eBay, Half.com, PayPal, Amazon.com Sellers: 2011 IRS 1099-K Regulations

I just received the following e-mail from Half.com, where I occasionally sell used books:

We’re writing to let you know that starting with transactions occurring on or after January 1, 2011, new Internal Revenue Service (IRS) regulations require Half.com (and other businesses that process payments) to file a Form 1099-K for all sellers with more than 200 transactions and $20,000 USD in sales per year.

If you’re a high-volume seller who has met or is close to meeting the IRS thresholds, we may need to generate a Form 1099-K for you. If you have multiple accounts, we’ll take all of them into consideration when calculating your volume status. If you exceed the IRS thresholds, we’ll send your first Form 1099-K to you in early 2012. Your Form 1099-K will give you a consolidated report of all payments received through Half.com for 2011. This information will also be reported to the IRS.

Apparently, as part of new legislation designed to help track down (and tax) unreported income, starting in 2011 any credit or debit card payment processor with clients that have more than 200 transactions and $20,000 in sales per year must file a 1099-K with the IRS.

In addition to Half.com, this also includes individual sellers using services like PayPal and Amazon.com. Perhaps also sites like Etsy and Zazzle? This won’t affect me, but I think it’s a pretty good idea. I do feel that lots of eBay income goes unreported, and the limits are reasonable. If you’re clearing 200 transactions and $20k in payments, you should be tracking your income and expenses like a business. This 1099-K won’t really matter as it just reports gross amounts.

I’m more scared about the upcoming changes in 2012 that says that a business has to file a 1099-MISC for any person or business it pays more than $600 in a calendar year. Corporations are no longer exempt. That’s a ton of 1099 forms swirling around. I’m going to have to send W-9 forms to everyone from Staples to my web hosting company. I still hope they’ll change this rule before it goes into effect and swamps tons of small businesses.

More info: CNN Money, Journal of Accountancy, Stop1099.org

Comments

  1. Do you pay more than $600 on web hosting costs?

  2. I agree, and it’s a bit crazy to require such reporting for everyone at the same old $600 limit. They should have adjusted the reporting requirement in order to relieve more of the smaller taxpayers out there. I think at least $1,500 and then also institute an inflation adjustment in $100 increments I might be a bit biased when it comes to costs of compliance being a CPA (in PA). But, that being said, I really think, for most people/companies, it’ll end up being more a process issue rather than a consumption of time issue. I think the most time consuming part will be obtaining the information from suppliers/vendors. I personally recommend that clients of mine make sure they are providing substitute Form W-9 information to customers proactively as a customer service tactic (and making sure they take credit for it).
    You should be able to have your CPA/EA/Tax Preparer do the filing for you relatively inexpensively IF you are willing to put at least some time into the process beforehand. Sure a few minutes for each vendor add up over time, but better over time than a rush at the end of the year to be compliant!

  3. most businesses / vendors I’ve dealt with have been issuing 1099s for earnings over $600 over the last few years. I have always believed it to be a rule, or at least a guideline that has been out there, and most companies I do business with have followed it.

  4. I am a non USA resident (I live in the UK) selling on Amazon.com. My sales are over 20,000 USD P/A. How can I submit a SSN if I am not resident in the USA? Does this new law effectively push all non USA residents off of Amazon, Ebay Paypal etc?

  5. I am in the same situation as terry (non-USA resident selling on Amazon.com). Anyone knows what can we do?

  6. All of these new reporting requirements only empower the IRS with more ammunition on finding taxpayers who are underreporting. Unfortunately, as computers get more powerful more and more of our daily financial activities will be easier to track and therefore be utilized to help the IRS and other taxing authorities validate or review the income and deductions we claim against it. Take, for example the new 1099K form that credit card processors will now be required to file with the IRS. Although the 1099K must only be filed by a payment processor when a merchant has more than 200 transactions and more than $20,000 in sales per year, I have called Chase, Discover, and American Express and all have informed me they will be generating and filing the form on all of their merchants regardless. Therefore, I advise that all merchants and people who sell items on websites where they are accepting debt and/or credit cards be prepared for their gross merchant transactions to be reported to the IRS. Furthermore, be prepared for the IRS tracking system that will be matching the reported transactions to the amount listed on the individual or business tax return and how quickly you will become an audit target if the gross receipts listed are less than you actually received. The 1099K reporting requirement will aide the IRS is collecting more unreported tax dollars and is another small business burden and something that all merchants should be preparing themselves for. If you need clarity you may go to the IRS.gov and search for the 1099K form and read the reporting instructions but realize that the IRS only lists the minimum reporting requirements and it will be up the individual merchant processors as to the threshold below the minimum that they will actually report.

  7. What an intrusive, f*cking joke.

  8. What about individuals selling their personal items on eBay to pay bills and reach the IRS threshold? Should they report it as income? It is after all like having an international garage sale. Pretty soon we will need to report that as income too.

  9. I will not pay taxes on used items i purchased.screw the IRS They should be abolished and just have a higher sales tax that would balance the budget in 1 -2 years and get the country out of debt They should audit them and see actually were all the money is going. I know It is goig in to the pocklets of the senate and the house. There war chests are astronomical were the middle class is basically on skid row. These Losers are laughing at all of us ..we voted for these bloated slobs. What a waste.

    Ron paul is the man for the job no doubt and they fear this man like the plague!!

    he is the one to win 2012. abolish the fed audit the house and the senate, look at were the money is going. Send not a dine overseas and keep it in the usa we would be out of debt in no time Ron Paul is the man of the century. Wake up sheeple get your brains unwashed by the media this is the next president . The only won qualified to do what 3 past presidents failed to do. He has been talking the talk and walking the walk for over 30 years abd the same problem he is talking about is still here it will not change unless we elect this man. obama was selected not elected just to get confidence in the african american people. Just listen to farahkan. He is 100% correct google it .

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