Etsy, eBay, PayPal Want IRS 1099-K Relief for Online Sellers
Companies like eBay, Etsy, and PayPal want Congress to raise the $600 reporting threshold for IRS Form 1099-K to give relief to millions of sellers who use their sites.
Online shopping sites like Etsy, and eBay, and payment network PayPal, among other companies want Congress to change the new $600 reporting threshold for IRS Form 1099-K. The rule, which won't apply for 2023 due to a recent delay from the IRS, affects millions of people who sell on sites like Etsy and Poshmark and get paid through third-party networks like PayPal, Square, and CashApp.
Previously, to receive a 1099-K, you had to have at least 200 third-party payment network transactions totaling more than $20,000 in gross payments. However, due to a tax law change, a single transaction on a payment network of just $600 could trigger a 1099-K. Some people call this the “600 rule.” The IRS delayed the rule Implementation last year, but that change and the most recent 1099-K delay for the 2023 tax year continue to cause confusion.
The Coalition for 1099-K Fairness (a group of online marketplaces that oppose the new rule) has urged Congress to get involved. The goal is to have bipartisan legislation that raises the 1099-K threshold, giving relief to “casual sellers.” That includes millions of people who are paid smaller amounts through third-party networks and haven’t received 1099-K forms in the past.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
More: IRS Form 1099-K: When You Might Get One From Venmo, PayPal, or Cash App
Is the IRS unfairly targeting casual sellers?
PayPal, eBay, and Etsy are among several members of the 1099-K Fairness Coalition that want Congress to ensure that casual online sellers aren’t burdened with the IRS 1099-K form. The organization cites a national survey of sellers where:
- 70% of respondents said they would be deterred from selling online because of the $600 IRS 1099-K reporting requirement.
- 85% percent of those surveyed didn’t think that the IRS should be “targeting people who only occasionally sell online,” according to the survey.
Members of the Coalition for 1099-K Fairness include Aribnb, Bikelist, eBay, Eventbrite, Block, Inc. (for Square and CashApp), ETA, Etsy, Goldin, Kidizen, Mercari, Noihsaf Bazaar, OfferUp, PayPal, Poshmark, Inc., Reverb, Rover, Sports Fan Coalition, StubHub, TechNet, and Tradesy
According to the Coalition, many transactions casual sellers have “involve the sale of used goods that do not create any tax liability.” (Some of those goods are often sold for less than what the seller initially paid). The organization says on its website that a $600 1099-K threshold would disproportionately burden some taxpayers, who could be at risk of over-reporting their income or “forced to hire a tax professional” to ensure compliance with the reporting requirement.
The Coalition also points out that economic hardship is another factor for nearly 40% of online sellers. The majority (close to 75%) said they sell online to help pay for necessary personal expenses.
1099-K: What could Congress do?
The Coalition for 1099-K Fairness wants Congress to pass legislation that would increase the 1099-K reporting threshold. If Congress doesn’t act, the organization says millions of people with relatively small online businesses will receive 1099-Ks for the 2023 tax year. The coalition contends that could cause significant confusion and administrative challenges–not only for networks and sellers but also for the IRS.
In Congress, the Saving Gig Economy Taxpayers Act was reintroduced in the U.S. House of Representatives with bipartisan sponsorship.
- The legislation would repeal the IRS 1099-K $600 rule and restore the previous $20,000/200 transaction threshold.
- It’s unclear right now what will happen with the legislation, which is similar to proposals circulated in Congress in the past but failed to gain enough support to pass.
For now? The IRS in November, announced that the $600 1099-K reporting rule won't apply for the 2023 tax year. But remember that the IRS expects you to report all taxable income on your federal return, whether you receive a 1099-K or not.
Related
As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Seven Steps Couples Should Take Before Blending Their Finances
Getting on the same page now can ensure you remain successful throughout your relationship.
By Kiplinger Advisor Collective Published
-
Charitable Remainder Trust: The Stretch IRA Alternative
The SECURE Act killed the stretch IRA, but a properly constructed charitable remainder trust can deliver similar benefits, with some caveats.
By Brandon Mather, CFP®, CEPA, ChFEBC® Published
-
Retirees Face Significant Tax Bills Due to Fraud
Fraud A new report sheds light on how older adult scam victims end up with big tax bills and lost retirement savings.
By Kelley R. Taylor Last updated
-
Tax Day: Is the Post Office Open Late?
Tax Filing Tax Day means some people need to mail their federal income tax returns.
By Kelley R. Taylor Published
-
High Earners: Beware of These Illegal Schemes to Lower Taxes
Tax Schemes The IRS says high-income filers are targets for several illegal tax schemes.
By Katelyn Washington Last updated
-
Mailing Your Tax Return This Year? What to Know Before You Do
Tax Filing There are plenty of reasons not to mail your tax return this year, but here’s what you should know if you are.
By Katelyn Washington Last updated
-
IRS Warning: Beware of Smishing and 'Helper' Tax Scams
Scams Tax season is a time to look out for email and text message scams.
By Kelley R. Taylor Last updated
-
Most Expensive States to Live in for Homeowners
Property Taxes High property tax bills make the places on this list the most expensive states for homeowners to live in.
By Katelyn Washington Last updated
-
Don’t Miss This $2,500 Tax Break for Paying Your Student Loan
Tax Deductions Do you qualify for the student loan interest deduction this year?
By Katelyn Washington Last updated
-
How Much Richer Could You Be Without a Big Tax Refund?
Tax Refunds A big tax refund isn’t a reason to celebrate if you overpaid throughout the year. Here’s how much money your interest-free loan to the government could have cost you.
By Katelyn Washington Last updated