The Internal Revenue Service (IRS) is intensifying its efforts to ensure taxpayers accurately report income earned through online platforms like eBay, Etsy, and others, according to a recent Wall Street Journal article.
This signals a shift towards stricter enforcement of tax laws for online transactions. In essence, the threshold for receiving a 1099-K form, which reports income from online sales, has been drastically lowered.
Previously, platforms typically issued these forms only to users who earned over $20,000. However, for the 2023 tax year, the threshold is now $5,000. This means millions more taxpayers will receive the form, increasing visibility of their online income.
Demonstrating a clear intention to capture even smaller online income streams, the IRS plans to further reduce the 1099-K threshold to $2,500 in 2025 and ultimately to $600 in 2026, according to the article.
It is important to note that, while all business income must be reported regardless of platform or threshold, personal sales are treated differently. If personal items are sold for less than their original purchase price, no tax is owed, only disclosure is required. However, profit on personal sales must be reported as a capital gain.
In addition, taxpayers who may have previously flown under the radar with their online income are now at higher risk of being flagged for audits or penalties. As such, taxpayers should be diligent in documenting their online transactions and seek professional tax advice when needed.
We addressed this topic in a recent Gorfine, Schiller & Gardyn (GSG) podcast interview with Laura Shuman, Director, Small Business at GSG, about 2025 accounting and financial planning tips for small business owners.
One of the key takeaways from this interview with Laura, which is very topical with this recent news, is that you need to be diligent in documenting online transactions and should seek professional tax advice. It’s also best to reach out to your accounting partner today to help with tax planning and minimize any last-minute surprises.
Please contact GSG here to learn more about how we can help you meet these updated IRS reporting requirements.
Categories: Emerging Regulations, Tax
