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Clients that use third-party payment apps and online marketplaces for personal and business sales need to be aware that the reporting threshold for 2023 has been lowered to just $600, down from $20,000. The change was first enacted by the American Rescue Plan Act of 2021 for 2022, but implementation of the law was suspended for the 2022 tax year.

If you sell an item of value online using eBay, Facebook Marketplace, etc., or collect payment using an online payment app such as PayPal, you may receive a Form 1099-K. Companies are required to file a Form 1099-K if the total gross payments to you for goods and services are over $600 for the year.

It is very important to keep track of the cost of any items sold through these mediums so you only pay taxes on the gain. Understand that each item is treated separately, so you cannot net multiple gains/losses together.

Note that losses on the sale of a personal item are not deductible against your AGI but can offset the income reported on a 1099-K. For example, if you sell a set of golf clubs for $650 that you paid $950 for, the 1099-K reported for the $650 sale can be adjusted on Schedule 1. You will not pay tax on the $650 but cannot write off $300. The result of the sale of a personal item at a loss adjustment is simply a $0 net effect on AGI.

For more information, read Understanding Your Form 1099-K at IRS.gov