Taylor Swift performs on stage at Lumen Field in Seattle on July 22, 2023.
Mat Hayward/tas23 | Getty Images Entertainment | Getty Images
According to resale research site TicketIQ, Taylor Swift fans spent an average of $2,183 on a resold ticket to a concert on the superstar’s The Eras Tour. Now ticket resellers may owe taxes on profits made during what was, at least for them, a rather “cruel summer.”
Ticket winnings have always been taxable, but the new IRS reporting threshold for business transactions on third-party platforms like Ticketmaster or Ebayis now a single payment of $600, compared to 200 transactions totaling more than $20,000.
Taxpayers must prepare for this Law comes into force next season.
“Starting early next year, you want to make sure you know how to report that income,” says the certified financial planner and registered broker Tommy Lucas by Moisand Fitzgerald Tamayo from Florida.
While the new tax reporting shouldn’t affect personal transactions, such as splitting the cost of a car ride or a meal, birthday gifts or Christmas presents, many people with business transactions will be affected because of the new lower threshold, experts say.
“A lot of people are going to be confused,” said Ted Rossman, a senior industry analyst at Bankrate. But “a friend who pays you back for pizza doesn’t count.”
How to prepare for Form 1099-K
Taxpayers who received business payments from e-commerce platforms such as Ticketmaster, EbayVenmo and PayPal that exceed $600 Form 1099-K this tax season. Even though you may be receiving this form for the first time, don’t ignore it, experts say.
“Previously, the IRS had no way of knowing the revenue from resold tickets,” Lucas said. “Now these platforms have to notify the IRS and you have to report.”
People who made more than $1,000 reselling Taylor Swift tickets “easily exceeded the $600 threshold for this year,” CFP said 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:
- Track sales transactions: As people conduct numerous Venmo and PayPal transactions, staying on top of them will be paramount, experts say. If you sold goods or services this year, do not close the accounts used for those transactions CPA Albert Campomanaging and founding partner of AJC Accounting Services based in New Jersey. It will make record keeping much more difficult, he added.
- Keep your purchase receipts: It is also important to keep copies of your purchase receipts for goods that you later resell, such as Taylor Swift tickets, as the taxes owed are based on your sales proceeds less the original purchase price.
- Make sure the 1099-K is correct: You should also double-check that all 1099-K forms match your transaction records, experts say. Failure to do so could result in a mismatch with your return. If you fudge the numbers, you’ll receive an automatic IRS notification and have to file an amended tax return, which can take up to 16 weeks to process. “Make sure you do it right the first time,” Lucas said.
- Tax plan: If you expect to owe taxes, putting money aside or making quarterly estimated tax payments is “absolutely a smart thing to do” since you may not be withholding enough from your paycheck at work, Lucas previously told CNBC.