Are you making over $600 from your online sales? You may owe money to the IRS!
The Internal Revenue Service (IRS) took a controversial decision at the beginning of 2022, bringing a new regulation for online sellers. This regulation affects anyone who makes over $600 per year by selling goods and services through popular e-commerce platforms such as eBay, Facebook Marketplace, and Airbnb. Plus, they now must share their Social Security Number (SSN) with the e-commerce giants.
Why did the IRS make such a rule? The IRS claims that third-party information reporting increases voluntary tax compliance and improves collections and assessments within its structure. Critics focus on the belief that the IRS is trying to overcome the post-pandemic crisis with extra taxation.
The IRS Expands Its Control Over E-Commerce
In line with the practice put into effect in January 2022, the IRS stipulated that users who sell more than $600 on online platforms and receive payment through third-party payment applications such as PayPal and Venmo must submit a Social Security Number (SSN). According to this decision, every user who sells more than $600 must file a tax return with the IRS until the last day of February of the following year. The IRS requires Form 1099-K to be filed for this statement to be made on online sales proceeds.
This practice is not a first for the IRS; many users have previously paid taxes on their sales on online platforms. However, those required by the IRS to file this statement were users who received $20,000 in payments for online product and service sales per year. With the January 2022 decision, this threshold has been lowered to $600, which has angered many users.
What If You Do Not Have an SSN?
A Social Security Number (SSN) is an identification number issued to United States citizens or legal residents, temporary workers, and non-immigrants. This 9-digit number gives holders work authorization and allows them to pay their taxes, open bank accounts, and rent or buy a property in the country.
Delaware-based US Tax Expert Samet Oynamis, EA, CAA, said that other numbers are defined for tax purposes for those who do not have and cannot qualify for an SSN. Taxpayers can fill out the requested Form 1099-K with an Individual Tax Identification Number (ITIN) or an Employer Tax Identification Number (EIN). Taxpayers who own a sole proprietorship or a single-member LLC should follow the guidelines for getting an ITIN number. Other LLCs, corporations, and partnerships must get an EIN for the same purpose. Mr. Oynamis handles many non-US resident tax returns and tax ID application for foreigners in DelawareAgency's Newark Office.
The Deadline For 2022 Tax Returns on The Corner
The IRS also announced a deadline for 1099-K Form applications. If you need to fill out your online income taxes via a letter to the IRS, you should do so until the last day of February 2023. The deadline for those who will apply online is April 1. Taxpayers must fill out the forms in the time given, mentioning their online income from the previous year. If you get confused and still don't know what you need to do with your online sales, you can get expert help.
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