Selling Goods Online May Soon Cost You With The IRS

NEW YORK (CBSNewYork) – You may sell goods online as a hobby, but the government may now consider you a business –and it will cost you.

If you’re an online seller, for the first time this year the IRS will be paying close attention to how much you make.

CBS Moneywatch Editor-at Large Jill Schlesinger explains more about a new tax requirement aimed at online entrepreneurs.

Online entrepreneurs like Tiffany Battel have turned their hobbies into cash. After Battel lost her job she bought some clay and started creating food-inspired charm necklaces to sell online.

This year, she is required to file a 1099K, a new tax form from the IRS that now ensures the Federal Government gets a cut of booming online profits, Schlesinger reported.

Battel’s online business, Pumpkin Pye Boutique, made just over 800 sales with a gross income of more than $20,000s in 2011, Schlesinger reported. Small time hobbyists trying to make a buck have remained under the radar, until now.

The IRS is targeting those who’ve made more than $20,000 or those who have processed more than 200 online credit card transactions, Schlesinger reported.

In a tough economy, this is the government’s way of making more money, said Small Business Advocate Chris Wallace. The IRS estimates nearly 54 million will file the 1099K.  “This is one way the federal government believes they can narrow the tax gap. The prices may have to go up when all is said and done,” Wallace said. “When everyone gets a cut there’s not much left for the artist.”

Following complaints about a costly paperwork burden for businesses, the IRS tweaked the new tax requirement and suggests anyone with questions about the new form to their website.

  • The MaD HaCkER

    Cause I’m the tax man.. The Betals had it right.

    • The Googe

      Who the hell are the Betals?

      Perhaps you mean the Beatles?

  • jlhiltonauthor

    I don’t understand how this is new or different, other than being another form to file. I’ve always had to pay taxes on my online hobby income. Anything with income above $400 requires a schedule C, and I pay the full social security on it, plus state and federal tax. Not sure whether this new 1099K is just closing a loophole on people who were (in violation of the law) not claiming the income at all, or whether this is an additional tax penalty against online sellers?

  • Frank @

    Yeah, I have an account on Amazon and they made the requirements stricter than the government is requiring. The gov. requires that you report it when you sell 200 items. Well Amazon requires that you report when you only sell 50. That seems crazy when I only sell stuff that I own that I don’t make a profit on.

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