As a seller on Drip, it’s important to understand the new IRS reporting requirements for payments you receive through PayPal. These changes could affect when you’ll receive a 1099-K form and how it’s used for tax reporting.
What is the new 1099-K reporting threshold?
For the 2023 tax year, the IRS has lowered the reporting threshold for third-party payment processors like PayPal. Now, if you receive $600 or more in payments for goods and services in a calendar year, PayPal will issue you a 1099-K form. This is a significant change from the previous threshold, which only required reporting if you received more than $20,000 and completed 200 transactions in a calendar year.
How does this affect Drip sellers?
Since Drip uses PayPal to process all payouts, any income you earn from sales on Drip will be reported by PayPal if your total payments exceed the new $600 threshold. If you hit this limit, PayPal will issue a 1099-K to you and file the same information with the IRS. This form will show your total gross payments, which you’ll need to include in your annual tax return.
Note: Some of the payments reported on the 1099-K may not necessarily be taxable (e.g., personal items sold at a loss or refunds), so it’s important to consult a tax professional for assistance in determining your taxable income.