IRS new $600 rule
I ocassionally sell on eBay to make extra money. Now that the rules have change and we have to report to IRS starting at $600, should I get a business license (despite EBay not requiring it)? Or else how do you keep track of everything? I am not too familiar with what it takes to run a business or what it now means to ocassionally sell on EBay! Part of me thinks that now you must have a business license, a software system like quickbooks to keep track of my cost: cost per item, packing materials, miles to store and USPS, etc and number of items sold and possibly more. Please someone help me figure this out as I need to start making extra money. Thanks
21 comments
sfau
·3 years agoI wish it worked both ways and we could claim our loses, especially now that I have older children and their clothes/toys are so much more expensive.
mam98031
·3 years agoI actually have a different way of looking at this. IRS allows you to deduct the full original purchase price and there is no deduction for all the years of use that you got out of those items. No depreciated value. That is a really big bonus for those selling off their personal items. It is a blessing IMHO.
luckythewinner
·3 years agoNow that the rules have change and we have to report to IRS starting at $600
You are fundamentally mistaken. The $600 threshold is for EBAY to report the payments it processed on your behalf to the IRS via a 1099-K. It is not a threshold for what you have to report to the IRS on your taxes.
should I get a business license (despite EBay not requiring it)? Or else how do you keep track of everything?
I'm not sure I follow this logic. A business license will not help you keep track of anything.
Part of me thinks that now you must have a business license, a software system like quickbooks to keep track of my cost: cost per item, packing materials, miles to store and USPS, etc and number of items sold and possibly more
I keep track of all of that in a spreadsheet.
car_audio
·3 years agoIs this article true saying it's delayed to 2024?
Meaning you sell more than $599 in 2023 you don't get the 1099K?
mam98031
·3 years agoWhat Article @car_audio . So far the poster making this claim has not supported it with any link to any article. And the IRS site still says it is $600 for 2023.
Oh, I found the article you are referring to.
https://www.nasdaq.com/articles/irs-delays-new-$600-reporting-rule-for-gig-workers-and-online-sellers-to-2024:-heres-what
However I don't think you should count on this as the IRS has NOT updated their site. The article was written in February of this year and now we are in mid August. IRS has made no update to their site nor do I see any other articles saying what that article says. I think they just got their years wrong.
https://www.irs.gov/businesses/understanding-your-form-1099-k#:~:text=Payment%20apps%20and%20online%20marketplaces%20are%20required%20to%20file%20a,or%20how%20tax%20is%20calculated.
The good thing is the 1099K is MERELY a FORM and nothing more than a form. With or without this form we are all responsible to claim our income to the IRS every year. The form is merely informational.
While this is a document for IRS for 2022 tax year, there is some really good info in it for those people that are selling personal property and how to account for it.
https://www.irs.gov/pub/taxpros/fs-2023-06.pdf
Here is another one with helpful info.
https://www.irs.gov/newsroom/form-1099-k-frequently-asked-questions-general
nobody*s_perfect
·3 years agoThe headline says, "IRS Delays Reporting $600 on 1099-k Forms Until 2024". I'm pretty sure that article is referring to the delay in implementing the $600 threshold from 2022 to 2023, and then the 1099-K's for tax year 2023 will be issued in 2024. The delay is the tax form not the tax year.
mam98031
·3 years agoI think that is what they were trying to say, but they missed the target.
IRS Delays Reporting $600 on 1099-k Forms Until 2024
2023 was initially the first tax year that IRS Form 1099-K would have had to be submitted on the part of anyone who takes in more than $600 from eBay, [this is not true it was 2022] Etsy, Uber, Lyft, Airbnb and other platforms and services. Before 2022, the requirement for reporting was $20,000 or 200 transactions [here they got it right].
But the IRS has delayed the new rule until 2024 [again a mistake, it should be 2023 but forms aren't sent until January 2024] to give businesses more time to prepare. The new rule for 2024 [2023 w/ form issued in 2024] is projected to raise $8.4 billion in 10 years. And it was part of the COVID-19-inspired American Rescue Plan passed in 2021.
So this boils down to word choice and the lack of words explaining what the were saying and this is just one little section of that article. So I can see why some would get confused by it.
car_audio
·3 years agoSo you read it as when they say in the article specifically that there's "no worries in 2023", that they mean the extra bookkeeping needed to file your taxes, not the sales.
car_audio
·3 years ago THIS is the problem - not the purposeful trying to evade taxes or anything like that-But anyone would definitely prefer to not pay taxes on things that are being sold that cost less than what they were bought at, but don't have a receipt from 10, 20, etc years ago to prove basis.
mam98031
·3 years agoWhile you may not be trying to get away with paying taxes, there are a whole lot of people that are. It is a mixed bag. What many don't realize is that with or without a 1099K FORM [simply a form, nothing more], you are suppose to be claiming your income to IRS. IRS does not have a minimum threshold. There is no FORM that the IRS has that sets the threshold to report income. NONE.
Here is some info that may help you.
https://www.irs.gov/pub/taxpros/fs-2023-06.pdf
https://www.irs.gov/newsroom/form-1099-k-frequently-asked-questions-general
car_audio
·3 years agoI know and understand that.
sin-n-dex
·3 years agoDon't waste money on Quickbooks... I'm a bookkeeper by trade, and Quickbooks does nothing except make a lot of busy work for me logging receipts for my clients.
For personal business stuff, I use spreadsheets that I customize to fit my needs (mainly doing a very big long list of receipts and sorting them out by category at year end.) Makes for an hour or two of logging stuff (mostly shipping receipts) each month, with a few days needed off work to sort it out in January.
C.
mam98031
·3 years agoI have to agree. I have a data base of my sales since I started in Microsoft Access, which isn't as hard to learn or program as one might think. And I do have a couple of things I track on Excel worksheets.
This has served be well for about 24 years. Now since Ebay has significantly upgraded the reports we can get, they make an excellent cross check for my numbers.
I encourage all sellers to NOT depend on Ebay reports only. Keep your own books and use them as a cross check.
gregs_collection
·3 years agoI would check the requirements of your state. In California, they have a requirement for a resale license after a number of sales made. Each state has regulations to the types of merchandise and the amount of income. If in doubt, talk to a Accountant and or business lawyer. Some will allow a free 1st time consultation. Uncle Sam will sooner or later want there share. It's not wise to try to skirt it. I myself have a state sales permit and business license which give me some perks to others who don't. The last thing you need is a visit from a IRS agent.
mam98031
·3 years agoThis is great advice.
STATE
1099-K FILING REQUIRED
DOES STRIPE FILE
FILING DUE DATE*
FILING THRESHOLD
IF ISSUED, PROVIDE STATE NUMBER
Alabama
State Portal
April 30
Same as IRS
–
Alaska
No
–
–
-
–
Arizona
If State Witholding
Same as IRS
US$ 0
–
Arkansas
CFSF
Same as IRS
US$ 2.499,99
–
California
CFSF
Same as IRS
Same as IRS
–
Colorado
If State Witholding
Same as IRS
US$ 0
–
Connecticut
State Portal
April 30
Same as IRS
Connecticut Tax Registration Number
Delaware
No
–
–
-
–
District of Columbia
State Portal
Same as IRS
US$ 599,99
–
Florida
State Portal
April 30
Same as IRS
–
Georgia
If State Witholding
February 28
US$ 0
–
Hawaii
CFSF
Same as IRS
Same as IRS
–
Idaho
If State Witholding
February 28
US$ 0
Idaho Withholding Account Number
Illinois
State Portal
Same as IRS
US$ 1.000 and 4 transactions
–
Indiana
If State Witholding
Same as IRS
US$ 0
–
Iowa
If State Witholding
February 15
US$ 0
–
Kansas
If State Witholding
Same as IRS
US$ 0
Kansas Withholding Tax Account Number
Kentucky
If State Witholding
Same as IRS
US$ 0
–
Louisiana
If State Witholding
Same as IRS
US$ 0
–
Maine
No
–
–
-
–
Maryland
CFSF
Same as IRS
US$ 599,99
Maryland Central Registration Number
Massachusetts
State Portal
Same as IRS
US$ 599,99
–
Michigan
CFSF
Same as IRS
Same as IRS
–
Minnesota
If State Witholding
Same as IRS
US$ 0
–
Mississippi
State Portal
February 28
US$ 600
–
Missouri
No
–
–
-
–
Montana
State Portal
Same as IRS
Same as IRS
–
Nebraska
No
–
–
-
–
Nevada
No
–
–
-
–
New Hampshire
No
–
–
-
–
New Jersey
CFSF
Same as IRS
US$ 999,99
–
New Mexico
CFSF
Same as IRS
Same as IRS
–
New York
State Portal
April 30
Same as IRS
–
North Carolina
State Portal
Same as IRS
Same as IRS
NC Withholding ID Number or EIN
North Dakota
No
–
–
-
–
Ohio
No
–
–
-
–
Oklahoma
No
–
–
-
–
Oregon
State Portal
Same as IRS
Same as IRS
–
Pennsylvania
No
–
–
-
–
Rhode Island
If State Witholding
Same as IRS
US$ 100
–
South Carolina
If State Witholding
Same as IRS
US$ 0
SC Withholding File Number or EIN
South Dakota
No
–
–
-
–
Tennessee
State Portal
April 30
Same as IRS
–
Texas
No
–
–
-
–
Utah
If State Witholding
Same as IRS
US$ 0
–
Vermont
State Portal
April 30
US$ 599,99
Vermont Withholding Account Number
Virginia
State Portal
April 30
US$ 599,99
–
Washington
No
–
–
-
–
West Virginia
If State Witholding
Same as IRS
US$ 0
–
Wisconsin
If State Witholding
Same as IRS
US$ 0
Wisconsin Withholding Tax Number**
Wyoming
No
–
–
-
–
https://stripe.com/docs/connect/1099-K
fashunu4eeuh
·3 years agoHi and welcome.
Below is a link to eBay’s Help pages regarding tax liability info. Might get you pointed in the right direction.
TBH, sounds like you already have a running start on the situation.
Sellers shouldn’t panic, but keep in mind that reportable income does not necessarily mean taxable income when potential expenses, offsets, and itemized deductions are applied.
Wish you the best of luck!!
https://www.ebay.com/sellercenter/resources/2022-changes-to-ebay-and-your-1099-k
mam98031
·3 years agoYou do not need to have a business license. You can operate what is called a Sole Proprietorship, which is what I've done for the past 20+ years.
If you are going to sell on a regular basis, you can file for a business license with your state. Then also get the Resale certificate so you can purchase your inventory without paying sales taxes. Most states have small business credits, so it may not even cost you anything or a very small amount.
r_lresale
·3 years ago@cccchango86 You do not have to have a business license to sell here. If you are selling here under your name (no DBA, LLC, etc.), just keep track of COG and expenses and as @klhmdg stated retain or seek advice of a tax professional to guide you. It sounds like this may be new to you to as far as reporting sales/gross income so I would HIGHLY suggest you go through a CPA to file (at least first year) until you fully understand your options.
mam98031
·3 years agoIRS has not changed their rules on when you are suppose to claim your income on your federal tax report. We have always had to or been required to report our income, all of it. With or without a form like a 1099K, you have always been responsible to report your income.
You have a MAJOR misunderstand like so many others. The threshold on an IRS FORM, ANY FORM, does not set the minimum for reporting income to IRS. The 1099K is merely a FORM and nothing more.
When the minimum threshold on the FORM was 20K, that met that only those that made above that got the FORM. What it DID NOT mean was that anyone below that 20K did not have to report their income to the IRS. And that is likely what will get some people in trouble because they assumed something that was not ever based in FACT. IRS does NOT HAVE a minimum requirement on reporting your income. So even when the FORM threshold was 20K, those that made 15K, 10K, 5K, 1K, etc. were still responsible for reporting their income.
Everyone needs to remember that the 1099K is ONLY A FORM and nothing more. It does NOT set the minimum requirements to report income to the IRS. That would be like saying if you don't receive a 1099K for ANY type of income you receive, you don't have to report your income and that is ridiculous. The 1099K only covers internet related payments. It doesn't cover when people are paid by check or any other form. So to think that the 1099K has the power to set the minimum standard for all of IRS, all those people that are NOT paid via the internet would not have to claim their income, which we all should know is not true.
onefootflipper2
·3 years agoYou don't have to keep track if it per item. You can just track money in and money out. Many occasional part time sellers are often able to get their tax liability down to near zero once every writeoff is considered.
klhmdg
·3 years agonothing "new" about it.
Sellers are to report all income no matter what the $ amount.
The only change was the 1099 is now sent to the seller and IRS for any amount over $599
You should talk to a tax professional.
Asking about taxes online you will get many opinions and none of them know your situation.