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What are the US tax reporting requirements for 2022?

This article contains information about tax reporting for 2022. If you’re looking for information about 2021 tax reporting requirements, see this article.

As of January 1, 2022, marketplaces like Reverb are required to report a seller’s sales if they sell $600 or more on the platform in a calendar year. This new reporting requirement means that if you hit the $600 sales threshold, you’ll need to provide tax identification information so that we can issue you a Form 1099-K. 

Here’s what you need to know

  • If you hit $600 in sales on Reverb, we’ll reach out to collect your tax identification information. You have the option to add this information to your account here at any point prior to hitting the threshold, but you will be required to provide it once you reach $600 or more in sales.
  • This information is needed to issue you a Form 1099-K and will help you file your taxes next year. If you hit the threshold and don’t provide this information, your payouts may temporarily be put on hold until you enter your tax information.
  • Once you’ve provided your tax information, no additional action is needed from you until later this year. We’ll reach out with more information and next steps as appropriate. 

Reporting your sales doesn’t necessarily mean you’ll pay income tax

Receiving a 1099-K doesn’t necessarily mean you’ll pay income tax on your Reverb sales. For example, say a Reverber bought a guitar for $1,600 in 2019 and sold it for $1,000 in 2022. Reverb would still have to report the $1,000 payment on a 1099-K, but the seller would have no taxable income to report since the resale amount was less than the original purchase price. However, everyone’s situation is different. If you have questions about your taxable income, it’s best to work with a tax professional.

How we’re advocating for change in this law—and how you can help

We recognize that this new IRS reporting requirement disproportionately burdens casual sellers who will be required to file unnecessary, burdensome, and confusing tax forms for used music gear sales that aren’t ultimately taxable. That’s why we’re advocating for Congress to raise the $600 reporting threshold. 

On April 27, 2022, we joined other leading online marketplaces to form The Coalition for 1099-K Fairness, a coalition committed to protecting casual online sellers from unfair tax reporting burdens. We want policy makers to understand the negative impact this new reporting requirement has on musicians that use Reverb to resell their used gear.  

If you’re a casual seller and you want to help us advocate for a change in this law, you can share your story here. We want to educate policy makers on the benefits of reselling music gear online —whether it allows you to try new gear and expand your playing or helps you make ends meet—and the negative impact this new threshold will have on many music makers.

FAQs and additional resources

We understand that this new reporting requirement is frustrating. While we can’t give you specific advice, we have compiled FAQs and additional info below to help you make sense of the situation. We’ll keep you updated as we learn more, but you can always reference the IRS website for the most up-to-date information.

  1. When did the above reporting requirements go into effect?

As of January 1, 2022, marketplaces like Reverb are required to report a seller’s sales if they sell $600 or more on the platform in a calendar year. Previously, a 1099-K was only required when a seller hit their state’s threshold or the federal threshold of $20,000 in sales and 200 or more transactions in a calendar year. 

  1. What do I do if I hit the $600 sales threshold?

If you hit $600 in sales on Reverb, we’ll reach out to collect your tax identification information. You have the option to add this information to your account here at any point prior to hitting the threshold, but you will be required to provide it once you reach $600 or more in sales. If you hit the threshold and don’t provide this information, your payouts may temporarily be put on hold until you enter your tax information.

  1. What happens if I don’t provide my tax information to Reverb?

If you hit the threshold and don’t provide this information, your payouts may temporarily be put on hold until you enter your tax information.

  1. What is a Form 1099-K?

A Form 1099-K reports payments you’ve received through a third party to the IRS. Since Reverb processes payments for sellers through Reverb Payments, we’re required by law to send out a 1099-K tax form to sellers who meet federal or state thresholds.

The Form 1099-K from Reverb reports the unadjusted gross sales you received through Reverb Payments during the last calendar year. Unadjusted gross sales includes:

  • Sales
  • Shipping
  • Refunds
  • Selling fees 
  • Bump fees 
  • Credit card fees 

Note that there may be other fees in addition to those listed above in Reverb’s 1099-K calculations. Reverb’s 1099-K amount excludes Marketplace Facilitator Taxes remitted by Reverb on behalf of sellers. Reverb fees and any refunded orders do not reduce your total sales for the year. 

You only pay taxes on your taxable income. For example, say a Reverber bought a guitar for $1,600 in 2019 and sold it for $1,000 in 2022. Reverb would still have to report the $1,000 payment on a 1099-K, but the seller would have no taxable income to report since the resale amount was less than the original purchase price. Each Reverber will have to look at all their transactions both on and off platform in a given year to determine their taxable income, and should consult a tax advisor with any questions. Visit the IRS website for more info on understanding your form 1099-K and instructions

  1. Why do I need to provide tax information to Reverb if I hit the $600 threshold?

This is a requirement by US law, introduced in the American Rescue Plan Act of 2021. As of January 1, 2022, marketplaces like Reverb are required to collect tax identification info from sellers who gross $600 in sales in a calendar year. This information will help us ensure the timely and accurate issuing of a Form 1099-K and help you file your taxes.

  1. Will I have to pay taxes on my Reverb sales?

Receiving a 1099-K doesn’t necessarily mean you’ll pay income tax on your Reverb sales. For example, say a Reverber bought a guitar for $1,600 in 2019 and sold it for $1,000 in 2022. Reverb would still have to report the $1,000 payment on a 1099-K, but the seller would have no taxable income to report since the resale amount was less than the original purchase price. 

However, everyone’s situation is different. If you have questions about your taxable income, it’s best to work with a tax professional.

  1. If I’m not a US-based seller, does this apply to me?

If you aren’t located in the US and don’t file a US tax return, these regulations do not apply to you. 

If you aren’t located in the US but you are paid in USD, we will need a Form W-8 BEN on file to remove you from the 1099-K obligation. Reach out to 1099taxreporting@reverb.com for more information.

  1. Is this $600 sales threshold specific to Reverb?

No, this is the sales reporting threshold for all third-party marketplaces. 

  1. Does the $600 threshold apply to one sale or multiple?

A seller has hit the $600 threshold when they have sold $600 or more on Reverb, whether that is through one sale or multiple sales. 

  1. Does this $600 threshold apply to both new and used gear sold on Reverb?

Yes, a seller has hit the $600 threshold when they have sold $600 or more on Reverb, including both new and used gear. 

  1. What if I sell something and then issue a refund?

Refunded orders do not reduce your total sales for the year. 

  1. How can I keep track of what I’ve paid for gear on Reverb?

You can view your past Reverb purchases in your buyer dashboard. Adding gear you’ve purchased to your Collection is another great way to keep track of what you own—including how much you originally paid—even when your gear was not purchased on Reverb. 

  1. What type of information will I need to provide to Reverb?

If you reach $600 in sales on Reverb, you’ll need to provide tax information—like your Employer Identification Number (EIN), Individual Tax ID Number (ITIN), or Social Security Number (SSN)—if you haven’t provided it to us already.

  1. What’s the difference between providing a Social Security number or an employer identification number?

If you’re a sole proprietor—meaning you’re not a business entity that is a corporation partnership, or limited liability company—you will use your Social Security number for tax filing and reporting. Otherwise, you need a federal employer identification number (EIN) to pay taxes as a business. 

Even if you’re a sole proprietor, you can still opt to get an EIN. This gives you a few privileges: you can hire employees, incorporate, form a limited liability company or partnership, and have a solo 401(k) retirement plan. Using an EIN instead of a Social Security number can also help to protect against identity theft and establish yourself distinctly, lending more credibility to your business. You can apply for an EIN from the IRS.

  1. What happens after I provide my tax information to Reverb?

Providing Reverb with your tax identification information will enable us to issue you a Form 1099-K. We’ll provide more information and next steps as appropriate. 

  1. Is my information secure?

Reverb uses industry standard security and encryption technologies to ensure your personal information stays secure and private. Specifically, Reverb uses a widely adopted security protocol called Transport Layer Security (TLS) and encrypts sensitive info using Advanced Encryption Standard (AES)-256.

  1. Will I need to update my tax information each year?

Yes, you will be required to provide tax information each year that you meet the IRS and/or your state’s threshold. 

  1. What if I have more than one Reverb shop?

Each shop, even if it is under the same TIN (“Taxpayer Identification Number”)—be it social security number or EIN ( Employer Identification Number)— is issued an individual 1099-K for their shop’s activity. We’re unable to combine shop activity at this time. 

  1. What if I have additional questions?

If you have questions about Reverb’s policies, you can view our updated Terms of Use and Payment Terms. If you have additional questions, we recommend consulting a tax professional. 

We’ve also compiled a few additional resources you might find useful: 

Tax laws change frequently, and the information below is not tax or legal advice. You're responsible for any use of this information. Please consult a tax professional if you have any questions.
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