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4 Myths About The New 1099-K Threshold & What You Should Know

Online platforms make it more tantalizing to take on entrepreneurship with its many benefits and flexibility. While starting a business in your own home is a great idea, it’s not without its hurdles. Form 1099-K used to only apply to big earners, but changes are being made that will eventually affect nearly everyone who makes a profit selling online.

Learn more about the new 1099-K threshold and what you should know before consulting the experts at Maggi Tax!

What Is Form 1099-K, And Does It Apply To Me?

Form 1099-K is reserved for online sellers who use platforms like eBay, Etsy, and Facebook Marketplace, just to name a few. These websites have become extremely popular as they cater to both the busy individual who doesn’t have time for in-store shopping as well as the ambitious entrepreneur who wants to make an income in an environment that they can manage. But once an entity becomes an influencing factor in the economy, changes need to be made accordingly just like with the recent inflation-adjusted tax brackets.

Form 1099-K will decrease its threshold from $20k down to $5k before dropping again to a mere $600. In response to this news, many rumors have been going around that can be cause for concern. No need to worry because we’re here to arm you with the power of the truth!

Myth: The Delay In Threshold Changes to Form 1099-K Means It’s Being Reconsidered

Since the announcement of the 1099-K threshold changes, the exact dates have seen some delays. However, this doesn’t mean that you should hold out hope on the IRS changing their minds and going back on their agenda. The changes will still be happening, it’s just taking a little longer than anticipated so it’s best to continue with your preparations.

Myth: Form 1099-K Does Not Apply To “Casual” Online Sellers

Many individual sellers believe that they are exempt from filling out Form 1099-K just because they don’t consider themselves a real business. Any income that is made from sales is taxable once it reaches the threshold, despite your occupational standing. Don’t make the mistake of thinking that Form 1099-K doesn’t apply to you when it does, or you might have an audit on your hands.

Read more > A Tax Guide For Self-Employed Entrepreneurs

Myth: Both Gains And Losses Are To Be Taxed Through Form 1099-K

Not all sales are considered profitable. If you end up selling at a loss, you won’t have to worry about that coming back to bite you later. Only profits matter when calculating your eligibility for Form 1099-K, so you won’t have to worry about owing taxes on something that didn’t bring in any money to begin with.

Myth: You Will Always Owe Taxes When Filing Form 1099-K

The main reason why online sellers are in an uproar about the decreasing threshold for Form 1099-K is the thought of owing taxes on their sales. But just like filing for taxes as an individual, turning in the form doesn’t automatically mean that you’ll need to pay something back. The form is simply to record your activity, and that data will be used to determine the result of your tax filing. Seeking a trusted tax advisor will help you sort everything out and help you find the best outcome.

Need Help Navigating Form 1099-K? Call Maggi Tax!

Since the threshold for Form 1099-K is being decreased by a large amount, there will be many online sellers who will be filling it out for the first time. If you need help navigating Form 1099-K to ensure you’re doing everything right, trust in the expertise at Maggi Tax! Our tax advisors will gladly walk you through everything you need to know with our tax strategy and preparation services. Call (727) 799-1701 to schedule a consultation!

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