Taylor Swift fans forked out an average $2,183 for a resold ticket to a concert on the superstar’s The Eras Tour, according to resale research site TicketIQ. Now, ticket resellers may owe taxes on profits made during what may turn to be — for them, at least — a rather “cruel summer.”
Ticket profits have always been taxable, but the new IRS reporting threshold for business transactions on third-party platforms, such as Ticketmaster or eBay, is now a single payment of $600, down from 200 transactions worth an aggregate of more than $20,000.
Taxpayers will have to prepare as the law takes effect this coming season.
“Starting at the beginning of next year, you want to make sure you know how to report this income,” said certified financial planner and enrolled agent Tommy Lucas of Florida-based Moisand Fitzgerald Tamayo.
While the new tax reporting shouldn’t affect personal transactions, such as sharing the cost of a car ride or meal, birthday gifts or holiday gifts, many people with business transactions will be affected because of the new lower threshold, experts say.
“A ton of people are going to be confused,” said Ted Rossman, a Bankrate senior industry analyst. But “a friend paying one back for pizza is not going to count.”
Here’s how to prepare for Form 1099-K
Taxpayers who received business payments from e-commerce platforms such as Ticketmaster, eBay, Venmo and PayPal that exceed $600 will receive Form 1099-K this tax season. While this may be your first time receiving this form, don’t ignore it, experts say.
“Before, the IRS did not have any way to know about earnings from resold tickets,” said Lucas. “Now, these platforms are required to notify the IRS and you have to report.”
People who made more than $1,000 reselling Taylor Swift tickets “easily exceed that threshold of $600 for this year,” said CFP James Guarino, managing director at Baker Newman Noyes in Boston. He is also a certified public accountant.
While this form may leave more room for error, here are four things you should do to start preparing:
- Keep track of sale transactions: As people engage in numerous Venmo and PayPal transactions, it will be paramount to keep track of them, experts say. If you sold goods or services this year, do not close the accounts used for those transactions, added CPA Albert Campo, managing and founding partner of New Jersey-based AJC Accounting Services. It will make record keeping much more difficult, he added.
- Save your purchase receipts: It’s also important to keep copies of your purchase receipts for goods you later resell, such as those Taylor Swift tickets, since taxes owed will be based on your sales proceeds minus the original purchase price.
- Make sure the 1099-K is accurate: You’ll also want to double-check that any Forms 1099-K match your transaction records, experts say. Otherwise, there could be a mismatch with your return. If you mess up the numbers, you will get an automated IRS notice and will have to file an amended return, which could take up to 16 weeks to process. “Make sure to do it right the first time,” said Lucas.
- Plan for taxes: If you’re expecting to owe taxes, setting aside money or making quarterly estimated tax payments is “absolutely a smart thing to do,” since you may not be withholding enough through your paycheck at work, Lucas previously told CNBC.