Find out everything you need to know about new federal legislation and submitting your W-9.
You may have heard other online sellers talking about the new U.S. federal legislation that now requires submitting a W-9 if you make $600 or more in gross sales on all reselling marketplaces. Yep, ALL of ‘em. Not just Mercari!
But, why the change? And what does it mean for you, as an online seller? It’s important to understand all the facts and if/how this legislation will affect you (it’s not really all that different from years past!), so let’s break it down.
All marketplaces including Mercari are required by the IRS to file a Form 1099-K on your behalf if you gross $600 or more in sales. That means that all sellers are required to fill out a W-9 for every online marketplace if you sell $600 or more in gross sales, for each calendar year. You’ll be able to access your Form 1099-K no later than January 31 for the preceding calendar year in the Mercari Tax Center – a resource we put together to make it easy to submit and update your tax info.
The American Rescue Plan Act of 2021, an economic stimulus bill passed by Congress and signed into law in March 2021, requires third-party payment networks to collect W-9 information and issue 1099-Ks for a wider group of sellers. This legislation changed the W-9 requirement from $20,000 in gross sales and 200 transactions to $600 in gross sales. There are many reasons why the legislature passed these updated requirements into law, however, the simplest explanation is that the U.S. workforce has evolved.
Until recently, people didn’t have many options outside of traditional 9-to-5 jobs, and being on company payroll with automatic tax, medicare, and social security deductions. Times have changed! Online platforms have opened up the gig economy, and people now earn income in new ways. From online marketplaces to housing rentals, on-demand delivery and freelance work, many people now manage their own schedule and income … and the taxes that go along with it.
By changing the minimum threshold to $600 for Form 1099-K, more sellers will receive the appropriate tax paperwork and be reminded to properly report online sales for income tax purposes. It’s important to remember that income taxes didn’t change when the 1099-K reporting threshold was lowered to $600 in gross sales – online sellers were always required to report income properly on income taxes. You are generally subject to income tax only on your gains, so if you sold an item for less than what you bought it for, you might not be subject to income tax on that sale. Be sure to keep your receipts for verification, and check with your tax advisor if you have questions.
If you think you’ll make $600 or more in gross sales on Mercari, it’s best to submit your W-9 early in the Tax Center so you don’t lose out on any potential sales due to account restrictions. If your gross sales are under $600 in a calendar year, you won’t need to fill out a W-9, and you won’t receive a 1099-K for that year.
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