Friday, June 10, 2022

More tax from online sales

From Bloomberg: The IRS is coming for your Venmo income.  The IRS is reported to have imposed a new requirement for Form 1099-K, on which an "online payment settlement entity" will be required to report any payment over $600 (down from the previous $20,000). The story begins with "Lexi," who frequently buys items at garage sales and flea markets and sells them on eBay, making as much as $15,000 per year. Up to now, that income has been tax-free for her - because she has not reported it. 

The IRS is not changing the tax laws. Any time that you buy something for $x and then sell it for $x+y, the $y is regarded as a capital gain, and tax has to be paid on capital gains. It is up to you to keep track of how much you paid for the item and how much profit you made on the sale. 

For a single person, long-term capital gains are taxable only if your income is over $40,000 or so. These rates require that the item be held for a year or more before it is sold. If it is sold earlier than that, the gain is taxable at ordinary income rates. 

More information from the IRS is available at its About Form 1099-K page. 

Update: In early January, the IRS announced a one-year delay in implementing this new policy. 

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