COVID Bill has new regulations for selling on eBay in 2022. Sellers - Beware.

[coasternut]

I just read that starting in 2022,  eBay will start reporting to the IRS all sales totaling in a year of over $600.  It is in the new 2 trillion $$ spending bill.   Currently, it is $20,000.   Is that true?  Not sure what that has to do with helping get rid of COVID, but maybe it does in some way.   I'm sure someone will tell us.  

[rock.star]

There are a couple of states that require 1099k at $600 Massachusetts is one and I think Illinois also.

There may be more to come as states are looking for more revenue. 

[alcoforever]

I believe the Dems are thinking that the additional tax revenue will bring in money to help pay for the covid bill.

I don't think it will affect small ebay sellers financially but it will increase their paperwork.   The sellers that are just closet cleaning are all selling at a loss so no tax will be due but they will need paperwork to prove it, i.e a schedule C added their tax filing.

[silverstatetreasureboxes]

Good grief! Always something isn't it?

[coastaltechsolution]

Not really why this would come as a surprise, States want the revenue 

[eunster1313]

(I just read that starting in 2022, eBay will start reporting to the IRS all sales totaling in a year of over $600. It is in the new 2 trillion $$ spending bill. Currently, it is $20,000. Is that true? Not sure what that has to do with helping get rid of COVID, but maybe it does in some way. I'm sure someone will tell us.)

It's true. But it hasn't been passed yet. If passed it will be a federal requirement

so it won't matter what state you live in it will apply to all.

A provision in the American Rescue Plan Act of 2021
(aka the COVID relief bill)

New Bill Puts Micro Sellers in Crosshairs of the IRS

https://www.ecommercebytes.com/C/abblog/blog.pl?/pl/2021/3/1615153514.html 

Gig workers could end up losers in Covid relief bill

https://www.politico.com/news/2021/03/05/gig-workers-coronavirus-relief-bill-losers-473902 

[slippinjimmy]

Only Sellers who are also Tax Evaders need be concerned.

What does it have to do with Covid? It has to do with raising the 1.9 Trillion Dollars that is being spent, the way the debt is rising the days of the IRS ignoring "spare change" is over, every penny of potential tax revenue needs to be found.

As others have mentioned even if the Feds don't require it the States certainly will, they are the most desperate and unlike the Feds they don't have the ability to simply print money.

[stephenmorgan]

It called Redistribution of income and wealth. 

How it relates to COVID is they are looking for ways to pay for all the giveaways.

It was only a matter of time before they lowered the amount that has to be reported.

I think next opportunity to get more revenue is to raise taxes.

No big deal, this free money that will be given out soon, set it aside to pay your taxes.

[go-bad-chicken]

@alcoforever said:

"I don't think it will affect small ebay sellers financially but it will increase their paperwork.   The sellers that are just closet cleaning are all selling at a loss so no tax will be due but they will need paperwork to prove it, i.e a schedule C added their tax filing."

The problem with this is, and what everyone has to remember is that all of the closet cleaner sellers are probably not going to have retained receipts for everything that they purchased over the last 20 years and are now selling those items for extra money. 

So if a casual seller sells lets say $10k in a year of their old junk and declares that no profit was made on any of those items, AND THEN GETS AUDITED, but no longer has any receipts for that old junk, how do you think the IRS is going to treat them?

[alcoforever]

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@go-bad-chicken wrote:

So if a casual seller sells lets say $10k in a year of their old junk and declares that no profit was made on any of those items, AND THEN GETS AUDITED, but no longer has any receipts for that old junk, how do you think the IRS is going to treat them?

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I wouldn't worry too much about it since audits on lower income folks are pretty rare.   Also, if you kept a record of what you sold, not just the ebay stats but also pictures and descriptions, any reasonable auditor would be able to see a loss.

[stephenmorgan]

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@go-bad-chicken wrote:

So if a casual seller sells lets say $10k in a year of their old junk and declares that no profit was made on any of those items, AND THEN GETS AUDITED, but no longer has any receipts for that old junk, how do you think the IRS is going to treat them?

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That is a very good question.

Here is a another one. 

Say in a tax year a person makes $2500 on $10,000 worth of on-line sales.  That $10,000 in sales was 50 items and many of the 50 items you actually lost money.  Overall though you did makes $2500 so you would be liable for taxes on the $2500.

Within this same tax year you sold $10,000 of stuff in yard/garage sale type activities.  With the $10,000 you reclaimed for your items, you actually have a lost of $15,000.

So when you are doing your Schedule C, do you claim the $15,000 loss and show that for the tax year you actually did not make anything selling your stuff (online and in person) but actually lost $12,500?

Can they say they will only consider you online income profit and not the in person losses?

[jayjaspersgarage]

"So if a casual seller sells lets say $10k in a year of their old junk and declares that no profit was made on any of those items, AND THEN GETS AUDITED, but no longer has any receipts for that old junk, how do you think the IRS is going to treat them?"

For starters the IRS can reach back ten years once they start an audit.  That's the statute of limitations.  

Numerous states have limits at or below $1,200 for receiving a 1099.  Several are as low as $600.  I had a link a couple of weeks ago that listed seven or eight states with the lower than 20K threshold.  Sounds like it won't matter if the sellers in the four largest states by number of ebay sellers get a 1099 starting after 2022.

[tealt]

Sellers beware, indeed!

Thank you for the links!

Much in the Dems blowout spending bill has absolutely nothing to do with Covid relief, and I wonder what other nasty little goodies are buried in it?

This will come as a bad shock to many, many small eBay sellers, I think, and it's more than just "tax cheats".

As the Political article points out, someone selling their fancy bike at a loss for $1000 will still get a 1099-K and have to go through the hassle of proving to the IRS that they made no profit. 

Winners:  Craigslist, Facebook Market, Next Door, flea markets, garage sales.  Anywhere folks can sell their stuff (for profit, or just to clean out) without the feds getting involved.

[tealt]

Next questions:

When (will?) eBay warn its current small sellers about this major change in income reporting to the feds?  Will any warning be given to new sellers?

$600  and a no transaction number requirement is a very low bar that could affect millions of eBay sellers in 2022.  Will MP be able to handle it?

[stephenmorgan]

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@tealt wrote:

Next questions:

When (will?) eBay warn its current small sellers about this major change in income reporting to the feds?  Will any warning be given to new sellers?

$600  and a no transaction number requirement is a very low bar that could affect millions of eBay sellers in 2022.  Will MP be able to handle it?

It won't be signed into law until next week, maybe?  There were some adjustments to the Bill so who knows what the final Bill will read.

I am sure as soon as it becomes law eBay will notify everyone.

Also as soon as it becomes law eBay will start working on adjusting fees to accommodate their extra work.