Beginning in 2023, anyone selling items through online marketplaces (i.e. eBay, Etsy, Mercari, PayPal, and more) must file an IRS Form 1099-K (for the tax year 2022) if they grossed over $600 in sales for any number of transactions.

Imposes Economic Burden and Increases Complexity and Compliance Costs

  • Many sales of used goods by casual online sellers and entrepreneurs would not create any tax liability since the items are often sold for less than what was paid.
  • Nearly 40% of online sellers surveyed said the change poses an economic hardship, a significant majority of whom sell online to help pay for necessary personal expenses.
  • Two out of three (69%) said they are likely to sell less or stop selling online.
  • Family and friends splitting the cost of a meal or sending gifts could also mistakenly receive tax forms.
  • Out of confusion, tax filers may not know how to report the sales or over-report income leading to inaccurate filings. 
  • Tax filers with simple returns may be forced to hire a tax professional to ensure compliance.  
  • Adjusting tax returns will force the IRS to expend additional resources and may delay the processing of those taxpayers’ returns contributing to the IRS backlog.

Disproportionate Effect on Women

  • Women dominate gig economy work when separating out ridesharing and delivery services.
  • Women are selling used kids’ clothes, engaged in food/grocery delivery, tutoring, babysitting, and other activities arranged through online apps.

Congress Did This, Congress Must Fix It 

  • In 2021, Congress lowered the threshold for reporting online sales from $20,000 to $600 and eliminated a transaction minimum. 
  • Lawmakers sought to raise $8.4 billion from perceived tax avoiders to fund the inflationary $2 trillion American Rescue Plan.
  • Congress can restore the original $20,000 reporting threshold or a higher threshold.