How the 1099 tax form will change in 2022: the most important innovation

Starting next year, in accordance with the American Rescue Plan Act, people selling goods or services on platforms such as Etsy, eBay and other sites using third-party transaction networks such as PayPal, Cash App and Venmo will be issued a tax form under titled 1099-K for online sales totaling $ 600 or more. The publication told about this in more detail. Augusta chronicle.

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Currently, online merchants only receive these forms if they have had at least 200 transactions totaling $ 20 or more.

Confusion has arisen on social media as to whether this change will affect people who use these services for day-to-day transactions.

Anything over $ 600 requires Form 1099-K

It doesn't matter if you're selling online as a part-time job or working full-time by early 2023, all online sellers will be required to complete 1099-K for sales made in 2022.

If you have sold at least $ 600 worth of goods, you must report the income you received on your tax return.

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This has always been a requirement when filing a tax return. The American Rescue Plan Act simply expanded the amount of reporting required to collect tax information and changed the income threshold.

Who will suffer

The IRS wants to make sure it sees all tax returns from part-time resellers and business owners, including online sales.

Will I have to pay taxes when sending and receiving money via PayPal and Venmo

This new threshold change, according to PayPal, currently only affects payments received from transactions in goods and services, so it does not include transfers of money to your family or friends using PayPal or Venmo.

How the IRS Knows If I Am Paying for Goods or Services

PayPal and Venmo users mark their transactions as personal / friends and family or goods and services when they buy a product or pay for a service. Selecting this tag will give you the information you need.

Is the 1099-K threshold change specific to PayPal and Venmo

No, this applies to all third-party settlement organizations that you can use to receive payments for the sale of goods and services. According to the law, this also affects all financial institutions that consumers use, such as bank accounts and other ways of sending and receiving money.

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And if I sell personal property, such as a sofa, for $ 600 or more, but this will be less than its original value

According to PayPal, while the IRS requires banks and payment service providers like PayPal and Venmo to send customers a Form-1099K if they reach the $ 600 threshold, certain amounts may be included in the form, which are usually excluded from gross income and therefore are not subject to income tax. It can be:

• amounts from the sale of personal belongings at a loss;
• amounts sent as refunds;
• amounts sent as a gift.

For example, if you bought a sofa for $ 1200 and sold it for $ 800, that amount will not be subject to income tax. Sellers are advised to speak with a tax professional when completing 1099-K to determine if specific amounts are classified as taxable income.

Hobby or business

Visit the IRS website for more information and how your taxes might change, or go to PayPal to learn more about online sales and taxes.

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