Quick Answer
Most sellers on Facebook Marketplace will not receive a 1099 form for their sales. The main exceptions are:
– Sellers who processed over $20,000 in sales and had over 200 transactions in the calendar year. Facebook will issue a 1099-K form in this case.
– Sellers who sold products as part of commerce on Facebook, such as Facebook Shops. These sellers will get a 1099-K.
– Sellers who accept payments through Facebook Pay. They may get a 1099-K.
So for the average person selling used items on Marketplace as an individual, no 1099 will be issued and you don’t have to report the income. But for high-volume sellers, you will get a 1099-K and have to claim the income on your taxes.
Do I Need to Report Facebook Marketplace Sales on My Taxes?
If you did not receive a 1099 form for your Facebook Marketplace sales, then technically you do not have to report the income on your taxes. The IRS does not require you to report income that is under $600 from informal activities like selling personal belongings for a profit on Marketplace.
However, it is still a good idea to keep track of your sales and report the income voluntarily if it amounts to a sizable sum. While you likely won’t get a 1099 unless you meet the reporting thresholds, the IRS still considers Marketplace sales to be taxable income if you are making a profit.
So even without getting a 1099, you should report any substantial earnings from Facebook Marketplace sales. This helps avoid any red flags with the IRS if you are audited down the line and they inquire about sources of income.
Some recommended guidelines:
– If you sold less than $500 worth of personal items at a profit, you generally don’t need to report it.
– If you made $500-$5000 in profit, consider reporting this as “other income” on Schedule 1 of your 1040 tax return.
– Over $5000 in profit should definitely be reported.
– Keep documentation of your transactions in case of an audit.
– Deduct any valid expenses like shipping costs and Marketplace fees.
When Will I Get a 1099 for Facebook Marketplace?
Facebook itself will only issue you an IRS 1099-K form under certain circumstances:
– You processed over $20,000 in gross sales on Marketplace in the calendar year.
– You had over 200 separate transactions on Marketplace over the course of the year.
Meeting both of those thresholds triggers Facebook to report your income to the IRS and send you a 1099-K document by January 31. This form shows your gross transaction amounts for tax reporting.
If you don’t meet both criteria, Facebook generally does not directly issue 1099s for Marketplace sellers. However, there are some other situations where you may end up with a 1099:
– If you sell products through Facebook Shops or commerce channels beyond just Marketplace, you are more likely to get a 1099-K from Facebook.
– If you receive payments through Facebook Pay, you may receive a 1099-K from PayPal or other payment processors, which integrate with Facebook Pay.
– If you use a payment processing app for transactions outside of Facebook Pay, like PayPal, Venmo, etc., you may get a 1099-K from that third-party processor if you exceed $600 in gross sales through their platform.
So the main way individual Marketplace sellers get a 1099 is by going over the IRS reporting thresholds on linked payment platforms, rather than directly from Facebook itself. But Facebook will issue 1099-Ks if you exceed 200 transactions and $20,000 in sales in a tax year directly on Marketplace.
Do You Have to Pay Taxes on Facebook Marketplace Sales?
Yes, you do have to pay income taxes on any profits earned from selling items on Facebook Marketplace. This applies even if you don’t get a 1099 form.
The IRS considers Marketplace to be a platform for small informal business transactions, so any income from sales is taxable. Here are some key points on paying taxes for Marketplace:
– You owe income tax on any net profit, not total sales. Calculate this by deducting the cost basis of items sold from the sale price.
– The capital gains tax rate usually applies if you sold personal used items at a gain. This is typically 15% of profits for most taxpayers.
– If you are formally in the business of re-selling products on Marketplace, your profits are subject to ordinary income tax rates, up to 37%.
– You can deduct eligible expenses like shipping costs and Marketplace fees to offset taxable income.
– Keep track of transactions, costs, and profit/loss on each item in case of an audit.
– Report profits on Schedule 1 of your 1040 as “Other Income” if you don’t get a 1099.
– If you do get a 1099-K, report the amount from Form 1099-K on your Schedule C or other business tax form.
So you should maintain records on your Marketplace sales and make sure to pay any applicable income taxes owed, even without receiving a 1099. The IRS requires taxpayers to voluntarily report taxable income received through online peer-to-peer platforms.
What Information Goes on a 1099-K for Marketplace Sellers?
The 1099-K is an informational return that is sent out to report payment transactions made through third-party settlement organizations like Facebook Marketplace.
Here are the key items reported on a standard 1099-K form:
– Box 1a: Reports the gross payment card and third party network transactions for the calendar year. This is the total sales amount processed through a platform like Marketplace.
– Box 1b: Shows the number of payment transactions. For Marketplace 1099-Ks, this would be the total number of sales transactions you completed.
– Box 2 through 6: Reports merchant information, including name, address, tax ID number (SSN or EIN usually).
– Box 7: Shows the merchant category code used by the payment settlement entity. For Facebook this would likely be e-commerce retail sales.
– Box 8: May show additional information, depending on the issuer.
So the 1099-K form issued by Facebook would report your total gross Marketplace sales amount for the year and the number of transactions that triggered the 1099. This lets the IRS know you met the reporting thresholds.
You would then use the 1099-K along with your records on costs and expenses to calculate the actual taxable income from those sales to report on your Schedule C or other business return.
How Do I Get My 1099-K from Facebook?
If you qualify for a 1099-K from Facebook for your Marketplace sales, there are a couple ways you may receive it:
– Facebook will mail a paper copy to your address on file by January 31 if you meet the reporting criteria.
– An electronic version may be made available for download in your account payment settings or tax documents page.
– Facebook may also provide the forms to your payment processor, like PayPal, which would then furnish the 1099-K to you through their platform.
So check both your Facebook account settings and your linked payment accounts around early February to access your 1099-K for the previous tax year.
If you cannot locate the form, you can try directly contacting Facebook support and requesting confirmation on whether a 1099-K was issued under your Seller account and instructions for obtaining a copy.
Note that if you exceeded the transaction thresholds late in the year, the 1099-K for those sales may not arrive until early the following year, after that tax season has passed.
What if I Made a Mistake or Omission on My 1099-K?
If you receive a 1099-K from Facebook that is incorrect or has missing or inaccurate information, you have a couple options:
1. Contact Facebook support to request a corrected 1099-K. Explain what information needs to be revised.
2. File a Form 1099-K correction with the IRS using Form 1099-K. Check box 2 for “Filer” and provide the correct information. Send copies to Facebook.
3. On your Schedule C or tax return, simply report the accurate gross sales amount from your records rather than the incorrect 1099-K figure. Attach an explanation.
Minor errors are usually not a major issue if your actual net income is reported correctly on your tax return. But material mistakes should be addressed by contacting Facebook for a corrected 1099-K or filing a correction directly with the IRS. Maintaining your own transaction records is helpful in catching any 1099-K errors.
Do Drop Shippers Have to Pay Taxes on Facebook Sales?
Yes, individuals and businesses using Facebook Marketplace for drop shipping are still required to pay taxes on their income. Here are some key tax rules for drop shippers:
– Sales tax may need to be collected and remitted based on nexus rules for economic thresholds in each state.
– Income tax must be paid on net profit, taking into account allowable business expense deductions.
– You may receive a 1099-K from Facebook or payment processors if thresholds are exceeded.
– Be sure to keep detailed records of revenues, costs, profit margins, and sales tax obligations for each state.
– Report income on Schedule C or other appropriate business tax form.
– Special rules apply in many states for marketplace facilitators who handle shipping and delivery.
So drop shipping sellers on Facebook should be sure to track sales carefully, charge any required sales tax, and report revenues appropriately on their business tax returns. Hiring a sales tax expert and accountant can help manage the multistate tax obligations.
Can You Get a 1099 from Facebook Business Manager?
Sellers who use Facebook Business Manager to manage their Marketplace shops and product catalogs may receive a 1099-K if they process over 200 sales and $20,000 in gross receipts within Business Manager in a calendar year.
The 1099-K would be issued by Facebook directly, the same as for sellers using the consumer version of Marketplace. Business Manager essentially consolidates sellers’ channels, so transactions are still tracked and reported to the IRS by Facebook if 1099 reporting criteria are met.
However, sellers may be more likely to exceed the 1099-K thresholds when using Business Manager, as it facilitates selling across multiple Facebook surfaces. So marketplace sellers, drop shippers, and other e-commerce merchants using Business Manager tools should be prepared for the possibility of getting a 1099-K.
Do You Have to Pay Taxes on Facebook Shop Sales?
Yes, sellers using Facebook Shops to sell products are required to pay any applicable taxes on income generated through those Facebook Shop sales.
Some key tax considerations for Facebook Shops sellers include:
– Income taxes must be paid on net business profit from Facebook Shop product sales.
– Sales tax may need to be collected and paid in states where the business has sales tax nexus.
– Sellers will likely receive a 1099-K from Facebook if over 200 sales and $20,000 in gross revenue.
– Business expenses can be deducted, like product costs, advertising fees, transaction fees, and other eligible business expenses.
– Report Facebook Shop revenues and profits on Schedule C or other appropriate business tax forms.
– Keep detailed records of all revenues, costs, taxes charged, and remitted taxes.
So Facebook Shop sellers should be sure to track sales, charge sales tax where required, and report income accurately, just like any e-commerce merchant. The 1099-K reporting thresholds often apply to those using Facebook Shops.
Do Facebook Fundraisers Have to Pay Taxes?
If you set up a Facebook Fundraiser for a charitable cause, you generally do not have to pay taxes on the money raised through Facebook. Any funds you raise are paid directly to the tax-exempt charitable organization.
However, you may be responsible for paying gift taxes if contributors give extremely large amounts:
– For individual gifts up to $16,000, no gift tax is owed in 2023.
– Gifts over $16,000 may trigger gift tax if the annual exclusion is exceeded.
– If over $16,000 is given by any single donor, you should confirm with the recipient charity that a gift tax return is filed.
– You can also have donors give directly to the charity to avoid potential gift tax issues.
So most Facebook Fundraisers will involve smaller contribution amounts that don’t lead to gift tax concerns. But be sure to monitor funds over $16,000 given by any one person and address gift tax compliance if needed.
Do Facebook Ad Earnings Have to Be Reported on Taxes?
If you monetize a Facebook page or account through ad earnings, this income generally must be reported on your taxes. Some key points:
– Ad revenue from Facebook pages is taxable income, even for personal accounts.
– A 1099 may be issued by Facebook if earnings exceed $600 in a year.
– Net profits, after deducting eligible business expenses, are subject to income tax.
– Report Facebook ad earnings on Line 8z of Schedule 1 as hobby or business income.
– Keep records of gross ad earnings and related expenses to calculate net taxable income each year.
– If earnings become extensive, report on Schedule C instead as self-employment income.
So make sure to track Facebook advertising income and factor it in when filing your annual tax return. While hobby earnings are taxable, extensive revenues should be claimed as formal self-employment business income.
Do Facebook Game Developers Owe Taxes?
Developers who create games for Facebook and earn money from game play and in-app purchases are required to pay taxes on this income like any other business. Key tax rules include:
– Income and payroll taxes must be paid on net revenue, after allowable deductions.
– Sales tax collection and remittance rules apply for purchases made within games.
– Issuance of 1099s depends on revenue thresholds and how payments are structured.
– Report Facebook gaming income on Schedule C as self-employment earnings.
– Keep detailed records of revenues and costs for both income tax and sales tax compliance.
– Sales made through the Apple App Store or Google Play may also trigger tax obligations.
So taxes are owed on both income and sales generated through Facebook games. Structuring the game entity appropriately and using a tax professional can help ensure you meet all IRS and state tax compliance requirements.
Do Facebook Influencers Have to Pay Taxes?
Yes, taxes must be paid on income earned as a Facebook influencer or content creator. This includes:
– Brand sponsorships and partnerships facilitated through Facebook.
– Ad revenue earned from content.
– Affiliate commissions from promoting products.
– Income from selling own products like merchandise or ebooks.
Taxes owed depend on influencer income structure:
– Report earnings on Schedule 1 or Schedule C based on level of activity.
– Pay self-employment tax on Schedule C income.
– Sales tax collection & remittance may be required in some states.
So influencers should track income from all monetization methods and make quarterly estimated tax payments to avoid penalties. Partnering with a tax professional can help navigate taxes owed as an influencer.
Conclusion
In summary, income earned through a variety of activities on Facebook is generally taxable and often requires issuance of a 1099-K form if reporting thresholds are met. This includes Marketplace sellers, e-commerce merchants using Shops, ad earners, game developers, and influencers.
Self-employment taxes on net income are owed, and sales tax compliance is required in many cases. Detailed records should be kept for all business expenses that can be deducted to lower tax liability. Working with a knowledgeable tax preparer or accountant can help ensure you meet all IRS and state tax filing and payment obligations related to earnings generated on the Facebook platform.