Americans using eBay, Ticketmaster, Poshmark, Airbnb and other websites can save themselves hassles by staying abreast of the latest tax rules

If you receive income through online platforms like eBay, Venmo, Ticketmaster, Airbnb ABNB 5.28%increase; green up pointing triangle or Poshmark, you’re probably confused about what the Internal Revenue Service knows. That’s not surprising: The rules have bounced around three times in three years, and Congress might change them again.



The background is important. To encourage tax compliance, Congress has enacted laws requiring payers to tell the IRS about income that isn’t subject to withholding (as paychecks are). This income is often reported on so-called 1099 forms sent to both the agency and the taxpayer. For example, bankers put interest on Form 1099-INT and brokers often put dividends on Form 1099-DIV.

The form for potentially taxable income from online platforms is 1099-K, which reports users’ gross income above certain thresholds. This income typically doesn’t include payments to “friends and family,” like reimbursements on Venmo.

In 2021, Congress dramatically lowered the 1099-K reporting threshold. For tax years beginning in 2022, it is $600 of total income a year. That is far below the prior level of $20,000 of payments and 200 transactions.

In making this change, lawmakers were trying to flush out unreported income earned by smaller businesses—and there’s plenty of it. According to IRS studies, this income has long accounted for a large chunk of the more than $450 billion of tax a year that’s owed but not paid.



But the shift brought strong protests from platforms and vendors. They said the $600 threshold would burden millions of casual sellers who earned no taxable income from selling items like household goods, clothing, or electronic instruments at a loss. As a result, these sellers would face complex record-keeping. For example, someone who sold a 1990s-era electric skillet on eBay could be required to ascertain its original cost to prepare the tax return.

For its part, the IRS was wary of a blizzard of new forms, many of them useless. A recent study by the Government Accountability Office said the $600 threshold would bring about 44 million 1099-Ks for 2023—30 million more than in the past.

Late in tax years 2022 and 2023, the agency used its authority to delay the $600 threshold and continue the prior one. In addition, it’s planning a $5,000 threshold for 1099-K forms in 2024—although Congress could change that.

The bottom line is that platform users have a lot to keep abreast of. Here’s what to know now.

1099-K reporting rules for tax year 2023
The IRS announced in November that the threshold for online platforms to report potentially taxable income on Form 1099-K for 2023 is once again $20,000 of gross income and 200 transactions. Say someone bought six tickets to a concert for $250 each last year and resold four of them for $1,000 each through a reselling platform. The platform doesn’t need to report the seller’s $4,000 of income to the IRS.

To be sure, this seller probably owes Uncle Sam tax on her sales. If the IRS finds out about them and she hasn’t paid tax due, she would likely owe interest and penalties. On the other hand, the higher 1099-K threshold for 2023 will bring relief to millions of casual sellers unloading items for less than they acquired them for.

One is Grace Tully, a 25-year-old marketing manager and celebrity stylist in New York City. She has been selling her unwanted clothing for three years on Poshmark, a popular site for reselling luxury goods. She says she has made less than $4,000 annually and typically doesn’t make a profit.

“I’d rather sell for less and get some money back than have the clothes sit in my closet. The $600 threshold would have been a disaster,” she says.

State-tax reporting for 2023 income from platforms
While the IRS’s reset of the 1099-K threshold for 2023 helps shrink federal tax reporting by the platforms, several states have lower thresholds. Sellers in these states could soon receive 1099-K forms for 2023 showing income reported to state tax departments.

Maryland, Massachusetts, Vermont, Virginia and the District of Columbia have a $600 threshold in effect for 2023, says Kelli Wooten, a principal with KPMG who specializes in this area. North Carolina and Montana also have a $600 threshold, although state tax officials have said these states may offer relief.



Wooten adds that in New Jersey the threshold is $1,000, while in Illinois it is $1,000 and four transactions. In California, where the federal 1099-K threshold applies for most platform sellers, there’s an exception for drivers working with firms such as Uber and Lyft. For them, the 2023 threshold remains $600.

For more information, platform users should check their state tax website. Ms. Wooten also advises vendors who move to another state to alert their platforms of the change of address to avoid hassles.

1099-K reporting rules for tax year 2024
In its November announcement resetting the 1099-K threshold for 2023, the IRS also said it’s planning a $5,000 threshold for 1099-K forms for 2024. This is intended to exempt many casual sellers who aren’t earning taxable income from their sales, like Ms. Tully.

Shortly after this announcement, however, Republicans on the House Ways & Means Committee sent a letter to the IRS saying the agency had exceeded its legal authority in planning a $5,000 threshold for 2024 while the threshold set by Congress is still $600. They called the move “a lawless act.”

They also asked IRS Commissioner Daniel Werfel to testify about it, although a date for his appearance before Congress hasn’t been announced. While a tax package currently under consideration in Congress would raise reporting thresholds for two other 1099 forms, there is no provision affecting 1099-K forms.

The upshot is that 1099-K reporting rules for 2024 are an unsettled area that will—once again—need to be resolved before year-end.

Write to Laura Saunders at Laura.Saunders@wsj.com

LINK: https://www.wsj.com/personal-f...line-sales-this-year

Let's say...I buy a tractor for $20,000. Five years later, I sell it on eBay for $15,000. Will I now be taxed on that $15,000?

Keep careful records and consult depreciation tables. This is CPA country.

I wouldn't trust them with a broken toothpick. I used to sell a bunch on eBay and paid them (and PayPal) a lot in fees.

eBay pushes for an agenda through legislation, and then get surprised that taxes and regulations are increased.

Now they had to lay off a few workers because former sellers like me aren't paying for their bottom line.

AMFYOYO.

The other careful thing people are going to worry about is tax loss carryover. Unless you’re selling is a business related asset or done as an investment, the max loss per item is zero. If it’s a guitar you played (assuming you’re not a professional guitar player), it is not an investment.

Here’s an example. Let’s say you purchase 2 guitars at 2k each. You sell guitar one for $1500 and sell guitar two for $2500. Net investment 4K, net proceeds 4K. No gain, no loss. Except, the rules for hobby income is different than investment income. The IRS says on hobby guitar one, your sale is below basis so there is a zero taxable income, but you cannot apply the loss toward other gains. So guitar two would have a taxable gain of $500 dollars even though you still took in the same amount as the original basis. You will not be able to carry the loss from guitar one to offset the gain on guitar two (unless the guitars were purchased as an investment or business related asset).

The only reason this was delayed by the IRS is the fact this is an election year. This is going to absolutely screw the middle and lower class. Not only in extra taxes, but add a layer of complexity to what would have been a simple tax return which will require professionals to sort the mess out. I can guarantee the average person would believe the above example would be a zero tax scenario and report it as such. They might even get away with incorrectly reporting the transactions. Why do you think the IRS asked for 87k new tax agents? You would lose in an audit and be responsible for penalties and interest. This would have wrecked the Democrats in November.

Does the reporting entity need to be an actual business? Does something like the SF Classified have to track user activity and report sales? Or would these be included under the "friends and family" provision?

Seems like that would change things around here. Since these are private sales, the question then becomes, are individuals who buy an item above the threshold required to report the purchase?

quote:

Originally posted by Gustofer:
Let's say...I buy a tractor for $20,000. Five years later, I sell it on eBay for $15,000. Will I now be taxed on that $15,000?

Generally no, but with the new reporting rules depending on where you sell it you might end up with a 1099 for it shifting the burden of proof to you as you now have to prove that you didn't have any capital gains on it.