Many people sell products on online marketplaces like eBay, Amazon, Etsy, or Shopify. These marketplaces did not send out a income statement (1099-K) unless the income was over 20,000. The IRS has been reporting for several years that this threshold would change. For the 2024 tax year, the form 1099-K will be sent to taxpayers who earn over $5,000. For the tax year 2025, the threshold will be 2,500 and for 2026 the threshold will be 600. Of course all income should be reported whether it was reported on a 1099-K or not.
A copy of this form will be sent to the IRS. This means that the income must be reported on your taxes. Generally this income will be reported on schedule C where the expenses of the business or service is reported. Self employment tax is imposed on the profit of the business or services. It is important to keep receipts and good bookkeeping for the income and expenses. Filing your taxes will be easier if you keep up with your bookkeeping.
Self employment is computed at 15.3% of the profit which is calculated on schedule SE. This is your social security and Medicare. (When you work for someone and receive a W-2, you pay 7.65% and the company matches it.) The profit is also reported on the front page of the 1040 meaning it also gets taxed at your tax bracket. Please consult with a tax professional and discuss quarterly tax payments.
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