Stimulus Bill Requires Marketplaces and Payment Processors to Report Earning of $600+
A massive $1.9 trillion Covid relief package was passed in Congress. We covered some of the main provision included in the bill, such as $1,400 checks for millions of Americans, additional unemployment benefits etc. We also mentioned a small change that could affect many people in this hobby.
If you use PayPal, eBay, Etsy, or any electronic form of payment processing to collect money from buyers, cashback from shopping portals etc., you will be impacted if the amount a single entity processes on your behalf exceeds $600. The details are in section 9674 in the bill.
Beginning on January 1, 2022, third party payment processors will have to report any income for goods or services exceeding $600 during the calendar year on a form 1099K. This is a requirement that some states such as Massachusetts, Vermont, and others already have in place.
Currently, Form 1099K is sent out by marketplaces and payment processors to sellers who have more than $20,000 in gross receipts, and over 200 transactions. So this will be a drastic change now that it is lowered to $600.
SEC. 9674. MODIFICATION OF EXCEPTIONS FOR REPORTING OF THIRD PARTY NETWORK TRANSACTIONS.
- (a) In General.—Section 6050W(e) of the Internal Revenue Code of 1986 is amended to read as follows:
- “(e) De Minimis Exception For Third Party Settlement Organizations.—A third party settlement organization shall not be required to report any information under subsection (a) with respect to third party network transactions of any participating payee if the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions does not exceed $600.”.
- (b) Clarification That Reporting Is Not Required On Transactions Which Are Not For Goods Or Services.—Section 6050W
- (c)(3) of such Code is amended by inserting “described in subsection
- (d)(3)(A)(iii)” after “any transaction”. (c) Effective Date.— (1) IN GENERAL.—The amendment made by subsection (a) shall apply to returns for calendar years beginning after December 31, 2021. (2) CLARIFICATION.—The amendment made by subsection (b) shall apply to transactions after the date of the enactment of this Act.
Read the full bill here.
Conclusion
You should report all income to the IRS, whether you receive a tax form or not. So normally, just because it is required for a company to send out a form, it wouldn’t change much. But in this case, it could result in many people getting a Form 1099K for sums more than $600 that might not be income.
Some of these payment processors are used for P2P payments, or to collect cashback and rewards earned from shopping portals. PayPal is usually the easiest way to redeem rewards from TopCashback, Rakuten, Swagbucks etc. These are usually rebates for purchases, so they shouldn’t taxed. But if you receive a tax form, you have to reports it and then provide additional information on why it shouldn’t be considered income. It could be a good idea to just cash out these rewards through gift cards or paper checks to avoid the extra work.
Consult with your accountant to find out how exactly this change will affect you, and what you should do.
HT: Doctor of Credit
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This is terrible for people using eBay to sell their old stuff. They will sell an old iPhone, old computer, sell some vase they don’t want anymore, and some car part they bought for a car they don’t have anymore. Suddenly, they have over $600 and have to report non income somewhere. These are capital losses since its less than the cost basis. Schedule D and 8949 is more of for collectibles/bullion and not selling an old iPhone for a loss.
This Bill just makes life more difficult and complicated for the vast majority of internet users who participate in selling their old stuff on eBay or getting rebates through PayPal. The Dems say they want to help the middle class but they always do the opposite. Republicans and Dems both protect the billionaire class.
Im pretty sure you are supposed to report those sales anyways (they are income) and then you can deduct the basis.
Technically, you’re supposed to report income from a yard sale (and then deduct the cost basis too)
BUT, someone HAS to ask, WTH this has to do with COVID??
I’d love to know, who inserted this language and what the heck they were thinking in doing so?? Has this been sitting on their desk for years & they saw an opportunity to stuff it in a big pork bill??
I’m getting sick & tired of the government trying to get their greedy little hands on a piece of every transaction, no matter how many times something has changed hands.
If the govt could figure it out, they’d figure a way to track ever paper bill, just to insure bartenders & waitresses were properly reporting their cash tips.
WTF!!!!
This is why more need to switch over to non-govt-trackable transactions such as bitcoin & other crypto currencies.
I guess this goes to prove the point some have made that there was more pork & non-covid “stuff”, stuffed into this pork bailout pkg.
I love traveling with more than $10k and telling DHS/TSA to stuff it when they ask, after looking at my paperwork
Remember when the king had a stamp tax, a tea tax, etc…