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The new 1099-K IRS Disaster and How It Affects Us

The attack on the American "Pandemic Survivors."

As you may have heard, on January 1, 2021 the IRS threw a live grenade into the lives of millions of Americans who were barely making a living buying and selling their belongings online after loosing their jobs and homes due to the devastating pandemic. Many creative friends of mine who’s livings went up in smoke because of the pandemic had turned to buying and selling online. This grenade is a new tax law that requires anyone who sells more than $600 in a calendar year to fill out a  1099-K form and pay income tax on their earnings. It targets Americans who, during the pandemic, turned to whoring out their belongings online or flipping stuff they bought locally through marketplace apps like eBay, Mecari and Reverb to stay afloat. Yes, the IRS’s answer to the devestation of the pandemic was to aggressively squeeze the last few drops out of these lower income bracketed people and now claim that the taxes they paid on these purchases and sales are now taxed the same as if it were your full time job with benefits and healthcare. Everyone flipping stuff online instantly realized the days of making a few bucks online are officially over. Hundreds of thousands of Americans closed their eBay accounts and eBay CEO wrote an open letter to congress begging them to reconsider what they had agreed on.

In fact, selling on eBay is now financially dangerous. You may be hit with a flood of confusing tax forms and penalties if you sell anything $600 or more in a calendar year! The shameful and egregious new IRS Tax Law is not only half-baked and unethical but unimaginably destructive at a time (mid-pandemic) when Americans needed a break.

The US government has snuffed out online revenue sources completely. The “side-hustle” has been obliterated overnight.

I used to enjoy flipping music instruments and recording gear online as a little side hustle but that all came to a grinding halt on Jan 1 2021. While I was quite disappointed, what about those who’s lives solely relied on online sales who went from an 8% tax rate to half overnight? What little profit they were making is now totally gone. Like every other musician I know, I was casually enjoying buying and selling musical equipment on Reverb for fun and was hit with a massive unexpected tax event this year. I instantly realized, “welp, this is over.” My heart goes out to those who had made this their livlihood. Uncle Sam has single-handedly strangled the life out of not only their source of side-income, but also hundreds of online arbitrage marketplaces like Reverb, Etsy and eBay who found that most people would rather stop selling online then give Uncle Sam HALF of the slim profits they were scraping together. For this reason, the CEO’s of over a dozen online marketplaces including those I just mentioned, have written an open letter to the government, pleading for reconsideration (you can add your name to this list by clicking the button below). Now is the time to act! Please take a moment to share your story below.

Some level-headed congress members and app CEO’s have written open letters to the IRS begging them to reconsider this attack on the American Public but so far the lawmakers have just doubled down on this atrocity.

I don’t think the IRS thought this through at all. In fact, it’s the shadiest thing I’ve ever seen the government do to the lower income American people in my lifetime. My heart goes out to those who had no other source of income, their revenue came to a screeching halt in January of 2021.

During Covid, many artists found news ways of staying afloat. Many musicians turned to flipping music gear online and Reverb because it is a place you can make 50-100k if you worked full time at it. I was one of those starving artists. In 2019 many people stopped spending money on websites, music and certainly paying live performers like myself. I do not have a storefront, I just flip gear out of my living room and was happy to find an alternative way to subsidize my income. Well, the IRS saw me and millions of other starving artists and said, “gimmegimmegimme.”

To step on lower class, lower income bottom 1% survivors, who were hit the hardest by Covid, is deplorable. To see musicians and artists as the “low hanging fruit” in this economic crisis we face is just evil.

So let’s break down the atrocity at hand:
If I bought say, a guitar for $1000 and sold it for $1200 I would make about $75 profit. Now that the IRS says I must fill out a 1099-K and pay full income tax as if I were an employee of eBay or Reverb, I actually end up owing the IRS more money than the profit I made before, so there is no point. Ergo, the IRS has obliterated not only my source of side-income but aaaaaaaaall the US online retailers as well that built this country and are keeping the economy afloat during the pandemic. Like me, no one wants to take time to sell gear if the little profit they were making is now gone. Did the IRS really think this through or did they just steamroll all Americans with an illogical, half-baked cash grab?

What’s worse is the IRS was already making a killing on online selling. Both the seller and the buyer were already taxed when a purchase was made. The buyer would then sell the same piece of gear online (arbitrage) and the seller and new buyer are then taxed again. If that same used guitar is sold 5 times in the year, the IRS sees 10 taxable events plus the tax they make from the marketplace app! But that wasn’t enough?? Kind of greedy, wouldn’t you agree? Isn’t it enough to tax a good as a good? I am not an employee of eBay or Reverb, why on earth am I filing a 1099-K and being taxed like one? I have no benefits, I have no health insurance, I have no store front nor is it my actual job. Selling gear is never musicians job, it is already an exchange of dignity to sell our wares to support our families or it is a fun side hustle to make a couple bucks but all of a sudden Uncle Sam wants half?

On behalf of every struggling musician, producer and artist who went from paying about 8% to 40% taxes overnight, I ask you to reconsider this new tax law disaster. Please reconsider the sledgehammer the IRS has put in your hand to bash over our heads. Maybe this time you leave online sellers alone? Especially because we are the “little guys” politicians are always talking about helping and you just slit all our throats. We are the artists and struggling art performers who had momentarily found dignity and a diverse way to feed our families during a pandemic that extinguished our only means of survival. Maybe an aggressive, brash move against us by our own government wasn’t the best move in 2021?

So what can you do about it? Well fortunately, companies like eBay and Reverb are fighting back. Click the button below and fill out the form to share your story with congress. Help us fight to reverse the attack on the American People and restore safe and free commerce online.

Want to really get involved and do more? Join me and eBay Main Street to make your voice heard. They are a global grassroots action network that keeps you informed and engaged on public policy issues that affect eCommerce. There’s also an awesome organization called 1099Fairness dedicated to straightening this all out with the IRS. I recommend signing up with them as I have, as well.

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