The American Rescue Plan of 2021 has lowered the 1099-K reporting threshold from $20,000 over 200 transactions to just $600 from any number of transactions, effective January 1. This new tax rule, which requires third-party settlement organizations and credit card companies to report payments for goods and services exceeding $600 per year, has raised concerns from lawmakers. Even casual sellers on popular platforms such as Poshmark, Facebook Marketplace, or Etsy could face penalties if their transactions total $600 or more in a year. According to a MoneyMagnify survey, nearly 40% of Americans sold items online early in the pandemic, netting about $1,800 on average. Therefore, it is essential for those who continue to sell goods online to have a proper understanding of the new tax rules. The Coalition for 1099-K Fairness, a group of online marketplaces opposing the new rule, believes that the new $600 rule is unfair, burdensome, and confusing for many casual sellers and gig economy workers across the country. If you sell handmade jewelry, art, home decor, or personal items like a car, refrigerator, furniture, stereo, or even clothes, and your transactions for the year add up to $600 or more, you should report this income on IRS form 8949, schedule D, and via your 1099-K if you meet the IRS threshold. However, the loss on the sale of a personal item is not deductible. The IRS originally planned to introduce the $600 rule on Jan 1, 2022, but after certain politicians and groups like the Coalition for 1099-K Fairness called for the rule change to be scrapped and for commonsense tax regulations to govern the resale market, the IRS announced an eleventh-hour delay, pushing implementation back by one year. In January, Rep. Carol Miller reintroduced the Saving Gig Economy Taxpayers Act with the support of 13 Republican colleagues to reverse the unwarranted and unfair lowering of the 1099-K reporting threshold. The act aims to protect Americans who use online payment platforms, gig economy workers, and small e-commerce sellers from being taken advantage of and ensure they continue to have access to reliable income streams.
According to a recent report from the Commerce Department, there’s a chill running through the American consumer, even as inflation continues to cool. The Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation gauge, eased further in March, indicating that the central bank’s rate-hike campaign is taking hold. While the closely watched core PCE index trended down slightly, consumer spending growth has trailed off considerably since a January surge. Spending was flat in March, with the largest increases in consumer expenditures coming from housing expenses and healthcare. Consumers cut back in pretty much every other area, indicating a retrenching consumer. “This is not a consumer with a devil-may-care attitude that just can’t be stopped and can spend through anything,” said Tim Quinlan, senior economist at Wells Fargo.