Black Friday is known as the day when Americans shop for great deals on items. This tradition traces back to the 1950s. However, due to the ease and convenience of online shopping, many shoppers are shifting payment methods and locations.
Cyber Monday takes the forefront in shopping popularity, with 66% of shoppers—roughly 99.6 million consumers in 2022—participating in Cyber Monday, followed by Small Business Saturday and Black Friday.
It is projected that $13.7 billion and $9.8 billion will be spent by consumers in 2023 on Cyber Monday and Black Friday, respectively.
A study found that 50% of all holiday season shopping was done on Cyber Monday, with 77% of all purchases being made online.
The popularity of these holidays continues to rise; 92% of Millennials and Gen Z plan to participate in Black Friday and Cyber Monday, surpassing the participation rates of Gen X and Baby Boomers, who have participation rates of 80% and 70%, respectively.
Despite the success of online retailers, both corporate and independent, their success is impeded once more by extensive government regulations.
New regulations passed by Congress in 2021 will now require third-party payment networks to submit Form 1099-K to the IRS for online transactions exceeding $600, resulting in certain transactions, such as paying a friend back, to be considered taxable income. Previously, only income exceeding $20,000 or more across 200 transactions needed to be reported on 1099-K forms.
On Black Friday, individuals typically spend an average of $734. Given the prevalent shift to digital transactions in this technological era, most people no longer carry physical cash. In the hustle and bustle of holiday activities, leaving one’s wallet at home is common. In such scenarios, many people resort to the convenience of using payment apps like Venmo, enabling them to promptly settle expenses by reimbursing a friend digitally.
Nearly half of Americans say they don’t “worry much about whether they have cash with them since there are many other ways to pay for things.”
Given the threshold being $600, an individual who receives, for example, a reimbursement from a friend for Black Friday purchases would now need to complete a 1099-K form.
For Venmo users, the average person sends five transactions per month, with the average amount being $65-75 in the U.S. This easily surpasses the threshold of $600.
Payment processors like Venmo, PayPal, and CashApp or online platforms such as eBay, Etsy, and Facebook Marketplace will now send 1099-K forms to individuals who sell $600 or more. These individuals are then responsible for reporting this income to the IRS. The new requirements will especially affect casual online sellers, who are often individuals selling pre-owned items such as clothing, shoes, and furniture to make extra money, declutter, or for sustainability reasons.
The new reporting requirement may also affect individuals who send friends and family cash for gifts and payments.
As of last year, Venmo is one of the payment options for Amazon shoppers. According to Venmo, as of June 2023, if you receive $600 or more for the sale of goods and services without initially providing your tax information, Venmo will withhold 24% of those payments and remit them to the IRS for backup withholding.
For example, people selling homemade goods on sites such as Esty or old clothes on apps such as Poshmark, are now met with complicated tax challenges instead of additional income to help make it through the holidays.
Several online selling websites have pushed back against the new 1099-K requirement. eBay has said that “millions of Americans casually selling things online shouldn’t receive unnecessary, invasive, and confusing tax forms for small-time transactions.”
Rather than the average American selling items online or utilizing tools such as Vemmo, for extra Christmas spending money, they are inhibited by the fear of complicated tax forms and fees.
We must repeal these unnecessary roadblocks for Americans struggling with a challenging economy.
Cyber Monday and Black Friday bring in billions to the economy, we should empower sellers to be successful rather than create policies that discourage them from entering the marketplace on Black Friday and Cyber Monday.