Small-business owners, prepare yourselves for the era of the 1099-K. That’s the tax form for disclosing transactions with services such as PayPal, Venmo, and Airbnb. Until this year, anyone with less than $20,000 in total payments typically didn’t get a 1099-K—and thus, in theory, could avoid paying taxes on money earned on such platforms. But since Jan. 1 those companies have been required to report gross payments of more than $600 directly to the Internal Revenue Service. That means small-business owners—as well as people who periodically empty their closets on EBay—will receive a 1099-K from any service provider where their income exceeds that amount.
Lexi, who asked that her last name not be disclosed because she fears an IRS audit, spends her weekends trolling flea markets, estate sales, and storage unit auctions for hidden treasures such as vintage sunglasses and Nintendo Game Boys. Since 2013 she’s sold those items as well as her old clothes and housewares on EBay, Facebook Marketplace, and Depop, earning as much as $15,000 a year. And because those companies didn’t say anything to the IRS, well … she didn’t, either. But under the new regulations, if she raids her closet for a vintage dress to sell for $45, that $45 will be considered taxable income unless she can provide the original receipt proving she’s selling it at a loss. “I’m just constantly cleaning out my house,” she says. “The new rule means I’ll have to track everything.”