Selling goods or services online has become increasingly common, and with that comes tax reporting responsibilities. If you sold event tickets, personal items, or other goods or services online and received Form 1099-K, you may wonder how to handle it on your tax return. The IRS has specific rules for reporting these transactions, and it’s essential to understand how Form 1099-K works, who receives it, and how to ensure you file your taxes correctly.
What Is Form 1099-K?
Form 1099-K documents payments received for goods or services through digital transactions, including those made with credit, debit, or gift cards, and payments processed via online marketplaces and payment apps, also known as third-party settlement organizations (TPSOs).
These platforms are required to submit Form 1099-K to both the IRS and the recipient by January 31 each year. However, transactions between family and friends for personal reasons, such as repaying a shared expense or sending a gift, are not included.
If you accept electronic payments for selling goods or services, you may receive Form 1099-K. This applies whether payments were made through payment cards or online platforms, particularly if your transactions exceed the IRS reporting threshold for the year.
Reporting Thresholds for Form 1099-K
The IRS has updated the reporting thresholds for third-party settlement organizations, including online marketplaces and payment apps:
- 2024: More than $5,000 in total transactions
- 2025: More than $2,500 in total transactions
- 2026 and beyond: More than $600 in total transactions
While the IRS is phasing in these changes, some companies may still send Form 1099-K if your transactions exceed $600. Therefore, keeping track of your sales and expenses is important regardless of whether you receive Form 1099-K.
Reporting Example
You purchase two sets of event tickets for personal use. If you sold the two sets of event tickets online in a single transaction you will most likely receive a Form 1099-K. You must report the sales correctly to ensure proper tax compliance. For example, if the first set of tickets were purchased for $250 and later sold for $800, this results in a $550 gain, which must be reported as taxable income. Meanwhile, if the second set of tickets were purchased for $250 but sold for only $200, there is a $50 loss. Since losses on personal-use items cannot be deducted, this must be recorded separately. The total sale amount of $1,000 from both transactions will be reflected on Form 1099-K, but each sale must be accounted for individually to ensure accurate tax reporting.
Since the first set of tickets sold for more than the original purchase price, the $550 profit is considered a short-term capital gain and must be reported as taxable income. This gain should be documented appropriately to ensure compliance with tax regulations.
The reporting process is different for the second set of tickets, which were sold at a $50 loss since losses on personal-use items cannot be deducted. The tickets were sold for $200, which is $50 less than the purchase price of $250. To prevent taxation on the entire sale amount, the transaction should be recorded by reporting the $200 sale price as other income and reporting other adjustments of $200. This ensures the transaction is properly acknowledged without being taxed as a gain.
Reporting Income on All Online Sales is Required
Whether or not you receive Form 1099-K, you must still report all taxable income from sales. This includes earnings from selling personal items online, freelancing, renting out property, or providing ride-sharing services through platforms like Airbnb, Uber, Venmo, and PayPal. Even if you sell personal items at a loss, you should report the proceeds and offset them properly to avoid being taxed on non-taxable sales.
Failing to report online income accurately can lead to IRS audits, penalties, or unexpected tax liabilities. To stay compliant, maintain detailed records of purchase prices, sales amounts, and associated fees. Keeping receipts and digital payment confirmations will help verify income and expenses. Separating business and personal sales is crucial to prevent misclassification and potential tax issues. Review your Form 1099-K for errors and immediately report any discrepancies to the issuing company.
With IRS rules on Form 1099-K reporting evolving, staying informed about tax requirements is more important than ever. If you sell event tickets or other items online, understanding how to report gains, offset losses, and accurately file your tax return can help you avoid unexpected issues when tax season arrives. Contact your Stephano Slack tax manager/partner at 610-687-1600 or taxinfo@StephanoSlack.com to discuss your situation.
Author Christine Fisher-Guyer, CPA, Partner, has provided top-notch accounting services to Stephano Slack’s clients. She currently manages tax auditing and accounting operations at the firm and is an excellent problem solver, especially regarding client concerns. Chris can be contacted at 610-710-4729 or cguyer@stephanoslack.com.
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