The IRS has announced new regulations that will require individuals who earn over $600 for the transaction of goods and services through third-party payment platforms to report their income with a 1099-K tax form. With a lower threshold for triggering this form, more people with side hustles and small businesses will be reporting their earnings to comply with these changes. Cyndi Thomason shares more on what this means for Amazon sellers and the like in this guest post.
There’s recently been a lot of talk about the American Rescue Plan of 2021 that takes effect in January 2024 after two years worth of delays. This plan requires 1099 reporting from third-party settlement organizations and payment processors to report payments for goods and services if they exceed $600 per year. Previously, the threshold for reporting was $20,000. So, what does the IRS $600 reporting rule mean for you as an Amazon seller?
Your Questions, Answered
To get the latest update on the IRS $600 reporting rule, I spoke with Mario Lucibello, CPA, a partner with Greenhaus Riordan & Co, LLP in New Milford, Connecticut. Mario is an eCommerce tax accountant who has been a great resource for bookskeep and our shared clients.
Mario shared some good news:
If you are an Amazon business, you likely already meet that $20,000 annual threshold and already get the 1099s. Amazon sellers that are in business to make money are serious about their business finances and will have the systems set up to already recognize that income.
He advised that this may be more of an issue for taxpayers on a personal level. For example, for those of you who use platforms like eBay to sell household items that you no longer use, it doesn’t take much to hit $600.
IRS Tightens Reporting Requirements for Sellers Paid Through Apps
The IRS $600 reporting rule applies to all payment processors, such as PayPal, Venmo, Facebook Marketplace, Cash App, and more. It does not extend to payments made to your loved ones for expenses incurred during shared occasions such as dining out, gift-giving, and group travel.
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