In the world of entertainment and sports events, making money by reselling tickets has long been a lucrative venture. However, for those who have profited from this practice in 2023, there’s a new player in town: the Internal Revenue Service (IRS). Brace yourselves as the IRS implements tighter regulations on ticket resellers when it comes time to file taxes for 2023.
Lowered Tax Reporting Thresholds
A newly enacted law has significantly lowered the threshold for tax reporting, especially for users of e-commerce platforms such as Ticketmaster and StubHub. Previously, individuals needed to have $20,000 in revenue and over 200 transactions before they triggered tax reporting. However, under the new rules, even a single transaction exceeding $600 will catch the IRS’s attention.
Reporting Requirements
According to this rule, ticketing platforms are obligated to report any seller’s proceeds that exceed $600 in a given year. This means that, regardless of whether sellers turned a profit, they will receive a 1099-K form from these platforms. The catch here is that sellers will only owe additional taxes if they made a profit by selling a ticket for more than its purchase price.
Confusion in the Air
With the lower threshold and these reporting changes in place, there’s potential for confusion among concertgoers and sports fans who have engaged in ticket buying and selling during 2023. This year, there has been a surge in demand for live events, spanning from professional and college sports to pop sensation Taylor Swift’s Eras Tour.
Origins of the Rule Change
This tax provision can be traced back to legislation that was enacted in the early days of the Biden administration, with its implementation scheduled for 2023. Initially, it was intended to take effect for the 2022 tax year, but it was delayed by a year to give the IRS more time to adapt to the change.
IRS Guidance
IRS Commissioner Daniel Werfel has indicated that the agency plans to provide guidance for taxpayers who may receive 1099-K forms due to their proceeds from ticket sales and who may owe taxes as a result.
Proposed Changes
In Congress, lawmakers are currently mulling over potential changes to the reporting threshold. However, it remains uncertain whether these changes will be implemented before the 2023 tax season begins.
One proposal, known as the Small Business Jobs Act, seeks to reinstate the old reporting threshold of $20,000 in revenue and more than 200 transactions. While it made progress in the House Ways and Means Committee earlier this year, its future in Congress is uncertain. It’s worth noting that this change could reduce federal revenue by approximately $9.7 billion over a decade, according to the Joint Committee on Taxation.
Another bipartisan proposal in the Senate, known as the Red Tape Reduction Act, aims to strike a compromise by setting the threshold at $10,000 in revenue and 50 transactions.
IRS’s Take
During a House Ways and Means Committee hearing earlier this year, Commissioner Werfel refrained from expressing a policy preference but hinted that a change in the threshold would be easier for the IRS to administer.
“I cannot opine on the wisdom or the preference of a particular policy outcome, but I will share that a change in the threshold would be easier to administer, and so at my seat of the table, I’d say the IRS would have an easier time of administering it,” Werfel commented.
In conclusion, the IRS’s crackdown on ticket resellers in 2023 is set to have significant implications for those who have profited from this practice. With the potential for changes in reporting thresholds looming, it’s a situation that ticket sellers and buyers alike will want to monitor closely as the 2023 tax season approaches.
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