Art & Antiques by Dr. Lori
by Dr. Lori Verderame
Online Resellers are everywhere. Millions of people are bringing home extra income with a side hustle, online selling gig, or reselling business. Whether you are running a robust online selling business on eBay, Etsy, Poshmark, Facebook marketplace or the like or you are just trying to declutter a few dusty old VHS tapes, unwanted crystal vases, or old board games from your basement by selling them online, the IRS wants to know about it and the “taxman” wants his cut of your sales income.
When I teach How to Sell Old Stuff Online for Profit course, I’m often asked about the requirements for reporting taxes. Many of my students are new resellers, new business owners, or single-item online liquidators. I’m not an accountant, but the simple rule for online resellers is a new law which was supposed to go into effect in 2022 has been postponed. This law requires that persons selling products or services online must report income at a monetary threshold for tax purposes. The IRS reporting threshold found on a 1099-K form was supposed to go into effect first in 2022 and then in 2023, is changing once again.
Beginning on January 1, 2024, the threshold for reporting income from online sales transactions will drop from $20,000 to $5,000. By 2025, the IRS will achieve its goal to reduce the reporting threshold for income from online sales to $600. That means if you made $600 or more in online sales, you need to report that income to the IRS and pay taxes on it. Again, this income reporting threshold for online sellers is $600 for the 2025 tax year.
This law was enacted as part of the American Rescue Plan of 2021. If you make more than $600 in online sales transactions in 2025, you will receive a 1099-K form. The online selling platforms like eBay and others are responsible for sending sellers the 1099-K form.
For resellers, trying to navigate the new tax law, keep these tips in mind:
- Keeping detailed records to aid in tax reporting.
- Save receipts.
- Keep records of costs for goods, shipping, supplies, online selling platform fees, and others expenses.
- Keep track of refunds, credits, etc.
- Shipping and supply costs may be deductible business expenses.
- Keep photos of the items you sold.
- Tracking information helps determine taxable income.
- Tracking information helps prevent over-reporting of income which can result in an overpayment of taxes.
- Keep receipts for at least 3 years, preferably 5 years.
- The IRS may audit tax returns filed within the past 3 years.
Make sure your online selling platform like eBay or Poshmark has your reporting information such as TIN, SSN, EIN, etc. If there is not a valid TIN, the IRS will instruct the selling platform to withhold 24% of your gross proceeds from your online store.
Don’t stress. Check with your tax professional if you have questions. There are many places online to ask questions and get answers. It’s a brave new world for the online seller and new tax laws are just the beginning.
Ph.D. antiques appraiser, award-winning media personality, author, and YouTube host, Dr. Lori Verderame shares her expertise on YouTube.com/DrLoriV and on Netflix and History Channel. Visit www.DrLoriV.com or call (888) 431-1010.
Photo credit: Staff of www.DrLoriV.com