Specter of Tax Form 1099K Looms for Sellers Once Again

Etsy reminded sellers last week that they may receive a 1099-K form in the New Year for 2023 since it’s required by law to report sales amounts to the IRS for any seller who made more than $600 in gross sales, which is down from the previous threshold of more than 200 transactions per year and exceeding an aggregate amount of $20,000. (Update: the IRS delayed implementation of the lower threshold again for tax year 2023, see the full story.)

It’s deja vu all over again – this time last year, companies were trying to get Congress to abolish the stricter reporting requirements for Form 1099K that were set to take effect for tax year 2022. While Congress didn’t act, the IRS issued a last-minute reprieve on December 23, that delayed implementation of the new lower threshold until tax year 2023. The day of reckoning looms, with only 41 days until the end of the year.

If unchanged, the law could result in an extra 30 million forms being issued, as Bloomberg Tax reported today: the IRS expects to receive about 44 million Form 1099-Ks in 2024 (for tax year 2023), an increase of about 30 million.

The 1099-K Coalition – which lobbies on behalf of a group of companies – told Bloomberg the new reporting requirement would cause confusion and compliance challenges.

Bloomberg summarized legislative attempts to change the law: “Lawmakers from both sides of the aisle are hoping to prevent potential taxpayer panic. Rep. Carol Miller (R-W.Va.) has a bill that would revert the threshold back to its original $20,000, Rep. Chris Pappas (D-N.H.) wants to raise the requirement to $5,000, and Sens. Sherrod Brown (D-Ohio) and Bill Cassidy (R-La.) proposed legislation to create a $10,000 threshold—the only bipartisan solution on the table.”

In its message to sellers last week, Etsy encouraged them to advocate for “clearer tax laws that make sense for small business owners like you” by sending a letter to Congress.

eBay has also tried to engage with lawmakers and sellers through its Government Relations’ Main Street program. In September, eBay CEO Jamie Iannone discussed the issue during his keynote address at the eBay Open seller conference.

But Bloomberg wrote today that chances for Congress to act on tax issues this year were dwindling, as the most likely vehicle for a tax package was punted to next year.

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.