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Selling Your Stuff Online? The IRS May Be Watching

Selling Your Stuff Online? The IRS May Be Watching

May 06, 2024

Spring cleaning time is here, and you’ve got an attic or basement full of stuff you need to get rid of. Some of it may be too valuable to throw away, like your grandmother's silver set or that Fender Stratocaster you haven’t used since your college days. Selling these things will not only clear your house of clutter, but it might bring in some extra cash.

Fortunately, you’ve got plenty of online marketplaces where you can advertise your stuff, get paid electronically and ship it anywhere worldwide.

You might not think you need to report these online transactions as taxable income on your tax returns, but you do. And if you get paid more than $600 a year, the IRS may know how much you’re earning.

This hasn’t always been the case. Until a few years ago, online marketplaces only had to report proceeds for sellers who received more than $20,000 in online payments.

But this changed in 2023. That’s when the IRS proclaimed that all online payment vendors and marketplaces must report each seller’s proceeds if the total exceeds $600.

However, so many marketplaces and payment platforms complained about having to potentially keep track and report payments for millions of sellers that the IRS temporarily delayed implementing this rule.

In 2024, the IRS decided to start easing the rule in gradually. This year, vendors will only have to report online payments they’ve made to sellers for amounts higher than $5,000.

Now, even if you don’t hit the $5,000 threshold, you may still receive an IRS 1099-K (Payment Card and Third Party Network Transactions) statement from that marketplace or payment platform.

If you get this statement, you'll need to report that income on your federal tax return. Even if you didn’t get a 1099-K, you should still report any online payment income over $600.

Reporting your online income

Since the IRS treats online sellers as businesspeople, you’ll have to report your 1099-K income on IRS Schedule C, Profit or Loss from Business (Sole Proprietorship).

You’ll then need to transfer that income to IRS 1040 Schedule 1 (Additional Income and Adjustments to Income). You’ll then need to report that amount on your IRS 1040 tax return. You'll need to include all of these schedules with your tax return. 

This can be a lot of work if you don’t make a lot of money selling things online. That’s why (and don’t quote me on this) you might want to try to advertise your stuff on sites where online payments don’t take place, and just get paid in cash.

If you have any questions about the tax implications of online selling, speak to a tax professional.

 

 

 

This article was authored by David Jaeger and Jeffrey Briskin. David is a financial advisor at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or djaeger@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.

 

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