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Have an online side hustle? Making thousands on eBay or Etsy?
Be careful this filing season: the Internal Revenue Service is cracking down on unreported online income.
Any person who earned more than $5,000 on selling tickets, instruments and other goods and services online in 2023 will receive a 1099-K tax form this month. Online platforms including Etsy and eBay typically only sent these forms to users who earned more than $20,000 in previous years, The Wall Street Journal reports.
Now, millions more Americans will receive the form compared to previous years, the paper reports. While taxpayers are always required to report income, many underreported their online income when no forms were sent, according to the Journal. Now, the IRS is cracking down in an effort to keep people honest about their online income.
“The IRS wants to get the message out that they’re enforcing it,” Bryan Skarlatos, a criminal tax lawyer, told the outlet.
Even if you’re below this year’s threshold, you’re still not in the clear. It will only go down from here, as the IRS will implement a $2,500 threshold in 2025 and a final $600 threshold in 2026.
There are also different rules for those running a business online and those selling personal items on platforms like e-Bay.
All business owners must report their income, regardless of whether your earnings come from online platforms or not.
But if you’re selling personal items for less than you paid for them, you wouldn’t owe tax, even if you receive a 1099-K — you would only be required to disclose the sales, the Journal reports. However, if you sell personal items and make a profit, you must report it as a capital gain on Form 8949 and Schedule D.
Meanwhile, President Donald Trump issued an indefinite hiring freeze for the IRS Monday, which will remain in place until his administration determines “that it is in the national interest” to hire again.
Taxpayers shouldn’t be immediately concerned about this having an outsized impact on their filing, Dr. Steven Hamilton, an economics professor at George Washington University who specializes in public finance, previously told The Independent.
But Hamilton noted that the hiring freeze could impact wealthier individuals, because the agency may have fewer resources for auditing.
“A hiring freeze on the IRS is like reducing enforcement on high income individuals,” he added. “If you don’t hire the people who could audit their returns more intensively…then they get away with more tax evasion.”
Read More: IRS is cracking down on your online income. What to know
