The Internal Revenue Service wants to know about your online side hustle, so online platforms will now be used to report users’ earnings.
Anyone who earned over $5,000 last year selling goods or services through an online platform, such as eBay or Etsy, can expect to receive a 1099-K tax form this month. Previously, the forms were only sent out to those earning $20,000 or more per year, according to The Wall Street Journal.
The change in requirements for sending out the forms is being gradually phased in over the next three years. For the 2025 tax year, online platforms will be required to send the forms to anyone who earned $2,500 or more, and in the 2026 tax year, forms will be sent to anyone earning $600 or more.
The new requirement is an effort to ensure that taxpayers are honest and accurate in reporting their income. Income earners have always been required to report their income accurately, but this new measure will give extra incentive for taxpayers not to “forget” to report it to the IRS.
An IRS investigation into the online platform JustAnswer revealed that some experts who were paid to answer questions on the platform failed to report their income. In one case, a platform respondent had more than $400,000 in unreported income over four years, and another failed to report more than $1.3 million, the WSJ reported.
Users selling online personal items at a loss must fill out a new line item on Schedule 1 of their tax form indicating that they took a loss on the sale. On the other hand, those selling at a profit must report the income as a capital gain on Form 8949 and Schedule D.
Anyone receiving a 1099-K who fails to report the income is at risk of being audited by the IRS and could face steep penalties.
