SAN ANTONIO — If you're selling stuff online and using payment processing services like PayPal or eBay to collect money, get ready for changes. The IRS now wants to know if your sales exceed $600.
A Form 1099-K is used to report transactions that are processed through online payment services. For example, if you use eBay, PayPal or Etsy to process credit or debit card payments, you may receive this form.
Currently, entities will issue this form to online sellers who process more than 200 individual transactions that collectively exceed $20,000. But a provision in the American Rescue Plan Act of 2021, also known as the COVID-19 Stimulus Package, is going to change the rule. Online sellers who process more than $600 will now receive this form.
“What that will say is, 'This is how much you sold during the year. You may be potentially taxed on that.' There are a lot of stipulations on that whether you will be taxed or not. Where did the merchandise come from? Was it more like a garage sale? Were you getting items from your house that you already had?” said Karl Eggerss, senior wealth advisor and partner of Covenant.
Eggerss adds that it is important for sellers to review what they can deduct off their business income.
“If it really was a situation where you bought it and resold it, even though it's going to be reportable at a much lower level now, you can turn that into a positive and treat it like an actual business," said Eggerss. "Shipping costs to ship some of these things, all of these different expenses that go along with running a business. Those things get deducted straight from the income, that you made from the items that you sold."
If you want to know if you'll be facing taxes and the amount, contact a certified public accountant (CPA).