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Demystifying 1099-Ok Reporting Thresholds for eBay sellers

If you happen to promote objects on-line, you’ve in all probability heard about new IRS reporting thresholds that went into impact this 12 months. These new necessities have brought on some confusion for sellers on eBay and different on-line marketplaces.

To assist preserve sellers knowledgeable, TaxAct® and eBay have partnered that can assist you perceive these tax modifications and what they may imply for the tax returns you’ll file for tax 12 months 2022.

Recap of the IRS reporting modifications

Previous to 2022, eBay and different on-line cost platforms weren’t required to report transactions to the IRS till you hit an annual threshold of 200 transactions and $20,000 in gross funds.

Starting Jan. 1, 2022, these thresholds dropped considerably. With the change in these necessities, platforms like eBay should now report funds totaling $600 or extra in a calendar 12 months, with no transaction minimal.

What eBay is doing to assist on-line sellers

Although you’ll obtain your Type 1099-Ok from eBay, it’s essential to keep in mind that eBay and different on-line platforms will not be answerable for these new thresholds.

The truth is, the Type 1099-Ok threshold modifications imposed by the IRS prompted eBay and comparable firms to type The Coalition for 1099-Ok Equity, an alliance pledging to advocate for “an accessible and honest on-line gross sales marketplace for entrepreneurs, microbusinesses, and informal sellers promoting used and pre-owned items” on-line.

The Coalition maintains the brand new legislation is unnecessarily complicated for thousands and thousands of People who use on-line marketplaces for informal promoting and burdensome for a lot of small companies which might be simply beginning out. To assist promote change, eBay has arrange a web page the place you may share your story or simply ship a letter to Congress expressing your issues.

How eBay sellers can put together for revenue tax submitting subsequent 12 months

TaxAct and eBay have put collectively three key steps that can assist you precisely file your revenue tax return subsequent 12 months.

1. Observe good bookkeeping.

It doesn’t matter in case you are an informal vendor or working as a small enterprise — protecting detailed data is important for tax functions.

The very best factor you are able to do is save your receipts and preserve organized paperwork of your transactions, even when these occurred exterior of eBay. A few of the most essential data to maintain monitor of are your price of products offered (often what you initially paid for the merchandise you might be promoting), delivery prices, charges paid to eBay, and any bills for packing and delivery provides. Remember to preserve monitor of any refunds paid to prospects as nicely.

Monitoring this info will aid you decide your taxable revenue and stop you from overreporting revenue that can lead to an overpayment of revenue tax. Bills like delivery and provide prices are typically deductible enterprise bills, so preserve monitor of every merchandise’s price foundation and the ultimate sale value to find out the price of items offered. It’s additionally a good suggestion to take pictures of the objects offered and place them along with your data.

Organized, detailed data will assist streamline your revenue tax return whether or not you file on paper or use a web based tax submitting software program like TaxAct.

Tax Tip: How lengthy do you have to maintain onto receipts? The IRS can sometimes audit tax returns filed throughout the final three years, as long as there may be not a considerable error. Due to this, it’s endorsed that you simply preserve receipts and different supporting paperwork for no less than three years after submitting your return, or till the statute of limitations expires. This could range relying on if you filed (or didn’t file) — in case you’re not sure, it’s in all probability finest to carry onto the receipts and seek the advice of a tax skilled.

2. Make certain eBay has your full TIN (SSN, EIN, or ITIN) on file.

While you registered to your eBay account, chances are you’ll not have supplied your full Tax Identification Quantity (TIN), which could be a Social Safety Quantity (SSN), Employer Identification Quantity (EIN), or Particular person Taxpayer Identification Quantity (ITIN). When you attain $600 in gross sales, eBay will ask you to offer your TIN to adjust to IRS reporting necessities.

Verify that the data you present to eBay is correct and matches what the IRS has on file for you or what you are promoting. This may be discovered within the Private Info part below Account settings on eBay. If the TIN you present doesn’t match IRS data, eBay would require that you simply add a W-9 to appropriate your TIN. Within the absence of a sound TIN, the IRS requires eBay to withhold 24 p.c of your gross proceeds.

For extra info on this matter, try eBay’s useful web page of solutions to vendor FAQs.

3. Know methods to use your Type 1099-Ok.

The Type 1099-Ok you’ll obtain from eBay is an informational doc designed that can assist you file your revenue tax return.

When submitting, it’s best apply to match the Type 1099-Ok in opposition to your detailed eBay transaction report and private data to make sure all of your transactions are accounted for. The quantities reported in your Type 1099-Ok are gross proceeds, not essentially revenue. To find out the revenue related to every transaction, you’ll need to find out the associated fee foundation of the merchandise(s) offered.

It’s additionally essential to notice that transactions included in your Type 1099-Ok are primarily based on the transaction settlement date, not the sale date. For instance, in case you offered an merchandise on Dec. 31, 2022, however the funds didn’t settle to eBay till Jan. 2, 2023, that transaction would present up in your Type 1099-Ok for 2023 as an alternative.

The way you report your eBay revenue is dependent upon what you promote and whether or not you run a enterprise. In case you are a self-employed sole proprietor, you’ll report what you are promoting income utilizing Schedule C. In case you are a client promoting capital property as a pastime, you’ll report any income as both short-term capital positive aspects or long-term capital positive aspects, relying on how lengthy you had the merchandise you offered.

If that is beginning to sound like rather a lot, don’t panic. Reporting revenue from eBay as a first-timer isn’t practically as daunting because it sounds. If you happen to select to file with TaxAct, our intuitive tax prep software program will ask questions on objects you offered and pull all the required tax kinds so that you can file.

For extra detailed info on this matter, learn TaxAct’s solutions to widespread eBay vendor FAQs and distinctive situations chances are you’ll run into when promoting sure kinds of objects.

Backside line

There’s no want for eBay sellers to emphasize about their taxes subsequent 12 months. To study extra about what eBay is at present doing to advocate for sellers, head over to eBay Fundamental Avenue.

Consider the Type 1099-Ok you obtain as a information designed that can assist you decide your taxable revenue. Hold good data, perceive that solely income are taxable, and confirm that eBay has your TIN to forestall delays or problems along with your on-line gross sales.

By following these important steps, you’ll be setting your self as much as file with confidence subsequent tax season.

eBay and its associates don’t present authorized, tax, or accounting recommendation. This materials is being supplied for informational functions solely and isn’t supposed as, and shouldn’t be relied upon for, authorized, tax, accounting, or different skilled recommendation. Please seek the advice of your individual authorized, tax, and accounting advisors for recommendation particular to your scenario
All TaxAct presents, services are topic to relevant phrases and circumstances
IRS CIRCULAR 230 DISCLOSURE: Any U.S. tax recommendation contained on this communication isn’t supposed for use for the aim of both (i) avoiding penalties which may be imposed, and (ii) supporting the promotion of any issues addressed.



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