If you have been selling items online, you might be getting a new tax form regardless of how many items you have sold throughout the year. In this interview on CBS, Karl Eggerss discusses the changes that could affect you and how to take advantage of this side business.
Sharon Ko: Maybe you want to make extra money selling unwanted stuff online, or you already have a side gig selling stuff online. Well, listen up, changes are coming. Right now, if you sell goods and accept money from buyers through any electronic payment processing platforms like PayPal or eBay, you’ll likely receive what’s called a 1099-K form.
Karl Eggerss: And what that will say is, “Here’s how much you sold during the year,” and you will be potentially taxed on that.
Sharon Ko: Currently, you’ll only get this form if you’ve processed more than 200 transactions worth $20,000 or more, but a provision in the American Rescue Plan Act of 2021, AKA the COVID Relief Bill is changing that rule. Online sellers who process more than $600 worth of payments will receive this form.
Karl Eggerss: Now, there are a lot of stipulations whether you’re going to be taxed or not. Where did the merchandise come from? Was it more like a garage sale?
Sharon Ko: Speaking of taxes, think about how to take advantage of your current expenses.
Karl Eggerss: 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. The shipping cost to ship some of these things, all 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.
Sharon Ko: If you have more questions about taxes for online transactions, contact a trusted CPA.