New 1099 Rules

Section 9674 of the American Rescue Plan (HR 1319) added a requirement that payment processors and online marketplaces send sellers a form 1099K if their annual activity exceeds $600. The idea is to provide additional information to the IRS to allow them to catch tax cheats in the gig economy. Sounds reasonable.
The problem is that there are many casual sellers who probably owe no tax that are going to have additional reporting requirements that may be onerous.  For example, you purchased an exercise bike for $1000. After watching it collect dust for a couple of years you sell it online for $650. The loss is not deductible, but suddenly you need to report the transaction on your return or be prepared to answer a notice. You may be asked to document the original purchase price. This would be even more of a problem for some sellers. Imagine a coin collector who sells his collection of buffalo nickels on Ebay. There are 500 coins that sell for $1.50 each. They were purchased over a thirty-year period, so he has no records of the cost but is certain he didn’t make money.
 When my kids were in college, I frequently purchased textbooks from Ebay, Amazon or other online markets. Often these were used books and I would resell them after the class. I certainly lost money, but my motivation was more recycling. The used book could be reused and not end up in a landfill. In addition, that might be a tree that didn’t need to be cut to produce a new book. Finally, I felt like I might be helping someone who couldn’t afford a new book or to decrease the amount they needed in student loans. Will sellers like me decide it just is not worth the hassle and stop?
Now, I have vented for everyone. The point is if you make online sales, you need to consider the reporting requirements to avoid a notice or inquiry down the road.
As always, if you have any questions contact us.