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‘I can’t believe it!’ Grim reality sinks in as eBay informs users of new tax law on sales above $600

August 30, 2022 | | Print Article

The American Revolution was as much about taxation as anything, with the storied Boston Tea Party protest by frustrated colonists rallying a fledging nation into rejecting tyrannical rule. This being a point of contention the U.S. government should take note of.

As it is, Americans are taxed at every turn, including an estate tax that collects when they die. And now they can add eBay sales above $600 to the mix — courtesy of President Biden’s 2021 American Rescue Plan.

But don’t worry, you only pay taxes if you sell an item for more than you bought it for. So, hopefully you still have the receipt for that coffee table you bought back in 1982. What a nightmare!

Turns out, Bloomberg reported on this back in June, informing small-business owners to “prepare yourselves for the era of the 1099-K.”

“That’s the tax form for disclosing transactions with services such as PayPal, Venmo, and Airbnb. Until this year, anyone with less than $20,000 in total payments typically didn’t get a 1099-K—and thus, in theory, could avoid paying taxes on money earned on such platforms,” Bloomberg reported. “But since Jan. 1 those companies have been required to report gross payments of more than $600 directly to the Internal Revenue Service. That means small-business owners—as well as people who periodically empty their closets on EBay—will receive a 1099-K from any service provider where their income exceeds that amount.”

Sellers were informed by eBay on what they need to know to be in compliance:

  • Starting on Jan 1, 2022, eBay and other marketplaces are required by the IRS to issue a Form 1099-K for all sellers who receive $600 or more in sales.
  • The new tax reporting requirement will impact your 2022 sales and taxes that you file in 2023—it will not apply to your 2021 sales and taxes that you file in 2022. Throughout 2022, look for updates from us that will help explain what’s changed and what you need to do next.
  • If you haven’t already given us your Social Security number (SSN) or Individual Tax Identification Number (ITIN), we’ll ask you to provide it once you reach $600 in sales.
  • No need to worry— you only pay taxes on profits. 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 last year and then sold it on eBay today for $700, that $700 you made would generally not be subject to income tax.
  • While eBay is unable to give tax advice to our sellers, we want to help make dealing with taxes as easy as possible. Our goal is to help all sellers, casual or those selling as a business, with these new requirements.

So more regulation to go on top of a mountain of red tape that already exists. The kicker here is that, according to the Tax Foundation, total federal tax collections, including payroll and other taxes, reached an all-time high in nominal terms of $4.05 trillion in fiscal year 2021, amounting to 18.1 percent of GDP.

Social media was not impressed with the money grab… here’s a quick sampling of responses to the story from Twitter:

Tom Tillison
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