Those 87,000 new IRS employees won’t be doing anything, right? (non-paywalled Yahoo story here)
Did You Sell an Old Desk Online? You May Receive a Tax Form.
It’s not unusual for anyone with an old desk or bicycle that’s in decent condition but no longer needed to sell it online and make some extra cash.
But because of a change in tax law, these small-time online sellers might soon receive a tax form that few have seen before, a 1099-K. The change took effect for 2022 and might be confusing, experts say, possibly leading some people to pay taxes that they don’t owe.
Millions of people could receive the forms early next year, said Christopher Walters, CEO of Blucora, the parent company of TaxAct do-it-yourself tax software. “A lot of people are likely to be surprised,” he said.
What’s going on? In 2021, as part of the American Rescue Plan, Congress changed the rules for how online marketplaces and payment services must report transactions. The aim was to better track gig economy income that wasn’t reported to the IRS.
Yes, they will be surprised. Any who voted for Biden and Democrats need to shut up and take it. This is the result of your vote. Put on a big smile and pay it
Before this year, online companies that process payments — including marketplaces like eBay and Poshmark and payment services like PayPal and Venmo — were required to send 1099-Ks only to sellers who exceeded 200 transactions and $20,000 in income annually. That threshold captured sellers running businesses, while excluding most people who were merely cleaning out their closets.
But this year, the income threshold dropped to $600, with no minimum number of transactions. If you received $600 or more for the sale of goods or services, you may receive a 1099-K in early 2023 — even if you are just an occasional online seller of used household items or clothing.
Remember, Biden voters, big smile!
Casual users of online platforms may receive the forms even if the payments don’t reflect taxable income, said Andrew Lautz, director of federal policy with the conservative National Taxpayers Union, which supports a higher reporting threshold. Used items generally don’t result in taxable income if they are resold for less than what the seller originally paid, he said.
Say you sold a used piano on eBay for $1,000, but you paid $2,500 when you bought it new. “You don’t owe taxes,” Lautz said.
Under the new rule, however, eBay will send both you and the IRS a Form 1099-K, showing you were paid $1,000. The company knows nothing about your initial purchase; it’s up to you to document the original price to show that no tax is owed. Taxpayers with normally simple tax profiles “may not know how to report this transaction” on their income tax return, the Congressional Research Service noted in a report.
Say it it with me, big smiles!
The change is not meant to apply to people who are receiving payments as gifts or as reimbursements from friends after splitting the cost of a restaurant meal, said Erin Collins, the national taxpayer advocate, who heads an agency within the IRS that assists taxpayers. But some people could mistakenly receive forms anyway — say, if they get payments mislabeled as business transactions rather than “friends and family” payments, she said.
“The change is going to cause confusion,” Collins said.
Right, and it will be so easy to get it resolved, even as the IRS adds all those employees, right? It will probably be easier to just pay.
Read: Small Online Sellers Should Get Ready For Biden’s Taxation »