IRS to crack down on third-party sellers’ earnings on eBay, Amazon and other sites

NOVATO, Calif. (KGO) — If you’re one of the nearly 4 million people who sell items on eBay, Amazon, or Etsy, the IRS is watching you. The “honor system” is soon going down the dinosaur path at the IRS. From this year, the tax authorities will no longer allow third-party sellers to self-declare their income.

For years, sellers have been able to sell their wares on third-party sites and remain largely under the radar of the IRS.

As long as you made less than $20,000 in sales, you were allowed to self-report your income.

No more, says Jennifer Chiou, a special agent with the IRS’ Criminal Investigations Unit.

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“So in the future, more and more taxpayers will receive Form 1099s in the mail, which are due from these companies by January 31,” Chiou said.

This means for sure that the IRS will collect taxes on the income generated.

“These businesses are required to file a 1099 on these people if their transactions exceed $600,” she said.

Not declaring can be expensive.

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The IRS accused Novato’s Terry Fischer of failing to disclose nearly $40,000 in Amazon sales in 2020.

The agency sent him a notice of demand for $14,000 in back taxes and penalties.

“I was floored. Absolutely floored,” he said.

Terry says he’s never sold anything on Amazon.

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“I didn’t. They say yes. And I’m stuck with the process of proving to the IRS that I never had that income,” Fischer said.

Fischer contacted Amazon and the IRS.

Amazon turned it over to the feds.

The IRS responded with another letter.

“It basically said the same thing, which you still owe and here are some payment slips attached,” he said.

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Frustrated, he contacted 7 On Your Side. We contacted Amazon and the IRS.

Amazon referred all requests to the tax agency, which advised it to file an identity theft complaint.

“We will be sure to work with the civil party to ensure that there are no other potential frauds or data breaches,” Chiou said.

Fischer says he’s been told the investigation could take a year and he doesn’t have to do anything more.

Check out more stories and videos from Michael Finney and 7 On Your Side.

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