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Seller Taxes and Receiving a 1099-K

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Starting in 2022, all online marketplaces, including Kidizen, are required by the IRS to report a seller's total gross sales that exceed $600 and provide a 1099-K to sellers meeting these criteria. While the amount that sellers are supposed to report as income has not changed, Kidizen will now file a 1099-K with the IRS and applicable states if you meet this threshold.

 

Here’s what you need to know about the tax changes:

 

  • Starting in 2022, all online marketplaces, including Kidizen, are required by the IRS to provide a 1099-K to all sellers who sell goods for a gross amount of $600 or more for the year. While the amount that sellers are supposed to report as income has not changed, this new law now requires that Kidizen also report a seller’s total gross sales that exceed $600. If you meet this threshold, Kidizen will file a 1099-K with the IRS and your State (where applicable). 
  • This new requirement will impact your 2022 sales (you will receive your 1099-K in 2023) but not any prior years.
  • Once you hit $500 in sales, we will need you to fill out a Form W-9 so that we have the necessary information to report your sales. 
  • For most sellers on Kidizen, this does not mean that you will necessarily owe taxes, particularly if you originally paid more for the items than the amount for which you sell them (for example, if you purchased an item for $50, and then sell it for $20, you should not owe taxes on this sale). You may also have other deductions associated with your sales on Kidizen that will reduce the amount you owe, if anything.  We recommend consulting your tax professional to help you determine what you can deduct. 
  • In order to assist with tax returns, by January 2023, all sellers will have access to a sales report that will itemize each sale and the expenses associated with each sale made through Kidizen, including shipping costs, marketplace fees, refunds, and client payments (if you are a Style Scout). 
  • This change impacts millions of casual sellers across all online marketplaces, not just Kidizen, who are seeking to make extra money by clearing out items in their homes. We believe that the new 1099-K threshold puts an unnecessary burden on those working to supplement their household income and support their families. Along with eBay, Mercari, Etsy and others, we are working to fight the new 1099-K threshold and we ask you to join us by sending a letter to Congress and joining the 1099-K Fairness Coalition.




FAQ:

What is a TIN?

Your Taxpayer Identification Number (TIN) is used by the IRS to identify taxpayers. For most sellers who are United States residents, your TIN is your Social Security Number (SSN). Individuals who cannot get a SSN can obtain an Individual Taxpayer Identification Number (ITIN). Business sellers generally must provide their Employer Identification Number (EIN).



Why is Kidizen asking me for my TIN?

As of 2022, Kidizen is required by the IRS to provide a 1099-K to all sellers who sell goods for a gross amount of $600 or more for the year. If you meet this threshold, Kidizen will file a 1099-K with the IRS and your State (where applicable). In order to provide a 1099-K, Kidizen needs the following info from any sellers who are coming near this threshold:

  • Name
  • Address
  • Taxpayer Identification Number (TIN), which for United States residents is typically your Social Security Number

 

You can submit this by going to your Settings > Manage Tax Info. Make sure that the tax information you are providing matches the information on your tax return. 



What does the $600 threshold include?

The $600 threshold is for unadjusted gross sales which include the total amount paid by buyers before any refunds are applied.  “Gross sales” includes fees and postage but does not include sales tax. 



What If My TIN/SSN Fails?

If the TIN/EIN fails, this indicates that according to the IRS the TIN/EIN you provided does not match the legal name they have on record. This could be because you got married and didn’t update your SSN, your name is spelled incorrectly, your address has your shop name in it, your address isn't exactly how it is on your IRS statements (putting Dr instead of Drive), or you are not a U.S. Citizen. We automatically fill in your name and address based on your return address to help facilitate the process. So, if you use your shop name in your address, you will need to update this with your legal name before submitting the TIN verification. If you are not a U.S. Citizen, please contact us so that we may exempt you from having to enter this information. If verification fails 3 times, you will not be able to try again for 24 hours. If you are unsure of why it is failing you can create an account with the IRS here which may help shed some light on what is going wrong. 

There may be a delay between the issuance of a new EIN number by the IRS and its acceptance through the verification system.  If you chose to create an LLC, please allow extra time for verification.

 

Why do you need my SSN? 

We are required by Federal Law to file a 1099-K for any seller who has sold $600 or more in gross sales. In order to file a 1099-K, we need to have a tax ID, which for United States residents is your Social Security Number.



What will the 1099-K form include?

This form will include your total sales transactions for the filing year if your sales exceed $600. Please note that adjustments for refunds, marketplace fees, shipping, and payments to Style Scout clients are not made in the amount reported on the 1099-K. In addition, the full amount of gross sales will be reported whether you cash out your Redeemable Kid Bucks, redeem your Redeemable Kid Bucks to make a purchase, or leave your Redeemable Kid Bucks in your account. By January 2023, a detailed sales report with this information can be accessed by going to Settings > Manage Tax Info. The reported amount on your 1099-K will be different from the total amount you received from Kidizen for the reasons above. Please consult your tax professional to determine what can be used as a deduction. Your sales report will be sent to you as a CSV file to make it easily imported into different types of programs. To open this file, you will need to use a spreadsheet program such as Microsoft Excel, Apple Numbers, Google Sheets, or OpenOffice Calc. We recommend doing a quick search on how to do this with your particular program. 

 

What happens if I do not submit my TIN? 

When you reach $500 in sales, you will receive an email and alert letting you know that you need to submit your tax information and your account will be restricted until this is completed. If this happens, you can resolve these restrictions by submitting your tax info in your account's Settings > Manage Tax Info. In order to avoid any account restrictions, you may enter your tax information at any time prior to hitting the $500 threshold. These measures are necessary because Kidizen is required by law to report this information to the IRS, and all sellers over $600 in sales are required to provide this information to Kidizen. If you don't provide us with an SSN, EIN, or ITIN, your payouts will be put on hold, and we may deduct backup withholding from future payouts.

 

When will I receive my 1099-K?

You will have access to your 1099-K in the Settings > Manage Tax Info section of your Kidizen account by the 31st of January following the tax year.

 

What do I need for the new 1099-K changes?

For everything you sell online, it's helpful to keep a record of your costs, item purchase prices, and any selling-related expenses. Receipts and other proof of payment such as bank and credit card statements may be helpful when determining the original cost of the items you sell. Kidizen will provide you with a sales record detailing other costs associated with your sales including shipping (if purchased through Kidizen), refunds, and marketplace fees. 

 

What if I have multiple accounts?

Each account that reaches $600 or more in gross sales will receive a 1099-K for each account. 

 

If I input my info as sole proprietor and then input again once my LLC info is finalized, will just the last input before the end of the year be what will be on my 1099-K?

When 1099-Ks are created, they will use your “most detailed level of TIN verified information available”. This means that if you enter personal information (i.e. SSN), then later enter business information (e.g, LLC information), the business information will be used when generating the 1099-K.
 

 

I am a Style Scout. How does it work since I pay clients a portion of the sales?

The gross sale amount, including the amount that is paid out to your clients, will be included in the amount reported on the 1099-K. The sales report you will be able to access in January 2023 will itemize the amount you paid to your clients for each transaction. We have more information on this new tax law for Scouts and their clients below. 

 

What can I do about this new 1099-K law?

This change impacts millions of casual sellers across all online marketplaces, not just Kidizen, seeking to make extra money by clearing out items in their homes. We believe that the new 1099-K threshold puts an unnecessary burden on those working to supplement their household income and support their families. Along with eBay, Mercari, Etsy and others, we are working to fight the new 1099-K threshold and we ask you to join us by sending a letter to Congress and join the 1099-K Fairness Coalition.



How does Kidizen protect my personal information? 

Kidizen uses the Abound software to safely store tax identification numbers. This information is not stored by or accessible to Kidizen. 

 

Where can I find more information on 1099-Ks?

Here are some general IRS FAQs on this topic.




SCOUT FAQ

Will the client payments no longer count toward my gross sales if clients are also getting a 1099-K?

We are required to report the gross sales amount for all your Kidizen transactions on your 1099-K. You may be able to deduct client payments when you file your tax returns. We recommend consulting a tax professional to determine how best to report this on your tax return. 

How will having my own client account (as a second account) for personal items affect my 1099-K?

You will receive a 1099-K for each account. If your second account functions as a “client” for your primary account, then the 1099-K will only include the gross amount of all direct sales you made through that account. 

Will clients receive 1099-K if they received $600 or more in payments?

No, clients will not receive a 1099-K from us if they received more than $600, just the Scout.

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