Marketplaces like SidelineSwap are required to provide a 1099-K to all US-based sellers whose gross sales have exceeded thresholds set by the IRS and by some States. Note, this does not apply to sellers located in Canada. In January 2022, the IRS threshold was lowered, but in an effort to ease the transition into these new requirements, they have delayed their enforcement for a year. This means that for the 2022 tax year, the tax reporting requirements are the same as those used for the 2021 tax year. Only sellers who have 1) reached $20,000 in gross sales and 200 transactions or 2) are residents of a state that have a lower reporting threshold will receive a 1099-K. Read the IRS’ announcement of that change here.
What is a 1099-K?
Form 1099-K is an IRS form for taxpayers to report applicable payment transactions received within a calendar year. If you reach the threshold mentioned above, SidelineSwap is required to issue a form 1099-K to report your gross sales to the IRS and/or State taxing authority where applicable. Your gross sales is reported as the aggregated sales price of items that were included in successful payments throughout the year, not including shipping fees or sales tax paid by buyers. The amount reported includes processing fees and fees paid to SidelineSwap as well as payments that were refunded.
In order to generate your 1099-K, SidelineSwap requires all users who have reached the federal or state thresholds to submit a W9 form. This form is a formal request for your Taxpayer Identification Number (TIN) and Certification. The information requested on this form is:
- Your legal first and last names
- Your Social Security Number (SSN) or Individual Tax Identification Number (ITIN)
- Your mailing address
- Your tax classification (aka your reporting status for income tax purposes i.e. individual v. business)
For certain tax classified business entities, such information may also include:
- Legal Name of Entity (if different from individual)
- Employer Identification Number (EIN)
- Registered Business Name/Disregarded Entity Name/Doing Business As (DBA), if any
- Registered address of entity
What happens when I reach the threshold?
When you’ve reached the threshold, SidelineSwap will prompt you to submit the W9 form from your Seller Dashboard. Because SidelineSwap is obligated by law to collect the information described above, your cashouts will be disabled until you’ve submitted the form. Your cashouts will be automatically re-enabled within 30 minutes of submitting your W9. You only need to submit this information once.
When will I receive my 1099-K?
Your 1099-K will be made available to you by January 31. When it is ready, you will receive an email from SidelineSwap directing you to your Seller Dashboard where you can download the form.
How do I know the correct gross sales amount is being reported?
Sellers are able to export a sales report reflecting the last 18 months of their sales directly from the Seller Dashboard. Simply look for the “Export” button above your Transaction History. Once you receive your sales history in a CSV file to your email, you can compare your sales history with the total sales amount reflected on your 1099-K. As a reminder, the amount shown on your 1099-K reflects your gross sales as described above.
What should I do if the information on my 1099-K is incorrect?
Once you receive your 1099-K, please review it to ensure all the reflected information is correct. If you find that any information is incorrect, please reach out to SidelineSwap support for assistance with updating the 1099-K.
Will I have to pay additional taxes on items I’m re-selling?
Receiving a 1099-K form doesn’t necessarily mean you’ll owe additional income taxes on your sales. The 1099-K form we issue doesn’t calculate your profit or indicate any personal or business income tax liabilities you may have—it simply gives the total gross sales processed by SidelineSwap in 2022. Since the gross amount on your Form 1099-K does not include any adjustments such as fees, refunds, or other adjustable amounts, it may not represent the final reportable amount on your tax return.
Additionally, you will only pay taxes on profits. You don't owe any taxes on something you sell for less than what you paid for it. For example, if you bought new hockey skates last year for $600 and then used them and resold them for $300 on SidelineSwap, the $300 you sold them for would not be subject to income tax.
As much as we’d like to make taxes as easy as possible for sellers, SidelineSwap is not in a position to interpret tax laws and give specific tax advice. You should consult your tax advisor to determine how best to use the information on your Form 1099-K when filing your personal and/or business income tax return.
Why did I receive a 1099-K from PayPal/Venmo?
PayPal is required to distribute 1099-Ks for users whose Venmo cashouts exceeded the federal or state thresholds. If you received a 1099-K from PayPal, you can work with a tax professional to make sure your income isn’t double-reported.
What will I be required to report on next year?
Next year, the IRS plans to enforce its new tax reporting requirements. This means any seller who earns more than $600 in gross sales in 2023 will be provided with a 1099-K by the end of January 2024. For more information on 1099-K requirements for the 2023 tax year, read here.