Income tax issues related to a person’s online sales accounts are important to consider, especially for fiduciaries and family members dealing with the person’s incapacity or death. The IRS has had trouble tracking income received from online sales, but new tax code provisions and proposed regulations will help the IRS identify high–volume online sellers in the future.
Starting in calendar year 2011, banks and other online payment organizations may need to report the total amount of sales proceeds that an online seller receives by credit card payments. The IRS and the online seller will receive this information on an IRS Form 1099–K.
The reporting under Internal Revenue Code § 6050W and Proposed Regulation § 1.6050W–1 would apply to taxpayers using eBay, Craigslist, and other online sales Web pages, but only if the online seller’s total sales proceeds exceed $20,000 and the total number of transactions exceeds 200. In other words, the reporting requirements are focused on high–volume sellers.
A May 30, 2010, Washington Post article has more information about these new IRS reporting requirements for online sellers: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/29/AR2010052900341.html.