2022 Tax Changes
If you sell products on Etsy, eBay, PayPal, or even Facebook Marketplace you will need to get familiar with the new tax laws.
Prior to January of 2022, you likely wouldn’t be aware of Form 1099-K unless you profited over $20,000 from online sales or had more than 200 transactions. Form 1099-K is the document that taxpayers receive for reporting income from payment cards and third-party network transactions. Generally, if you reach the reportable income threshold the online selling platform will automatically send you this form sometime in January.
With the 2022 tax changes stemming from the American Rescue Plan Act, the threshold for reportable income has dropped down to $600 with no transaction minimum.
All online sales generating a profit are considered as taxable income and likely should be reported to the IRS. Income from online sales and transactions should be reported on Form 1099-K for each tax year. Online marketplaces will issue a Form 1099-K to all sellers receiving $600 or more in sales.
Even though you’re required to report the sales, you’re not necessarily required to pay additional taxes on the transaction. Should you sell an item for less than what you paid for it, you won’t owe any taxes on that transaction. For example, if you sell your sectional couch on Facebook Marketplace for $500 when you originally paid $1,500 for it, there typically is no reason to report that income. However, if you find an authentic Gucci handbag at Goodwill for $5 and turn around and sell it on eBay for $1,000, you will need to report this income to the IRS.
The professionals at The Center for Financial, Legal, and Tax Planning, Inc., are more than knowledgeable on the changes in tax law. Please contact us at (618) 997-3436 for more information.