You sold an old couch on Facebook Marketplace and got paid through Venmo, or you sold last season's clothes on Poshmark. You thought that was the end of it, until an unexpected tax form arrived in your mailbox: a 1099-K. What is it, and do you actually owe taxes? Even if you're not running a business, these forms can land in your mailbox, and with them comes a new set of reporting responsibilities. Understanding how Form 1099-K works, what the IRS expects, and what's actually taxable can help you stay ahead of any surprises during tax season.
What Is Form 1099-K and Who Gets One?
Form 1099-K reports payments you receive through third-party networks. If you used PayPal to accept payments for items you sold on eBay, or if you get paid through Etsy or Facebook Marketplace, the platform might send you this form.
In the past, you only received a 1099-K if you earned over $20,000 and had more than 200 transactions. But that's changing. For 2024, the reporting threshold drops to $5,000, regardless of how many sales you make. Starting in 2025, it's expected to drop again.
Even if you're just selling old clothes, electronics, or furniture, you could meet the threshold and receive this form.
Why This Affects Casual and Occasional Sellers Too
You don't need to own a business to be affected. If you clean out your garage and sell a few things online, or if you help a friend sell concert tickets and get reimbursed through a payment app, you might still receive a 1099-K.
That doesn't mean you automatically owe taxes. But because the IRS receives a copy of the form, it's important to address it on your return. Ignoring it could lead to questions, notices, or penalties, even if the money isn't taxable.
What the IRS Expects You to Report
The 1099-K shows gross payments received, not profits. The IRS doesn't assume you made a profit on every sale, but it does expect accurate reporting.
If you sold personal items at a loss, those sales may not be taxable. Still, you'll need to document what you originally paid, what it sold for, and any associated costs like platform fees or shipping.
The same goes for items sold at a profit. If you earned income, you're responsible for tracking and reporting expenses that reduce your taxable amount. A CPA can help you organize this information and file accurately.
FAQs
Do I owe taxes on personal items I sell online?
Not necessarily. If you sell something for less than you paid, it's typically not taxable, but documentation is key.
Why did I get a 1099-K from Venmo?
If your total payments through the platform exceeded $5,000 in 2024, you might get a 1099-K, even if the payments weren't for business.
What if the 1099-K is wrong?
You may be able to fix the issue when you file or ask the payment platform to correct it. A CPA can help guide you through the process.
How a CPA Can Help You Get It Right
Online selling has blurred the lines between business and personal transactions. A CPA can help sort through the details and determine what truly counts as taxable income, track legitimate expenses, apply any available deductions, and make sure everything aligns with what the IRS has on file. If a form was issued in error, like for a gift or repayment, a CPA can help correct the issue before it becomes a problem.
Whether you're running a small side hustle or just trying to keep your individual sales organized and compliant, we can help you make sense of what to report and how to do it correctly. Contact us to schedule a consultation.
