Do you sell on eBay or Etsy? Do you use pay apps like Venmo, PayPal, or Square to collect money for goods or services? If the answer is yes, then you are probably wondering about the new reporting requirements for sellers required by the American Rescue Plan of 2021.
Starting in 2022, third-party networks such as PayPal that process credit card and internet transactions for goods and services are required to provide a 1099K to the seller if their transactions total $600 or more for the year. This is anyone who has a business or even just a side hustle selling goods on eBay, handmade crafts on Etsy, etc. Anyone who accepts credit cards, takes payments thru an app, and/or sells online is potentially a “seller” under these new rules. If you were already reporting this income, then it’s not really a big change. A 1099K is only an information document that informs the IRS of the amount of sales processed.
So why the change?
Under the old rule, a 1099K was not issued until the seller’s transactions exceeded $20,000 or 200 transactions. This meant that many people with a side hustle selling on eBay, Etsy, or other sites didn’t receive a 1099K. Unfortunately, many people failed to report their income from these sales either because they weren’t aware it needed to be reported or just didn’t want to report it.
If you reported this income on your tax return anyway, good for you, but what about people who haven’t been reporting the income from their side hustle?
If you weren’t reporting this income, then we suggest getting into compliance this year before the 1099Ks start coming out in January of 2023. That seems like a long way off, but getting it straight now will save you a headache later. If you aren’t sure where to start, then start by contacting us.