income is taxable, however, just what information the IRS will receive. Gig workers are still required to track and report all income, they just won't have e-commerce sales platforms ratting them out.
As the Journal also notes, the reporting rules aren't aimed at people using Venmo or other payment apps for gifts or splitting the cost of meals.
kh-vince
·2 years agoHi everyone,
Due to the age of this thread, it has been closed to further replies. Please feel free to start a new thread if you wish to continue to discuss this topic.
Thank you for understanding.
missjenec80
·2 years agothis is such a lie -- ebay already had the sent outs since 2021.....I got one last year and I sold $4500 not 20k or 200 items....just watch your dashboard
nobody*s_perfect
·2 years agoYou got a 1099-K because you live in New Jersey, which has set a threshold of $1,000.
vioici
·3 years agoThe main problem with the original rule is that there is zero mechanism for exempting those who are clearly only garage-sale type sellers. You either have to report the "income" as a hobbyist, which means being taxed at 30% with zero deductions allowed, or you have to report it as a bona fide business, which means, well, starting a business. Why should the IRS penalize anyone who does not want to make selling a job but just wants instead to get rid of stuff that's been piling up, keeping it out of the landfill, and allowing people who can't afford to buy brand new to get something still usable?
Now, if you're going to thrift stores on a regular basis to score deals that you then sell for more than what you paid, or you collect X, Y, Z things with an eye toward their appreciation to sell at some point in the future, then, yes, you're a business and you need to register and get yourself set up accordingly. Otherwise? It's none of the IRS's business. Don't they have bigger fish to fry?
dhbookds
·3 years agoyou collect X, Y, Z things with an eye toward their appreciation to sell at some point in the future, then, yes, you're a business and you need to register and get yourself set up accordingly
no, you don't "have to set yourself up as a business"..........you just report on Schedule C........been doing that for almost 20 yrs.......
maxine*j
·3 years agoAll the 1099 does is show money processed. When a tax return is filed, if the 1099 recipient is even required to file a return, the taxpayer then "explains" this income, so to speak, and calculates what is taxable, if any, and how much tax is due on it, if any. A very occasional seller, selling odd bits and bobs, is unlikely to see any change in his tax burden.
However, if you hang around these boards long enough, you'll see thread after thread started by people "just selling off some personal stuff" and really upset the new 1099 threshold -- yet they have been selling here for years, have thousands of transactions, have multiples of items, have many brand new items, often in multiples, and so on.
"Just selling off some personal stuff," eh? I think not. The government thinks not. Thus, the new, lower threshold for the 1099, necessary because such sellers have been dodging taxes for a long, long time. And during all that time, by the way, they have had an unfair pricing advantage over sellers playing it straight, which is one reason they get not a lot of sympathy here.
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nobody*s_perfect
·3 years agoGood news! There is a "mechanism" for sellers to easily report selling used personal household items at a loss. IRS has recently issued some helpful guidance for those sellers. IIRC the 30% rate is related to capital gains only.
"if you received a Form 1099-K for $600 for the refrigerator for which you originally paid $1,000, you should report the loss transaction as follows:
Form 1040, Schedule 1, Part I – Line 8z, Other Income. List type and amount: "Form 1099-K Personal Item Sold at a Loss .... $600" to show the proceeds from the sale reported on the Form 1099-K
and,
Form 1040, Schedule 1, Part II – Line 24z, Other Adjustments. List type and amount: "Form 1099-K Personal Item Sold at a Loss.... $600" to show the amount of the purchase price that offsets the reported proceeds. Do not report the $1,000 you paid for the refrigerator because the loss on the sale of a personal item is not deductible."
https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
red_ball
·3 years agoI have several related concerns. That document says that gains from sale of personal property cannot be offset by losses. Each item is a separate transaction. This seriously undermines my efforts to clean out the junk in my basement.
Since I am not a business, I collect shipping with each transaction. And I pay shipping to ship the item. I read that 'shipping cannot be considered a cost when selling a personal item.
EBAY takes a seller fee based on transaction including shipping and sales tax. Where do I write off that cost?
Many of my transactions are small $3-5-10. The effort to process paperwork make these sales not worth it.
nobody*s_perfect
·3 years agoTo use the IRS example: if you bought a refrigerator for $1000 and later sold it for $600, the you cannot deduct the whole $100 original cost which would leave you with a net $400 loss; you can only deduct $600 for a net of zero.
There's no deducting expenses like shipping or eBay fees since that would put your total even farther below zero and you're already zero-ed out. There would be no point in trying to deduct expenses like shipping and fees because you're already at net zero.
red_ball
·3 years agoI get that, but my problem seems simpler. In rough numbers:
I sell an album for $10, with $5 shipping and $1 state tax. EBAY says: you made a sale for $16 and charges fee on all $16. I receive maybe $13.50, and spend $5 to ship the album. Say I paid $5 for the album so its a profit.
What is EBAY going to report to the IRS? What will I be taxed on?
nobody*s_perfect
·3 years agoeBay will report $15 on your 1099-K.
Your example is not an item that was sold at a loss.
nobody*s_perfect
·3 years agoHere's a link to the article in the WSJ. I'm sure this story will be in all the news media soon. I'm surprised that the IRS has the authority to do this.
https://www.wsj.com/articles/irs-delays-gig-tax-filing-rule-for-side-hustles-of-more-than-600-11671815725?mod=hp_lead_pos4
dhbookds
·3 years agoSurprised about them having the authority to do it also......
Haven't really looked, but does this mean the 1099 for the old $20,000 amount won't be sent either?
lacemaker3
·3 years agoNo, the old rules will apply:
Press release from the IRS:
https://www.irs.gov/newsroom/irs-announces-delay-for-implementation-of-600-reporting-threshold-for-third-party-payment-platforms-forms-1099-k
bookdey
·3 years agoJust to be clear - it's $20,000 AND 200 transactions?
I have $19,100 1099-K from eBay and $1000 1099 K from PayPal.
My total transactions are 101. Does that mean I qualify for the delay?
Thanks,
Bookdey
nobody*s_perfect
·3 years agoNo. Massachusetts set the threshold at $600 back in 2018. Anybody who got a 1099-K from eBay should understand that eBay also sent a copy of the 1099-K to the IRS. You have to report the income.
mam98031
·3 years ago@bookdey
A delay??? You mean you are questioning why you received the 1099Ks. If they were issued to you, you HAVE to use them when doing your Tax Return.
The rules on the 1099K can be Federal or State, whichever is lower. The state you are in requires them at a minimum of $600. So you were always going to get them this year from both Ebay and PayPal. Your number of transactions don't matter in this case. You need to claim the entire $20,100 [19,100 & 1,000] of Gross Receipts less all your costs, refunds, etc.