A new provision in the American Rescue Plan has dramatically expanded the reporting requirements for people and business who sell goods online. While the law was initially intended to crack down on tax avoidance schemes undertaken via Apps like PayPal and Venmo, the language in the law broadly impacts many other types of business. Companies like eBay, Facebook, Etsy, Unbuilt and others that facilitate online sales transactions must now send 1099 forms to the IRS reporting any payments over a 'threshold' value made to customers. While a previous version of the law allowed unreported transactions up to $20K, that number has been dropped to $600, creating a much wider impact on small businesses, individual resellers and occasional resellers, including many Unbuilt customers.
It is important to note, that while these payments must be reported, depending on individual tax situations, net income may not be impacted. Resale commission income may be offset by the original purchase cost of an item, which is usually higher than the commission - yielding no net new income.
Because of the added burden on individuals and small businesses, this provision is very unpopular and a number of legislators and lobbyists from the larger platforms impacted by the law are working to reverse the the law.
However, in order to comply with the law, Unbuilt is required to collect information from our clients who earn over $600 in 2022, prior to issuing payments. We collect this information, including official name and address of the entity to which payment is made, as well as entity type and tax identification numbers, and use the information to file 1099 forms with the IRS and our customers at the end of the Tax Year in which payments are made.