New Federal Tax Law Changes Impact Marketplace Sellers – eBay Announcement
There has been a change to Federal Tax reporting which is set to affect online marketplace sellers everywhere including eBay and Amazon. The change will mainly impact those smaller sellers who previously have managed to fly under the radar of the IRS along as they had fewer than 200 transactions annually and less than $20,000 in sales annually.
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The good news is that this change will come into effect for your 2023 tax filing and not your filing for 2022. Below you can see the full announcement from eBay regarding how this change will impact their sellers.
eBay Federal Tax Change Notification
“We wanted to share an update about a change to federal tax reporting legislation that will impact people who sell on any online marketplace, including eBay.
Here’s what’s changed
As of January 2022, the IRS will now require all annual online sales over $600 to be reported using Form 1099-K. This requirement previously only applied to sellers with at least 200 transactions and over $20,000 in sales each year. This change will impact your 2022 sales and your 2023 tax filing; it will not apply to your 2021 sales and 2022 1099-K tax forms.
Here’s how this change will impact your 2022 taxes
Many sales on eBay aren’t taxable, so if your sales are over the $600 threshold it doesn’t necessarily mean you will be taxed on those sales. Only goods that are sold for a profit are considered taxable, so you won’t owe any taxes on something you sell for less than what you paid for it. For example, if you bought a bike for $1,000 a few years ago, and then sold it on eBay today for $700, that $700 you made generally would not be subject to income tax.
But you will now need to report these sales as part of your federal tax return and we’ll continue to share updates that will help you prepare for these changes.
Here’s what we’re doing
This change will impact millions of casual and small business sellers on eBay. It has raised concerns in our selling community and we’re working to bring these concerns to Congress. We believe this new legislation will cause confusion, over-reporting of non-taxable income, and privacy concerns for millions of Americans who are just trying to get by. We are continuing to highlight the undue impact this increase will have on small sellers on eBay and are urging an increase to the reporting threshold.
Here are some of the issues we’re working to address in our conversations with Congress:
- Overly complicated federal tax forms for smaller transactions.
- Targets casual sellers who are not set up to handle this kind of tax reporting.
- Doesn’t take into account the selling of used goods, which are rarely taxable income as they are sold at a price below the original purchase price.
Here’s what you can do
We invite you to join the conversation on eBay Main Street, where you can contact Congress on behalf of our community of sellers, small business owners, and entrepreneurs.
We will continue to keep you updated as this legislation evolves. Going into 2022, we’ll also share more detailed information that will help you understand what’s changed so you know what to expect in the upcoming tax year. We’ll keep you posted on how we will support you, and what steps you need to take. In the meantime, we want to remind you that this change will impact your 2022 sales and your 2023 tax filing; it will not apply to your 2021 sales and 2022 1099-K tax forms.
Thanks for being part of the eBay community.”
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Dave is a Co-Founder of eSeller365. For over 10 years he has been involved with eCommerce with a particular interest in the marketplaces and the huge opportunities available for sellers when utilizing a multi-channel strategy. After a year of being the UK’s youngest eCommerce consultant, he built an education platform called UnderstandingE that showed the world how to utilize Magento as the “Third Generation of Multi-Channel software”.
Dave has also created a YouTube channel dedicated to entrepreneurship and eCommerce as well as a podcast dedicated to mental health awareness. When Dave isn’t working his main interests include learning and playing Chess, researching the Crypto and NFT space, and trying to find the nearest beach.
im a ecomerce retailer and this may hurt a few small sellers who try to get out of paying the taxes they owe. But it will also bring all of the scammers that hide behind anonymity. Since ebay don’t report there income they have no need to use their real name or to have a real bank account. When your a small business competing with a group of people who don’t pay the 20% taxes on what they make its hard to compete in prices. Its a unfair advantage for a person with no business license or the expense that goes with it to sell and compete with honest people who do. regardless of if you had to report your income anyone who buys and resells for a profit must file taxes by law. No matter how many sales or the cash amount you sell. The only people who this law applies to is people who buy a pair of shoes and sell them used for a cheaper price 3 months later. But that’s not what these people are doing. There buying and selling as a business would and hiding behind the limits so to not be caught or raise suspicion of tax fraud. If you buy 1 item with the intention to resell it for a profit then the 20,000 dollars or 200 transaction reporting law doesn’t apply to you. if you participate in business activity and don’t pay taxes or have a business license your a criminal not a entrepreneur. Not many people sell over 600 dollars a year in merchandise unless they are doing it as a retailer. If you sell a car its understandable but not used shoes or 600 dollars worth of old tshirts you pressed a design on. Basically if you sell goods for a profit the 200 transactions or 20,000 dollar rule doesn’t apply to you. But if you make 1$ profit its a taxable sale and you no longer are protected by the law. You must pay taxes on that dollar or its fraud.
They need your social security number you can’t sell anon on a legitimate platform. Everyone saying this will help them – remember- most people buy AND sell and will take their business elsewhere. No one is a winner here,
Bidens policies are bad for all Americans . No Americans are winners here! With Joe Biden.
That’s what we get for putting Politicians on pedestals. They have less control than you think. But certainly they are not all one thing, Democrat or Republican, myself I’m a Independent and choose to think for myself. 🙂
Remember this all started long before Biden was elected Yes, the old rules were 600 sales and/or $20,000. So no one responded and larger retailers were making a load off-books so the IRS wrote the new rules. They can’t figure out how to get millionaires to pay more so it is all about increasing their revenue somehow.
Apparently you’ve never struggled to make a dam* dollar! I Draw Social Security and barely make it and with the rising cost and inflation especially with the rising cost in food I cannot afford to even buy food hardly anymore so I have to try to make money selling on Facebook marketplace! Do I make 20,000 no do I even make 10,000 no I’m lucky within a years time if I make two grand! So the federal government to go to stick their nose in where it doesn’t belong everybody’s having to try to do something to make money to pay for food and other things because of the rising cost and inflation!
Yeah. I feel you
Thanks for your input. So true. The Biden administration is not going after billionaires the are taxing poor people who are just trying to live
Exactly! If they would work on bringing prices down on groceries, gas, cars and you name it, you wouldn’t have so many people having to do extra to make ends meet. Things go up but never seem to come back down to far!
Same here! My family lives off of SSI and VA disability. We sell to make a little extra. How is this fair when economists estimate that the top 400 billionaire families in the United States paid just $8 in taxes on average!??
Your statement is ridiculous. so where do they stop at? Did you also support them looking in your bank account and taxing you on any transactions over $600? People just selling used items or antiques that they buy here and there up to $20,000 or 200 items is plenty for them to tax. yes people selling and making an actually living wage should pay there taxes but for you to support them doing this is stupid. It’s going to just make many small sellers leave eBay and find another way to sell and eBay will raise YOURs and other large sellers fees, since you sell so much on there and don’t seem to care about being taxed to death then you should be fine with
that, to cover all the lost revenue from all the small guys leaving. This is something that everyone should be against. this is ridiculous over reach by the federal government and I hope eBay can use their connections to stop it. You stating that people selling $600 annually is criminal is a joke these are people that have a small hobby of treasure hunting and selling to add a little extra money in their pocket and supplement their income. I mean really did you think about how ridiculous you sound? Are you going to run out to the corner and yell and the kids at the lemonade stand stating they should be paying their taxes too? Or every garage sale you go to your going to go point your finger at them calling them crooks unless they hand over that cash to the government as well?!! People not making a livable wage selling on eBay are working a job to support themselves which the state and government gets the lions share of that cash so they can stay out of small private transactions. Again yes if they ARE making a livable wage on eBay then fine tax it. Please think a little more before you comment.
I’ve just retired at 66. Four years ago I was injured in a fall and have not been able to sit for long periods of time. By the time I returned from work I needed to take strong pain meds and ice or use heat on my back. I was expecting to sell more on eBay once I retired since I would not be working. I have accumulated an attic full of new, unworn high end clothes my daughters bought, hundreds of Hallmark Keepsake ornaments going back to 2004, a big collection of American Girl items, most new, a comic book collection inherited from my brother and more. I don’t have receipts for my items since it has been years since they were purchased. I don’t even know where to start. I’ve taken down most of my listings in order to stay under the $600 cap. I think starting as a business may be too complicated for me at this time. In 2018, HR 1, “TCJA” was enacted and it does not allow “hobby sellers” to claim any deductions. I imagine I will need to become a “business” if I want to get these items out of my house and not just take them to the Salvation Army, but don’t know if it is worth it. I think I will try to find someone who is already a business and sell my more valuable collections to them. Thought it would be perfect to sell in retirement but it may prove to be too challenging and make my family’s CPA hate me.
I feel so bad for eBay, PayPal, and the like. I recently purchased a used Bose mixer on Facebook Marketplace for about $350, two hours later, the seller contacted me and said that she’s going to refund my money because Facebook is requesting more information for tax purposes, she canceled.
How bad for Americans
I’m retired on a fixed income. Selling on Ebay helps supplement my income to offset some of the rising inflation under this left government . I’m not a big seller but my problem is I am selling off some of my train and sports collection which I paid good money for many, many years ago . Most item I am selling at a loss, I did not keep original receipts . If you sell items on Ebay for a loss, you are not taxed because no profit was made . How do they expect seller to have accurate accounting from items they purchased so many years ago, with very little notice from Ebay of the change for 2022. I understand its not Ebay fault but the fees have going up over the years. I feel government is trying ways to collect taxes on everyone due to the free stimulus money received and when the Dems passing the American Rescue Plan Act of 2021changing the taxable amount from $20,000 per year to $600 generating a K-1099 form to the IRS. This is over taxation and not fair for the American people . I hope Ebay is successful in fighting this . Now I will have to stop selling on Ebay and look for other selling sites.
I’m in the exact same boat! Barely getting by on SSDI with 2 closets packed full of nice clothes, shoes and purses! I don’t have any receipts for this stuff…many still have tags (never worn!). I personally think Congress should pass a bill to allow the elderly (or say 50+ even) who no longer work (retired or disabled) making $150k or less per year to sell all our personal belongings without all this tax hassle! I’m going to write some more letters to a few congress members this weekend on that topic! I encourage you to do the same (or call them, email them). With Biden being so OLD himself….a bill like this might really make Seniors happy with him for a change! Good luck to you Tony selling your collectibles! I hope you can figure it out! Wish me luck too! I’m binge watching “how to” videos for retired seniors selling personal items online to try and get up to speed! Another idea I read in a comment is to sell your collection to another resale or consignment business directly. You might not get as much as selling direct, but you’d avoid ALL the hassle otherwise 😊
Personal sales are not taxable, even with the $600 threshold. The issue is how are marketplaces to know or how are taxpayers to prove that if audited. Both parties said they want to change the law, but as usual, unless there is a deadline, nothing happens, or gets punted down the road. As they did last year.
This really throws a wrench into my plans! I’ve been collecting vintage stereo equipment, computers etc for over 30 years and have intended to spend the first few months of the year thinning my collection. My parents and grandparents have also been wanting me to assist them in selling antiques. We were individually going to keep it within the $20k online yard sale provision. Now we’re going to be stuck with the burden of proof that we’re not for profit businesses if we even pursue selling at all.
We will have a guide soon that we think can help with some ideas on how to stay within the rules to avoid big issues with the new 1099K requirements. Fundamentally, taxes should always be paid on profits, so that really hasn’t changed. There are expenses that some sellers may not think about that could reduce that burden.
The biggest impact we see is for sellers that do both, sell products for profit and also sell items out of their home or family household. We will discuss that a bit as well.
I’ve been selling on eBay on and off for 16 years. Yes, I’ve flipped items for a profit I ran around looking for on clearance sections at the stores and didn’t pay tax on it. However… we are not talking about much profit. Truth is eBay has become a pig. Their ever raising FVF’s now at 15% give or take a couple percent depending on the category plus other fees such as PayPal, state taxes, and shipping have caused me to nearly stop selling altogether. Now the government wants their cut which makes looking for those clearance items a waste of time. I mean… the whole reason we flip items is to make a profit. Essentially I’ll now have to get an item at no less than 70% off to make a small profit after everyone’s cut. People on eBay buy there because they want a deal. If you’re not selling new items on eBay for at least 20% off of retail it’s probably not going to sell (in most cases).
What I find disgusting about this new wrinkle is the scenario they illustrate… selling used items lying around the house. I have lots of items that were several hundreds of dollars, are now five years old and maybe worth $100. So now I’m going to be required to prove what I paid for an iPad four years ago and if I can’t find the receipt the government wants their cut. I must generate 50 to 100 receipts per month. I have no idea how I’m suppose to organize those so when I want to sell something in the future I can prove what I paid for it.
This $600 threshold is asinine. I can agree it probably should have been lowered… maybe cut in half to $10,000… but $600? I see eBay stock plummeting… and other like venues.
This is what happens when you have progressives trying to balance everything out with their little socialism experiment. I’m definitely not a fan. LGB
I think the $20,000 limit was fair! This chane to $600/year is REALLY hurting Senior Citizens!! I’m contacting my legislators in DC with my suggestion for US! Allow retired/disabled Americans earning under say $150k per year to sell off our personal items up to the old limit $20k per year without all this hassle! It’s only fair….God help us! And best of luck to you 😊
No shit you don’t have to pay on items that aren’t sold for a profit. The problem is, many of these items are antiques that we purchased many years ago and don’t have proof for any longer. I will make no profit on these items yet they are worth thousands. How will IRS take my word for it if I don’t have proof I purchased them. This is terrible.
Exactly Frank. If the government wanted to make changes they should have started with lowering the threshold to 10k and 100 items annually. This is horrible because so many items lying around the house can’t be sold without the government unjustly sticking its hand out and stealing from people.
Those of you irritated with this new law… if you voted for Brandon… I hope it affects your life drastically, because you deserve every hardship you’re causing us all. Unfortunately you’ve dragged us all down with you. But hey… no mean tweets have been emanating from the White House the last 11 months thank god. 🙄🙄🙄🤬
Feel free to contact Janet Howell from Virginia, she’s the one responsible for getting this completely unreasonable new law passed in Virginia. Someone needs to start an online petition too. Also, reach out to Mark Warner, and Tim Kaine and deliver the following message: You are concerned about the 1099-K change passed by Congress earlier this year.
This new threshold means that even people selling personal, used goods online will get confusing tax forms, even for sales that aren’t taxable.
It also means that people will have to give platforms like eBay their full Social Security numbers just to sell a few things online.
Finally, you would like to ask the congressperson to protect Americans who want to sell personal goods online by raising the 1099-K reporting threshold to a fair level.
It seems the the joe Biden administration is going not after billionaires but poor people. Tell me if you disagree.
The problem was – as often is the case – that whoever wrote the old requirement was an idiot. It read that you were to receive a 1099 IF your sales exceeded $20,000 AND you had 200 or more sales. So, if you had income of $50,000 on 100 sales NO ONE WOULD KNOW EXCEPT YOU!
As much of a mess this is going to be for each of us, imagine the mess it will cause for the IRS agent. If I pay $5 for a chair and sell it for $10 the $10 is reported and I list the cost of $5 on my tax return. If I sell my ex-wife’s wedding band for $50 but I bought it 20 years ago for $500, do I get to write off the $450 difference against other income? What if your grandmother gave you the most ugly sweater you have ever seen but you find an idiot who thinks it looks great and gives you $20 for it. Do you include the $20 in income and deduct what grandmom paid? Or does she write off the cost but doesn’t have any income?
I flip stuff from thrift stores like old pottery, mugs, vintage items and books. Anyone selling things like this is going to make a profit as you’re only paying a few bucks at Goodwill or Salvation Army to begin with. Now what happens?! This is ridiculous.
This is awful!! Just to buy and sell everything’s taxed to death. Buying things I’m taxed on to begin with then selling then the ppl buying it being taxed on it!! Add on the cost of food that’s went up 30%, gas, and cost of living with the devaluation of the American dollar 😳
To rent a dump hole now is $800 a month at the least. It’s getting rough out here
I’m am now officially done with FeeBay and the others. #FJB