Have you had a nice side income selling stuff on eBay or through PayPal? Sales you maybe conveniently forgot to declare at tax time?
Well, that party is officially over.
Thanks to our revenue-hungry, debt-strapped government, the IRS is now keeping tabs on what you've been selling on eBay, Amazon or your own company's website. If you've used PayPal or other popular payment-collection tools to sell products or services, you may see a crisp new 1099-K form from your payment provider. This change is a biggie.
Over the years, an industry sprang up around small, online sellers and resellers who neglected to include their Etsy or eBay income at tax time. It was like running a lemonade stand, or the equivalent of a cash business.
That's no longer the case. If you conducted 200 transactions totaling $20,000 or more, you'll be getting a tax form from your payment provider declaring the amount of that income. If you're thinking about losing that form, don't -- the IRS gets a copy, too.
I personally cannot wait to find out the total figure in previously hidden income this 1099-K form will reveal. I think it will be huge.
We may see some changes in the marketplace, too. Smaller sellers may keep a sharp eye on that $20,000 figure and just shut their stores down for the year if they get close to that threshold.
Other, more serious sellers may even lift their prices to cover the tax bite. Otherwise, they're looking at a pretty radical change to their profit margins, especially for sellers of physical goods.
Still more sellers will ramp up their business to try to reel in added sales. If more than 30 percent of an entrepreneur’s gross income just vaporized thanks to the 1099-K form, they may be looking to drive more sales volume to keep their income stable.
If you have questions about your obligations with the new 1099-K form, the IRS's website is a treasure trove of information, so start there. If you have more questions, ask a tax pro.
Tell us how this tax change affects you in the comments below.