For years the IRS has wanted to find a way to tax the undercover business of selling on eBay. Already the changes in the worldwide auction website has hit many of its long time sellers hard. A huge amount have closed up shop or found other auction sites to peddle their goods as fees and lack of traffic have crippled their business. Finally, the nail in the coffin arrives for 2011 with the IRS new form 1099 K.
Starting next year, eBay sellers who do more than $20,000 a year in gross business or more than 200 transactions for the year, will have their gross sales and online credit card receipts reported to the IRS. That comes out to only 17 transactions a month. Sellers will be required to provide a tax identification number,(either a EIN or SSN) to payment processors like PayPal.
Already, the profit margins for many of these eBay sellers, is very slim, between the cost of shipping, eBay and payment processing fees, such as PayPal. eBay no longer allows sellers to feature their products most are getting lost in the waves of mass listings. This change was included in the fast pace approved 2008 stimulus package.
If you live in a state that has income tax, like GA, the work that needs to be done, especially if you have to hire a accountant will not make it worth the effort to use eBay as a small business model. This reporting will also allow cities to see who has set up home based businesses that may not have a occupational license. The snowball effect of this could affect many of the unemployed who are trying to do anything to survive through “The Great Recession.”
With such tough economic times, this 1099 K should be delayed for at least another 24 months. Many sellers on eBay will be receiving double taxation, as they sell off goods at a discount that had already been purchased with money that was taxed. The business of selling on eBay ended a long time ago for many of its loyal client base.
Considering how many USA based corporations avoid taxation through loopholes and outsourcing, it seem unfair that once again this administration is cracking on the last leg of capitalism for small business owners, the unemployed and the under-employed.