Tax & Accounting News
Online Sellers Frustrated at New Tax Thresholds, Marketplaces Fight For Their Users
For many families across the United States, selling secondhand items -- like gently used clothing and unwanted antiques -- has become a major source of income. Stay-at-home parents, for example, have used reselling operations to turn themselves into dual income households.
Then, there are online shops like eBay's Linda's Stuff that have become fully fledged e-commerce retailers in their own right.
Now, new tax thresholds have many online sellers frustrated.
The American Rescue Plan of 2021 included a provision that requires sellers to report online marketplace transactions that exceed $600 in total — this is notably lower than the previous $20,000 threshold, and has made things immensely challenging for smaller sellers.
Sellers must fill out a 1099-K form their transactions, and although the IRS says the change impacts only tax reporting rules, not overall income taxability, it has small sellers miffed.
Melissa Williams, a mom from Walla Walla, Washington has been selling her kids' clothes online for over a decade to help fund their new wardrobes every season.
“It really helps us financially, being able to sell my kids’ used clothing and then turn around and buy their next size up,” Williams said in an interview with The Hill.
She went on to tell the outlet that she is actually considering suspending both her Kidizen and Mercari accounts for the remainder of the year since she's already exceeded $600 in sales on both platforms.
Kidizen, eBay, Etsy and Poshmark are all among online marketplaces that have banded together to fight the low tax-reporting threshold.
All of these companies have joined the Coalition For 1099-K Fairness, which also includes big names like Airbnb, OfferUp, and PayPal.
The Coalition is seeking a return to the previous $20,000 reporting threshold, noting specifically that they aim "to increase the reporting threshold for sales on online marketplaces. We operate under the belief that millions of Americans casually selling things online and micro entrepreneurs just starting a business should not receive unnecessary, invasive, and confusing tax forms for small-time transactions."
If you are interested in writing to your Congressperson regarding a reversal of the tax reporting requirements in the American Rescue Plan, the Coalition has provided a pre-written letter here.
Have you been impacted by these new regulations for third-party sellers online?
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