It used to be that if a person sold more than $20,000 AND 200 or more transactions on a platform like eBay or BikeList, the company would be required to collect personal information like Social Security Number, Address, etc., and then report those transactions to the IRS.
However, in 2021 Congress lowered that threshold to $600 and ONE transaction. Why $600? Best guess is that is the same magical threshold for reporting independent contractors. Which was set back in 1954 by the way. Gas was 21 cents a gallon back then.
When we were building BikeList earlier this year we we confronted with two VERY BAD options. Either we collect that personal information BEFORE a seller is allowed to list items on our site, or we collect the information before releasing funds to the seller when they cross $600.
We knew we would lose some folks with this, but chose to collect the info up front so nobody would think that we were pulling a gotcha on them after they sold their item. A quick look at our marketplace shows that about 80% of the bikes for sale for $600 or above. For most of our sellers, a single bike sale would trigger the information collection, reporting transactions to the IRS, and a 1099k in the mail in January.
So, where do we go from here? Now that the limit remains at $20,000 and 200 transactions for at least a year AND there is bi-partisan support for changing the law we have some room to redesign our seller onboarding experience to ask for information only if a seller is approaching the higher limit.
Even if Congress updates the rule to be $5k or $10k, it will be more manageable than $600. This is likely a larger development effort, so we can't quite say when the site will be updated..sometime next year.
Finally, we had a good time helping drive awareness in DC as part of the dream team. We met with some very nice Congressional advisors, staffers, and even one of our state's Senators. We tried our best to relay our seller's complaints - even the harsh expletive-laden ones - and be part of the solution.