The IRS hates side hustles on Etsy, Shopify, and Amazon
In recent years, the number of people working a side hustle to make extra money has skyrocketed. According to some studies, up to 44 percent of Americans have a side hustle.
The most popular side hustles are online businesses such as Etsy, Shopify, and Amazon. These businesses allow people to work from home and set their own hours.
The IRS is not happy about these side hustlers because the agency has been cracking down on people who make income from these businesses.
Reason for the Crackdown
In many cases, the IRS believes that these individuals are not properly reporting the money they make from selling items online.
The IRS has required this reporting for several years now.
Form 1099-K is used to report payments made to merchants through a variety of channels, including marketplaces, payment processors (credit and debit cards), and third-party settlement organizations.
The goal is to identify merchants who do not report all of their income by comparing the amounts reported on 1099-K forms to the amounts reported on an individual’s or business’s tax return, and then following up with the under-reporters by communication or auditing their accounts.
The IRS just issued new rules to make tax evasion more difficult
The IRS recently announced that it will be requesting more information from Etsy, Shopify, and Amazon about its sellers.
The agency claims that it is focusing on these platforms because of the large number of sellers who are operating as side hustles.
In the past, the 1099-K filing level was reached when the gross value of all reportable payment transactions for a calendar year surpassed $20,000 and the aggregate number of transactions for that payee during that calendar year exceeded 200, according to the IRS.
As a result, entrepreneurs who run a modest side business selling items on the Internet, either directly or through third-party marketplaces such as Etsy, Shopify, Amazon, and others, may have missed out on receiving a 1099-K in the past.
Since the American Rescue Plan Act of 2021 contains a provision lowering the reporting threshold to $600, effective in 2022, this will all change starting in January 2023 when reporting begins for transactions occurring in 2022.
Other Side Hustlers Affected
Another point to consider is that individuals who provide services through Internet websites for delivery, babysitting, house cleaning, as well as elder care and other services, seldom meet the $20,000 level and have not gotten Form 1099-Ks in the past.
The new law will affect them, too. If you earn income from a side-hustle or other websites, be aware that under the American Rescue Plan Act of 2021, you will receive Form 1099-K in January 2023 for transactions occurring in 2022.
What to Do If You Have Not Been Paying Taxes on profits from Etsy, Shopify, and Amazon
People who do not pay taxes on their income from Etsy, Shopify, and Amazon can face penalties and interest charges.
If you have been selling items on Etsy, Shopify, or Amazon and have not been paying taxes, you should consult with a tax specialist to find out how you can rectify the situation.
Conclusion:
In recent years, there’s been a surge in people launching their own businesses.
Whether it’s through online platforms like Etsy, Shopify, and Amazon, or more traditional methods like starting a brick-and-mortar store, more and more people are looking to become their own boss.
And while there are certainly many benefits to owning your own business, one of the biggest challenges is dealing with the IRS.
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