New tax law requires third-party sellers to pay taxes on earnings over $600
RICHMOND, Va. (WWBT/Gray News) – Side hustles seem to be more common as families find unique ways to make ends meet.
But starting next year, the extra money you’ve been making on third-party marketplace apps like Amazon, eBay, Etsy or Facebook Market, may just get taxed.
The IRS is coming after anyone who receives over $600 in payments for goods or services processed by third-party payment apps like Paypal or Venmo.
“eBay, Venmo, Square, there are so many of them I can’t say them all,” tax preparer Larry Edwards told WWBT. “If you make $600 or more, you have to pay a self-employment tax.”
To be clear, most Americans will not receive a form for earnings gained in 2021, but everyday sellers who sell over the new threshold can expect a 1099K form in 2023.
Before 2022, the threshold to receive a 1099K form was $20,000 in sales and 200 transactions. Both requirements had to be fulfilled.
Edwards said small businesses should experience a minimal impact from the change, but now the IRS is treating anyone who sells over the new $600 threshold like a small business too.
“Cash could go in your left-hand pocket, but you better put it on your tax return,” Edwards said explaining the IRS is trying to capitalize on millions of dollars that go unreported every year.
The new law was lumped in with the American Rescue Plan Act that passed last year.
Essentially, it is how the government pays for the plan and its benefits, like the stimulus checks millions of Americans received during the pandemic.
But there are some exceptions to this law.
“This doesn’t count ATM transactions or friends and family. It’s just a business, credit card or cash-app transactions,” Edwards said.
It’s important to remember that this applies to earnings made this year. If you make over that threshold, you will receive a 1099K when you file taxes in 2023.
Third-party selling apps, like eBay, are currently lobbying the federal government to raise the threshold back to where it was.
In a statement, eBay said, “We’re lobbying Congress on your behalf to raise the $600 threshold. Help us stop over taxation and the avoidable disclosure of private information.”
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