IRS reminds: Sellers with annual income exceeding $600 must declare taxes

It is learned that recently, the U.S. Internal Revenue Service (IRS) issued a reminder that starting from January 2023, all taxpayers will need to download Form 1099-K to report sales revenue of goods and services exceeding US$600 collected through payment applications such as Venmo, PayPal and CashApp.

The requirement is one of the provisions of the American Rescue Plan Act passed by Congress in 2021, which amended a section of the IRS tax code, specifically Section 6050W, effective January 2022.

IRS Code Section 6050W details the income level a taxpayer must reach before they have to pay federal taxes. Before the recent changes, people had to make $20,000 and make at least 200 trades to be taxed. Now that number has dropped to $600, and there is no longer a minimum number of trades.

According to the bill, tax return recipients mainly include small business owners who use third-party payment platforms to receive and pay, such as credit card companies, Square, Venmo, Paypal, etc., as well as sellers who sell through third-party e-commerce platforms (Amazon, eBay).

These third-party platforms will record all sales revenue of sellers. If the seller opens an account with a US company, the platform will send this data to the US IRS every year. Therefore, sellers need to submit 1099 forms to the IRS based on the sales volume sent by the platform to the IRS. False or misreporting will be heavily fined.

Therefore, sellers should not take chances and must declare if they meet the tax obligations. It should be noted that most third-party platforms will not send you 1099K, and you need to download it yourself. This is also the reason why the IRS has issued another reminder. Many small business owners may not be aware of this tax policy change.

A February survey by the 1099-K Fairness Coalition found that 47% were unaware of the IRS changes that took effect Jan. 1. “Many small business owners just getting started are receiving 1099-Ks without knowing it, which can create significant confusion and administrative challenges,” the coalition said.

Editor✎ Ashley/

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