New IRS Rule Targets Ticket Resellers and Scalpers

Oct 30, 2023 | Blog

The 2023 tax returns of those who benefited financially from the resale of sporting event or concert tickets this year may face new scrutiny from the Internal Revenue Service. According to an IRS tax lawyer, the ecommerce-platform tax-reporting threshold was lowered under a newly implemented law, from $20,000 or more or 200 or more transactions, to a simpler guideline of a mere $600 per tax year. This means that any seller whose proceeds from ticket sales topped $600 in 2023 must report the revenue, and, if applicable, pay taxes on the amounts collected.

One Transaction May Trigger Reporting

StubHub, Ticketmaster, Vivid Seats and similar event ticketing websites must report information to the IRS – even if a single transaction hits the threshold. A 1099-K form must be used by such platforms to forward this information to the IRS, a copy of which is also given to the taxpayer. Interestingly, the form must be sent whether or not the seller earned a profit when reselling tickets. However, sellers will not owe taxes if they can show that no profit was made.

Implementation Delayed

Legislation enacted at the beginning of Biden’s presidency originally set the 2022 tax year as the deadline, but it was delayed for another year to allow the IRS additional time to properly implement the change and offer guidance to taxpayers. The provision was part of the $1.9 trillion stimulus package, otherwise known as the American Rescue Plan Act, and was included in the Act as a revenue-generating measure. Those who may owe taxes because of their proceeds from ticket sales will receive guidance from the IRS, according to Daniel Werfel, the agency’s Commissioner.

Changes to the Tax Reporting Threshold Currently Being Considered

Our San Jose tax attorney has informed us that changes are still being considered with regard to the reporting threshold, so ticket sellers may have to keep an ear to the ground in the near future. This is because it’s not clear whether these changes would be made before the 2023 tax season or after.

The Small Business Jobs Act bill, if successful, would restore the previous reporting threshold of 200 or more transactions, or $20,000 or more in revenue. Earlier this year, the House Ways and Means Committee advanced the bill, but its fate in Congress is not yet known.

Yet another proposal, known in the Senate as the Red Tape Reduction Act, was written with a goal of essentially splitting the difference between the old and new standards. It proposes setting the threshold at 50 or more transactions, or $10,000 or more in revenue.

Mr. Werfel would not comment on a policy preference among the three options, but implied that administering a revised threshold would be easier for the IRS. Some ticket sellers may have to begin reporting such income after not having done so for years or even decades. Because of the 1099-K form, the IRS will know about such profit even if the sellers omit it from their returns.

Ticket resellers who want to avoid eventually needing a back taxes attorney should monitor the bills and proposals to stay abreast of changes, if any, that are on the horizon. Any qualified IRS tax lawyer can provide additional information to any individual who is unsure about the new rule.