Have you had a nice side income selling stuff on eBay or through PayPal? Sales you maybe conveniently forgot to declare at tax time?
Well, that party is officially over.
Thanks to our revenue-hungry, debt-strapped government, the IRS is now keeping tabs on what you've been selling on eBay, Amazon or your own company's website. If you've used PayPal or other popular payment-collection tools to sell products or services, you may see a crisp new 1099-K form from your payment provider. This change is a biggie.
Over the years, an industry sprang up around small, online sellers and resellers who neglected to include their Etsy or eBay income at tax time. It was like running a lemonade stand, or the equivalent of a cash business.
That's no longer the case. If you conducted 200 transactions totaling $20,000 or more, you'll be getting a tax form from your payment provider declaring the amount of that income. If you're thinking about losing that form, don't -- the IRS gets a copy, too.
I personally cannot wait to find out the total figure in previously hidden income this 1099-K form will reveal. I think it will be huge.
We may see some changes in the marketplace, too. Smaller sellers may keep a sharp eye on that $20,000 figure and just shut their stores down for the year if they get close to that threshold.
Other, more serious sellers may even lift their prices to cover the tax bite. Otherwise, they're looking at a pretty radical change to their profit margins, especially for sellers of physical goods.
Still more sellers will ramp up their business to try to reel in added sales. If more than 30 percent of an entrepreneur’s gross income just vaporized thanks to the 1099-K form, they may be looking to drive more sales volume to keep their income stable.
If you have questions about your obligations with the new 1099-K form, the IRS's website is a treasure trove of information, so start there. If you have more questions, ask a tax pro.
Does your business sell online? Tell us how this tax change affects you in the comments below.
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Comments:
Hmm. Never even occurred to me to pass on declaring income to the IRS and documenting it and writing off deductions of course). So I will be okay:)
This is the beginning of the end for ebay.....no way they will be the size that they have been for the past few years prior to these new requirements. Large to Mid -Sellers will be dropping out like flies.
If one has been properly declaring income all along, this added paperwork is nothing. The only ones to be worried are those who have not been paying taxes on their online sales income, when they should have been. This new rule merely catches some of the dishonest.
If you're engaging in business sales--regardless of the method of payment--you should be reporting it from the get-go, what's so earth-shattering about that? If you're doing the right thing to begin with (and by that I mean following the letter of the law), a 1099-K will actually help you reconcile your books at the end of the year. Those who weren't? Welcome to reality.
I am an eighteen year old senior in Connecticut and when I read things like this its devastating, I was watching Food Inc. last night and it’s disgusting how corrupt our government is. In the simplest of terms they are either a figure head of a major corporation or the lobbyist from a major corporation gets to them and the same verdict is reached! These politicians or executive position “leaders” have created a monopoly! If I was taught right I’m pretty sure those are illegal? Granted there are other factors that need to be comprehended, but our government is a well-oiled machine that is set to capitalism! Then after collecting an immense about of debt it pulls things like this is order to the country limping along at some rate. Either way we have to pay for the actions of some corrupt individuals that are in power and are working only for themselves.
Very interesting read, not shocked though. Felt this coming for a little while. I am a new eCommercer and believe I understand my tax requirements but am not willing to take a chance with the IRS so have a tax guy handle that for my business. Either build it in, shut your doors or whatever but plan on paying your taxes owed....