Starting in 2022, the IRS is cracking down on selling sites like eBay, Poshmark and Mercari. Anyone who does more than $600 in sales will be reported to the IRS by these platforms and sent a 1099 form to complete their taxes.
According to the IRS, the new $600 tax rule means a third party is required to report third-party network transactions paid with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions.
The first thing I want to say is don’t let this new tax rule stop you from side hustling. The truth is you should’ve already been paying your taxes from your reselling. If that’s the case then you have nothing to worry about. But if you’re just starting out then keep reading for more information about filing your taxes as a reseller and finding tax deductions.
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What is a 1099 form? How can I file my taxes as a reseller?
Basically, a 1099 form is used to report additional income to the IRS that isn’t part of your full-time or part-time jobs. These forms don’t change how you file your taxes much, but they do add some extra steps.
In my opinion, the easiest way to file taxes as a reseller or side hustler is by using Turbo Tax. You’re less likely to be audited when using a filing service, Turbo Tax makes it EXTREMELY easy to factor in your 1099 forms and find tax deductions. Other services like H&R Block provide similar tax resources, but I have only personally ever used Turbo Tax.
Remember, you’re going to need to keep all of your receipts from items you’ve sold and other business expenses for when you file. I keep my physical receipts in an envelope and my digital receipts from online purchases in my business email account.
Does Poshmark report sales to the IRS? Does Poshmark send 1099 tax forms?
Yes, Poshmark reports sales to the IRS. Poshmark will be sending all of its sellers a 1099 form if they surpass the $600 IRS rule.
Unless you request otherwise, Poshmark will likely make your 1099 tax form available digitally. That way you don’t have to worry about losing it. You can download it from your Poshmark account and access it when you need it.
Prior to 2022, Poshmark did not send sellers 1099 forms.
Once again, this shouldn’t affect you much since you should’ve already been reporting all your sales and income to the IRS.
Does eBay report sales to the IRS? Does eBay send 1099 tax forms?
Yes, eBay is another selling platform that is going to report sales to the IRS. You can bet that eBay will be sending all of its sellers a 1099 form if they surpass $600 in sales.
Before 2022, eBay did send out 1099 forms. However, they only sent them to sellers who surpassed $20,000 in sales and had more than 200 transactions. That is a stark difference from a $600 threshold.
However, even if you didn’t do more than $20,000 in sales on eBay in previous years it’s still always best to report your extra income to the IRS. You never want them to come audit you.
Does Mercari report sales to the IRS? Does Mercari send 1099 tax forms?
Yes, Mercari will also be reporting sales to the IRS starting in 2022. They will be sending 1099 forms to sellers who pass the $600 threshold.
I sound like a broken record at this point, but sellers should’ve already been reporting their sales from Mercari to the IRS. The only difference we’re seeing now is that the IRS will be watching selles more closely on these platforms.
What selling platforms don’t report your sales to the IRS?
Platforms like Craiglist, OfferUp and local deals on Facebook Marketplace won’t report your sales to the IRS. It’s because a lot of local deals are done on these platforms and payments are received in cash.
Please remember that you should still be reporting these payments to the IRS, even if they are in cash. But those three selling platforms can’t control or track local deals that take place after they introduce buyers to sellers.
Starting in 2022, all online selling platforms will be reporting sales to the IRS. This means other platforms like:
- The RealReal
All of these platforms will be reporting your sales to the IRS so make sure you’re prepared to pay your taxes when tax day comes each year.
Do you have to pay taxes on reselling shoes and other personal items?
Yes, you have to pay taxes on any item you sell if you surpass the IRS’ $600 rule. If you’re selling a personal item then there’s a chance you might not have to pay taxes on it depending on how you file, but make sure you consult a tax expert first.
Reselling sneakers on platforms like StockX will become more difficult for younger sellers who don’t want to take the time to learn how to properly get their taxes done. Don’t be a sneaker reseller who gives up because they don’t know how to pay taxes. Keep your receipts, use Turbo Tax and save some money for your taxes.
If you’re smart enough to research profitable sneaker brands to resell then you’re smart enough to do your taxes.
How can I file my taxes as a reseller?
Filing taxes as a reseller is easy. As I previously mentioned, keep track of all your business expenses throughout the year. From your cost of goods to your Wi-Fi, make sure you have records saying you paid for them.
Once you receive all of your 1099 forms and any other tax forms like a W2 or 1098, then you can file your taxes. Like I said before, I’m a huge advocate for using services like Turbo Tax because they make it easy for me and I’m less likely to be audited.
All you need to do is create an account, start entering your information and Turbo Tax will guide you through the rest. It’s truly a painless experience.
How can I file my taxes if I do side hustles?
Filing your taxes if you do side hustles is the same as if you’re a reseller. Get Turbo Tax, log in, answer a few questions about yourself and your side hustles and the software will guide you through the process.
Another great feature about Turbo Tax is it offers actual accountants to help you in real-time if you get stuck. Did I mention they do that for free?
Takeaway: Do your taxes for your reselling
The bottom line for resellers and taxes is just to do them. Sure, the first time you file your taxes might be a little bumpy but you’ll learn and get better at it. Before you know it you’ll be saving so much money that you earned from your business when you learn the right deductions for your taxes.
I understand many people look forward to tax season because they want to get their tax refunds from the government. Sadly, this is not a great way of looking at tax day. That tax refund is money the government owes you and has been holding until you file your taxes to ask for it.
By doing a side hustle or starting a business, you likely won’t be getting any money from your refund and that’s okay. We want to keep most of our money instead of letting the IRS hold it.