The quantities reported on Kind 1099-Ok embrace solely funds acquired for items or providers. The shape doesn’t embrace changes for charges, reductions, delivery or refunds. These quantities aren’t “earnings” within the eyes of the IRS however will be deducted from the quantities reported on Kind 1099-Ok when the tax return is filed.

Shoppers who use websites like Venmo and PayPal to switch funds for private functions shouldn’t see these quantities reported on Kind 1099-Ok. Nevertheless, that does make it essential to rigorously overview the knowledge contained on the shape. If the quantities reported don’t match the taxpayer’s data, the taxpayer can contact the third-party supplier and request a corrected type.

Whereas it’s essential for taxpayers to know the altering regulation governing Kind 1099-Ok issuance, it’s additionally essential for them to do not forget that the IRS expects taxpayers to report all earnings no matter whether or not they obtain a Kind 1099-Ok. Even when shoppers don’t cross the relevant threshold, they’re nonetheless chargeable for reporting earnings earned by means of on-line gross sales and facet hustles.

Sale of Private Gadgets

One significantly complicated space entails conditions by which taxpayers promote private gadgets on-line by way of platforms like eBay and Poshmark. In prior years, the $20,000 threshold was excessive sufficient that almost all of those on-line sellers didn’t obtain Kinds 1099-Ok.

Nevertheless, with the decreased thresholds, these taxpayers might now see sale proceeds reported on Kind 1099-Ok. When taxpayers promote used private items, they’re taxed provided that they promote them at a revenue. Taxpayers usually decide achieve or loss by subtracting the sale value from the quantity they paid for the merchandise.

Achieve on the sale of things that have been beforehand held for private use is taxable. Nevertheless, losses aren’t deductible. These transactions have to be reported on Kind 8949, Gross sales and Different Inclinations of Capital Property, and Kind 1040, U.S. Particular person Revenue Tax Return, Schedule D, Capital Beneficial properties and Losses.

The IRS has directed taxpayers who bought private gadgets at a loss to make offsetting entries on Kind 1040, Schedule 1, Further Revenue and Changes to Revenue, by: 

• reporting the proceeds as listed on Kind 1099-Ok on Half I – Line 8z – Different Revenue, utilizing the outline “Kind 1099-Ok Private Merchandise Offered at a Loss” and
• reporting their prices, as much as however no more than the Kind 1099-Ok quantity, on Half II – Line 24z – Different Changes, utilizing the outline “Kind 1099-Ok Private Merchandise Offered at a Loss.”

Conclusion

Hundreds of thousands of taxpayers who’ve by no means acquired a Kind 1099-Ok are more likely to start receiving these varieties in 2024 and subsequent years. The IRS is releasing steering and examples on a rolling foundation to assist these taxpayers perceive their reporting obligations — and advisors ought to pay shut consideration to the main points.

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