If you sold personal items like concert tickets or used clothing online last year or received money for services through payment apps, you may get an unfamiliar tax form this year.
A tax law change means most online marketplaces and payment apps must send the Internal Revenue Service a form called a 1099-K, with a copy to you, if you received more than $5,000 in payments for “goods or services” in 2024. That’s down from a threshold of $20,000 in payments and more than 200 transactions. (Starting in 2024, the number of transactions no longer matters.)
“As the threshold keeps going down, it catches more people,” said Melanie Lauridsen, vice president for tax policy and advocacy at the American Institute of Certified Public Accountants.
Under the old cutoff, the forms mostly went to people running active businesses rather than to occasional or small-time sellers. “This substantial drop in the reporting thresholds could result in millions more taxpayers receiving Forms 1099 this filing season than in prior years,” according to a blog post by Erin M. Collins, the national taxpayer advocate, who leads a group within the I.R.S. that works on behalf of taxpayers.
Here’s what to know about Form 1099-K:
Who’s eligible to receive Form 1099-K?
If you bought several concert tickets, for example, and resold them online at a markup, you could potentially meet the 2024 threshold for getting the form, Ms. Collins said in an interview. Tickets for big-name concerts, she said, such as performances by Taylor Swift, have reportedly sold for more than $1,000 per ticket. If the seller made money, the gain is taxable.
The rule doesn’t apply to personal payments, like gifts or transfers of money to friends and family, the I.R.S. says. If you and a friend go to a concert, and your friend pays you for the ticket using a payment app, “you should not receive a Form 1099-K for the reimbursement and, generally, it would not be taxable,” according to “common situations” described on the agency’s website.
Similarly, if you dine out with friends and pay with a credit card, then have the others reimburse you for their share of the meal via Venmo or another app, that transaction doesn’t count toward the reporting requirement, the I.R.S. says.
It’s possible that you could receive a form for such transactions in error — for instance, if someone mistakenly tagged payments to you as purchases rather than personal payments. With both Venmo and its parent, PayPal, for instance, transactions between consumer accounts are “friends and family” by default unless the person paying designates them as goods and services. To help avoid a mix-up, the I.R.S. advises, “be sure to note these types of payments as nonbusiness in the payment apps when possible.”
CashApp says on its website that only users with designated business accounts who exceed the federal threshold will get 1099-K forms. You can check the website of your payment app or marketplace for information about its specific tax policies.
What should you do if you get one of these forms?
If you get a Form 1099-K this year, “the No. 1 thing is, do not ignore it,” said Tom O’Saben, director of tax content and government relations with the National Association of Tax Professionals. “Think about, why did you get it?”
Just because you receive a form doesn’t necessarily mean the full amount it shows is taxable, said Lisa Greene-Lewis, a certified public accountant and a spokeswoman for TurboTax. “Don’t panic when you see that amount on a 1099-K,” she said.
If the amount reflects business income, you can deduct expenses for marketing, supplies, advertising and the like, she said. (Gig workers, freelancers and other self-employed people typically report income and expenses on Schedule C.)
If you get a form because you sold used clothes on eBay or Poshmark, but sold them for less than you paid, you generally don’t have to pay taxes on the payments you received. (Since you didn’t make money on the sale, the amount isn’t taxable.)
In an attempt to simplify such situations when you file your 2024 tax return, the I.R.S. has included a new space at the top of Form 1040’s Schedule 1 for reporting “additional income and adjustments to income.” There, you can include amounts reported in error on a 1099-K or report personal items sold at a loss.
As of Thursday, the I.R.S. had not updated all of its online information to reflect this change, but details can be found in the instructions for Schedule 1.
If you expected to get a 1099-K but haven’t yet, check on your provider’s website to see if electronic versions are available. Forms should have been made available to users of online payment systems and marketplaces by Jan. 31, the I.R.S. says.
What if I sold the goods for a loss?
As with any information submitted on a tax form, it’s wise to keep receipts and other documentation showing the amount you originally paid for the item — sometimes known as its “basis,” said Andy Phillips, vice president of H&R Block’s Tax Institute.
Say you paid $6,000 for concert tickets and resold them online for $5,500, according to an example in Ms. Collins’s blog. You’ll get a Form 1099-K reporting gross payments of $5,500. But because you didn’t make money on the tickets, you’ll report the amount of $5,500 in the new space, and won’t owe tax on that amount.
Why is this change taking effect now?
The change had been scheduled to take effect in 2022 at a threshold of just $600 as part of a plan to better track income from the gig economy that may not be reported to the I.R.S. The change was included in the American Rescue Plan legislation that Congress passed in 2021.
The I.R.S., however, delayed the change by two years. A lobbying group representing payment apps like Venmo and CashApp and marketplaces including eBay and StubHub had opposed the change, and a government watchdog agency said the much lower threshold could confuse gig workers.
Then, in November, the I.R.S. announced that it would stagger the arrival of the lower threshold over a few years, giving businesses and sellers time to adjust. For 2024 — the year covered by the tax return you are filing this year — it’s $5,000. For 2025, the threshold will drop to $2,500. And in 2026 and years after, it will fall to $600.
“I think the I.R.S. listened, and that was appreciated,” said Ms. Collins, the taxpayer advocate.
Do some states have lower reporting thresholds for 2024?
Yes. At least five states set lower limits for receiving the form, according to PayPal. They are Maryland, Massachusetts, Vermont and Virginia, where it’s $600, and Illinois, where it’s more than $1,000 and four or more transactions. If you live in one of those states, or others with different rules, you may get a Form 1099-K even if you didn’t exceed the federal threshold for 2024. In those cases, companies send the forms to state tax authorities, not to the I.R.S., according to PayPal.
What if I had income from online sales but didn’t get a 1099-K?
Income of any type — even if it’s beneath the threshold for getting a 1099-K form — should be reported on your tax return, Mr. O’Saben said. The 1099-K, and other similar forms, are intended to make the I.R.S. aware of the income, he said. But it’s incorrect to assume that if a form isn’t received, the income isn’t taxable.
Could the threshold for 1099-Ks be changed again?
Modifying the federal thresholds would require action by Congress, Ms. Lauridsen said.
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