Filing ebay 1099 taxes made easy (everything you need to know)

Selling on eBay can be a great side hustle. If you are a seller, you're probably wondering how to file your eBay 1099 taxes. That's why we created this blog post with all the information you need.

In this article, our goal is for it to be easy enough that anyone can understand and do their own taxes as a freelancer without help from a professional accountant (although we always recommend you seek tax advice from your CPA).

It is the eBay seller's responsibility to follow all tax regulations that apply to sales. Some parts can be complex, like filing quarterly taxes or qualifying for tax deductions. However, they'll make sense as soon as we walk through them step-by-step together. Ready? Let's get started...

Note: If you need a little help managing your eBay seller taxes, try Bonsai Tax. Our app tracks tax deductions, sends filing reminders, and estimates your taxes. All in one place. In fact, our users typically save $5,600 off their tax bill with our software. Try a 7-day free trial here.

1099 eBay taxes you need to pay on sales

As an Etsy or eBay seller selling stuff online, you have to pay self-employment taxes on your income. Self-employment taxes are composed of two parts: Social Security (12.4%) and Medicare (2.9%). So, the total tax liability would be 15.3% on your eBay sales.

You can quickly calculate how much you'll owe with our free self-employment tax calculator tool.

Only when required by law in the appropriate state, eBay will collect and remit sales tax on your behalf.

There is a CSV spreadsheet you can download that has all the seller-collected sales tax on it.

Unless you earned money as a hobby and NOT a business, you'll have to pay self-employed taxes. We'll go more about the difference between a hobby and a business below.

Difference between hobby and business for eBay sellers

The IRS does not view all sellers the same on their online marketplace. According to the IRS, if you sell every now and then on eBay, your online sales would essentially be a physical garage sale and you would not have to report your gross sales.

For example, if you sold old clothes or toys you outgrew to make more space in your house occasionally, you would not have to report your gross sales to the IRS.

The income you generated would be considered as a hobby and NOT as a business. You would not be responsible for self-employment taxes. Unlike business losses, taxpayers can typically only deduct qualified expenses up to the total of the hobby income. Put simply, you cannot claim a loss for hobby income.

The lines to determine if you are selling as a hobby or business can be quite confusing. You can learn more about the differences on the IRS's website.

How to file quarterly taxes

As a self-employed worker, you'll need to file quarterly taxes. Quarterly or estimated taxes were designed by the government to help business owners from paying one large tax bill at the end of the year. Hence, the U.S. operates on a pay-as-you-go system.

If you expect to owe more than $1,000 in taxes for the year, you are required to file estimated tax payments four times a year.

Your payment is calculated by taking the total tax liability (self-employment tax, income tax, and any other taxes) from the previous year and dividing that number by four.

You can use Form 1040-ES, or an online calculator to determine how much to send.

When are due dates for quarterly taxes?

These taxes are due on the 15th of April, June 15, September 15, and January 15 of the following year. You can easily send these payments online via IRS direct pay.

Mark your calendar because if you miss the deadline or underpay your taxes, you'll have to pay a penalty. If you send in your money late, you are subject to a penalty of .5% for every day after the due date. There is a 25% penalty limit on the gross amount owed.

What happens if you underpay estimated taxes?

If you send the IRS less money than you owe for quarterly tax payments, they will not be happy. The money you send must equal at least 90% of 100% of the taxes shown on the tax return for the prior year.

If you don't meet that, you'll have to pay an IRS tax underpayment penalty rate on your owed taxes at the end of the year.

1099 eBay tax forms you'll receive

The most common IRS tax form you'll need to deal with as an eBay 1099 business, is the 1099-K. A freelancer typically reports non-employee compensation on a 1099-NEC, but since you are using an online platform, you have a different form. You should receive your 1099-K from eBay after January 31. We'll discuss the requirements for receiving this form as well as the information presented on it.

Form 1099-K for eBay

The 1099-K is an information return that reports the gross amount of all reportable payment transactions from eBay within a calendar year. This includes discounts, credits, fees, refunds, and other adjustable amounts.

An IRS Form 1099-K tracks payments received through third-party payment transaction networks such as Venmo, credit card, PayPal, and other payment methods. In addition, Form 1099-K does not include sales tax when it is automatically collected by eBay. Later in the article, we'll discuss where to find eBay's collected sales tax info.

If you sell goods in any European country or in the United Kingdom, you could be required to register for Value Added Tax or VAT and to collect it on every sale.

The requirements to receive an IRS Form 1099-K are:

• eBay sent you $20,000 or more in payment and...
• You had 200 or more payment transactions through eBay.

New eBay 1099 limit for 2021

A new law requires reporting gross sales or receiving a 1099-K for sellers on platforms like Etsy and eBay. Starting next year, online eBay sellers will receive a 1099-K if they made at least $600 in gross sales instead of meeting the $20,000 threshold. With this change, most sellers on eBay will now get a 1099-K.

Different State Reporting Requirements

Some states have minimum reporting thresholds below the federal limits. This means you could receive a 1099-K even if you didn't make more than $20,000 in gross payments or have more than 200 payment transactions. For example, if you live in Massachusetts or Vermont and have over $600 in gross payments, you must file a 1099-K.

If you meet these requirements, eBay is required to send you Form 1099-K. A copy of your 1099 will be reported to the IRS and the correct State tax authority. Since a 1099-K from eBay reports gross payments or sales you received from the platform, it would show the total amount including fees.

This form does not report tax-deductible expenses (that will be reported on a Schedule-C). The IRS 1099-K is only the gross amount of money coming into your account.

You can download the form directly from your eBay account. When managing taxes for your business, you need access to all your sales and transaction information. Your account will have details on payouts, sales tax charged and collected by eBay, pending payments, Tax ID, address, items sold, and more.

How to get your payment reports on eBay

Instead of scrambling around to find the correct documents to help you file your taxes, here are the instructions for how to get them.

Head to eBay's Seller Hub:

1. Click on the Payments tab in the Seller Hub.
2. Navigate to the left-corner menu and click on the Reports option.
3. From the drop-down list, select the 1099-K detailed report option.
4. Select your preferred date range.
5. Click on Create report.

eBay's reports are a little messy but you'll be able to sort and find all the information you need to file. Make sure the numbers on the form line up with your own records. If there's an issue with your Tax ID or personal information, contact eBay immediately to update your account details to the correct information.

What to do if you have two eBay accounts

If you have two eBay accounts belonging to the same Tax ID, you may receive separate forms for the two accounts. For example, if you have made over 200 transactions and received $15,000 on one and $5,500 on the other, you'll receive a 1099K from each account.

Do you still have to report if you do not receive an information return?

Not receiving a 1099-K does not exempt you from reporting income on your taxes. You must report all gains from online sales. The IRS requires anyone with net earnings from self-employment of $400 or more to file taxes. If your net earnings on eBay are less than $400, you do not have to pay self-employment taxes.

If you did not receive a tax form in the mail, and you know you should have got one, you can access your 1099 online.

How to get your 1099 reports online

Go to the Seller Hub and select the "Payment" tab. From the menu, choose "Reports." Then select the detailed 1099-K report from the drop-down menu. Select the preferred date range and click "Create" to download your report.

Remember, eBay reports your income to the IRS so they'll catch a missing 1099 form and you'll be penalized.

How to get a 1099-K from PayPal

There are federal laws set up by the IRS that require PayPal to send you a 1099-K if you meet certain requirements. These help the IRS track down sellers who don’t report their profits. After all, eBay sales are all trackable through PayPal.

Taxpayers who use a third-party payment processor such as PayPal or a service similar will receive a 1099-K in most cases.

To get the form, simply log into your PayPal account and download it from the platform. If there is no option to download a 1099 form and you know you met the requirements, contact PayPal immediately.

1099 eBay tax deductions you can claim for your business

The wonderful thing about being an eBay 1099 self-employed business is that you can subtract expenses from your business income. You'll need to file a Schedule-C along with your 1099 form to show the IRS what you spent in order to run your business.

A Schedule-C reports profits and losses for a business and has different line items to start deducting expenses to figure out your gross income.

Let's review a list of qualifying tax deductions that most eBay business owners can claim.

Common tax write-offs for 1099 eBay sellers

Keep clean records of all business expenses to report to the IRS. Common deductions eBay sellers can claim include:

• Shipping costs
• eBay and PayPal fees
• Supplies and inventory
• Home office expenses
• Advertising and marketing

• eBay fees (you'll essentially get a refund on the fees paid)
• inventory expenses i.e. the costs related to buying and selling merchandise.
• start-up costs (i.e. legal fees to starting an LLC)
• costs related to tax preparation i.e. if you hire an accountant to help with your tax filing
• cost of gas
• parking/tolls (you cannot deduct parking tickets from your taxes)
• mileage deduction (you can only deduct miles you drove for business and not personal reasons. You cannot claim actual expenses if you choose to track mileage for taxes).
• home office deduction/ dedicated section to work
• eBay tools or tax software
• office supplies i.e. pens, papers, binders, etc.
• costs of office furniture i.e. chairs, desks, lamps
• traveling expenses (Uber or Lyft ride-share services, and business meals count under this)
• car repairs (car maintenance fees can only be claimed if you select the Actual Expenses method for vehicle expense deductions)
• cell phone bill (data/cell phone line expenses)
• wifi
• eBay shipping expenses i.e. shipping supplies like boxes, plastic, bubble wrap, shipping returns
• business use of your vehicle (either actual expenses or the standard mileage rate deduction related to the business use of your car)
• advertising expenses i.e Google ad words, eBay ads or other marketing costs
• storage unit rental fees
• business meal expenses

Fill out the IRS 1040 Schedule C Profit or Loss Form to claim these write-offs. Be sure to keep all your receipts safely. The IRS requires you to hold your receipts for at least three years after filing if you ever get audited.

Note: Bonsai Tax is an app that can automatically track and organize your business receipts. Our software will discover all the potential tax-write-offs from your credit card/ bank statements to maximize your deductions. Sit back and watch as our tool does all the hard work for you. Try a 7-day free trial here.

Time to file your 1099 eBay taxes

If you're an eBay 1099 seller, then you'll need to be prepared to file your 1099-K tax return. Understanding how taxes work as a 1099 seller is important so that nothing slips through the cracks and your business receives all of the deductions it's entitled to.

We hope our article helped eBay sellers understand this process. Bonsai Tax offers easy-to-use software that simplifies:

• Quarterly filing deadlines
• Calculating sales totals for specific items
• Creating customized invoices if needed

It doesn't matter what kind of online selling experience you have. Bonsai supports you when it’s time to file IRS forms, calculate your income tax on independent contractor earnings, and organize all your write-offs.

Try our software today for 7-days free here.

What to do if you have any questions

If you have any questions on what you can deduct from your taxes or how to file your 1099, consult with a licensed tax professional or CPA for tax advice.

When tax season rolls around, the cost of a CPA or tax professional far outweighs the price and hassle of receiving unnecessary penalties or fines.

A professional or CPA's services can help you stay compliant with reporting your 1099 taxes to the IRS.

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Changes in Form 1099-K thresholds and reporting limits

Understanding the new 1099-K reporting thresholds for 2024

The IRS lowered the reporting threshold for Form 1099-K starting in 2023, and this change continues through 2024. Now, third-party payment processors like PayPal and eBay must issue a 1099-K if you receive over $600 in gross payments, regardless of the number of transactions. This is a significant drop from the previous threshold of $20,000 and 200 transactions combined.

For eBay sellers, this means more sellers will receive a 1099-K form reflecting their sales income. For example, if you sold $700 worth of items on eBay in 2024, you will likely receive a 1099-K from eBay or its payment processor. This form reports your total gross sales, which you must include when filing your taxes.

To stay compliant, track your sales and payment receipts carefully throughout the year. Using tools like eBay’s Seller Hub or accounting software such as QuickBooks Self-Employed can help you monitor when you approach the $600 threshold. This proactive tracking ensures you are prepared for tax time and can accurately report your income.

How the lowered threshold impacts eBay sellers’ tax reporting

The lowered 1099-K threshold means many casual and part-time eBay sellers now receive tax forms they didn’t get before. This can increase your taxable income reporting requirements, even if you only sell occasionally. The IRS uses 1099-K forms to cross-check income reported on your tax return, so accurate reporting is essential to avoid audits or penalties.

For example, if you sold $1,000 worth of collectibles on eBay in 2024, you will receive a 1099-K reflecting that amount. You must report this income on Schedule C if you’re self-employed or as other income if selling personal items for profit. Keep in mind that sales of personal items sold at a loss generally do not count as taxable income, but gains must be reported.

To manage this, maintain detailed records of your purchases, sales prices, and any related expenses like shipping and fees. This documentation helps you accurately calculate your net profit or loss. Apps like Bonsai or Expensify can simplify expense tracking and ensure your tax filings reflect your true earnings.

Exceptions and state-specific considerations for 1099-K reporting

Some states have their own 1099-K reporting thresholds that differ from the federal $600 rule. For instance, Massachusetts and Vermont maintain the old federal threshold of $20,000 and 200 transactions for state tax reporting. Sellers should check their state’s tax department website to understand local requirements for 2024.

Additionally, certain types of sales may not trigger 1099-K reporting. Personal sales where you do not profit, such as selling used personal items below purchase price, typically are not taxable and may not appear on a 1099-K. However, if you regularly sell items for profit, the IRS considers this a business activity requiring income reporting.

To navigate these nuances, consult a tax professional familiar with e-commerce and your state’s tax laws. Using tax software like TurboTax or TaxAct can also guide you through federal and state reporting requirements based on your income and location. Staying informed helps you avoid surprises and keeps your eBay selling compliant.

Form 592-B and state-specific tax forms for eBay sellers

Understanding Form 592-B and its relevance to eBay sellers

Form 592-B is a California-specific tax form used to report amounts withheld on payments made to independent contractors or sellers, including those on platforms like eBay. If you sell on eBay and are a California resident or your income is subject to California withholding, you may receive this form to document state tax withheld during the year.

For example, if eBay or a payment processor withheld California state income tax on your earnings, Form 592-B will show the amount withheld and paid to the Franchise Tax Board. This form helps you claim the withheld amount as a credit when filing your California state tax return for 2024. Keep this form with your tax records to avoid double taxation.

To stay compliant, verify if you received Form 592-B by early 2025, as California requires payers to send it by January 31. If you did not receive it but believe withholding occurred, contact eBay or the payment processor promptly. Understanding and using Form 592-B correctly ensures you accurately report income and withholding on your state tax return.

Other state-specific tax forms eBay sellers should watch for

Besides California's Form 592-B, eBay sellers may encounter other state-specific tax forms depending on where they live or conduct business. For instance, Massachusetts uses Form M-1099 to report payments made to independent contractors, while New York requires Form IT-2104.1 for withholding on nonresident sellers. These forms help states track taxable income and withholding.

For example, if you live in Massachusetts and receive payments through eBay, the payment processor might send you Form M-1099 showing income and any state withholding. Similarly, sellers in New York may need to submit additional withholding forms if they are nonresidents earning income in the state. Check your state’s department of revenue website for specific forms related to online sales income in 2024.

To manage these forms effectively, maintain organized records of all eBay transactions and any tax documents received. Using tax software like TurboTax or TaxAct can help you import and track state-specific forms, ensuring you file accurate returns and claim any withholding credits available.

How to handle state withholding and reporting for eBay income

When selling on eBay, understanding state withholding rules is key to avoiding surprises at tax time. States like California require withholding on certain payments to independent sellers, which means a portion of your eBay income may be withheld and reported on forms like 592-B. You should factor this withholding into your estimated tax payments or final tax return.

To handle this, first confirm whether your state mandates withholding on eBay sales income. If so, track any withholding amounts shown on forms such as 592-B or M-1099. When filing your 2024 state tax return, report your total income and claim the withheld amount as a credit to reduce your tax liability. Failure to report withholding can lead to overpayment or penalties.

Additionally, consider consulting a tax professional or using specialized accounting tools like QuickBooks Self-Employed to monitor income and withholding throughout the year. Staying proactive with state-specific tax forms and withholding ensures you remain compliant and avoid costly tax issues related to your eBay sales.