Yes, it’s 2022 (or almost 2022, depending on when you’re reading this). So, why am I talking about 2021.
When it comes to tax pros, we often live in the past. We’re looking at the past year to determine how your taxes will be calculated and the best strategies you can use when you file, to make sure you pay the least amount of taxes legally possible.
That’s why this article about 2021 is so important for you now.
There have been two critical things that have happened.
#1: If you sell through Etsy, eBay, PayPal or any other 3rd party network, you’re going to get a Form 1099-K if you sell $600 or more in 2021.
The magic number used to be $20,000.
Now it’s just $600.
That means the IRS is going to count that as income for you, unless you have a business.
#2: Starting with the 2018 tax year, hobbiests couldn’t take any deductions against that income.
In the past, hobbies couldn’t take a loss against other income but they could take deductions for costs to sell their products.
Now, that’s gone.
If you sell $1,000 worth of products and the cost of items sold is $1,000, you’d think you had 0 income or loss. But not since 2018. Now, you pay tax on $1,000, with no deductions at all.
Turn Your Hobby Into a Business
If you want to pay less taxes, you need to turn that 2021 hobby into a business. Here are some articles to help you get started.