Side-hustlers and small business owners earning money on platforms such as PayPal, Venmo or Ebay will have to report income of more than $600 to the Internal Revenue Service (IRS), per a new rule effective for transactions made after December 31, 2021.
Previously, a 1099-K form was only reserved for those making more than $20,000 a year. Now, anyone making money through small side businesses or even reselling their own possessions will receive this form from the platform they use, according to PWC. (RELATED: Small Businesses Struggle To Survive In Biden’s Economy: POLL)
A woman who makes as much as $15,000 a year reselling finds from flea markets, estate sales, or even her own closet, told Bloomberg she will have to report her income now if it exceeds $600.
“I’m just constantly cleaning out my house,” she said. “The new rule means I’ll have to track everything.”
Small business owners who use services like PayPal and Venmo for payments previously could, in theory, avoid paying taxes on money earned there if they made less than $20,000.
But a new IRS rule is changing all of that. https://t.co/jfyx8FDNCj
— Businessweek (@BW) June 8, 2022
Users will also have trouble tracking what is business income and what is, for instance, a small repayment to a friend.
“The biggest impact is having to decipher which payments are income,” real estate broker Marvette Critney told Bloomberg.
In response to the new requirement, eBay, Etsy, Mercari, OfferUp, Poshmark, Reverb and Tradesy have founded The Coalition for 1099K Fairness.
“The new reporting threshold of only $600 means that Americans who sell only used goods and owe no taxes will now get confusing IRS forms, and many will be forced to consult costly tax experts when they normally handle their own returns, or risk over paying on their taxes,” the Coalition’s website stated.
One way the Coalition intends to alleviate the burden on side hustlers and small business owners is by, “Advocating for Congress to urgently fix Section 9674 of the American Rescue Plan Act of 2021 to raise the 1099-K online sales reporting threshold.”