The IRS and Your Entertainment Ticket Resales: What You Need to Know
In the age of digital platforms, selling tickets to events and concerts has become more than just a way to make a few extra bucks—it’s turned into a profit center for many individuals, a cottage industry so to speak. Whether you're a dedicated ticket reseller or just someone who happened to score tickets to a sold-out Taylor Swift or Beyonce concert, for example, there's something new you should know. The IRS is getting more involved in tracking the profits from ticket resales.
As a part of the American Rescue Plan, implemented in 2021, the IRS has applied new provisions aimed at collecting more detailed information about financial transactions that occur online, including profits from the reselling of entertainment tickets. How does this affect you and how will the IRS be able to discern your earnings? Let’s dive in.
Understand the $600 Threshold
The key point t is the $600 profit threshold. If you make more than $600 in profit—not just sales, but actual profit—from selling tickets, the IRS wants to know. Previously, such small amounts might have gone unreported. But with the new rules in place, more transactions will be visible.
How Will the IRS Track These Profits?
Platforms like PayPal, Ticketmaster, Cash App, and StubHub have been roped into these provisions. If your transactions on these platforms (and others) exceed the $600 profit threshold, the online payment systems are now required to send both you and the IRS a Form 1099-K. This form reports the amount of your transactions, informing the IRS of potential taxable income.
Websites dedicated to ticket sales and resales, like StubHub or Vivid Seats, will be especially vigilant. They will also be adhering to the $600 rule and providing the necessary documentation to the IRS.
The American Rescue Plan has also introduced requirements for banks and financial institutions to report inflows and outflows of personal and business bank accounts. So, if your ticket resale profits are significant enough to be noticeable through these inflows and outflows, this could also alert the IRS.
Why This Change?
The primary motivation behind this new provision is to address the tax gap. There's a growing difference between the true tax liability for a given tax year and the amount that is paid on time. With the advent of the digital age and online transactions becoming commonplace, a lot of income remains unreported. By tightening the ropes on financial reporting requirements, the IRS aims to ensure that all taxable income is documented and taxed appropriately.
What Should You Do?
It’s more important than ever to maintain complete and accurate records of your sales and purchases. This way, if there's ever a question or if you need to prove your profits did not exceed the $600 threshold, you have evidence on hand.
Even if you feel like your earnings might be insignificant, it's essential to remain transparent. Remember, with the new reporting requirements, it's likely the IRS will already have an idea of your profits.
If you’re unsure about how these new rules impact your ticket resale side gig or even just occasional sales, it's always a good idea to consult with a tax professional. ATAX Tax Service can provide guidance tailored to your specific situation. Find a convenient location at www.atax.com.
The world of entertainment and concerts brings joy to many, so it's crucial to stay informed and prepared when it comes to the business side of ticket resales. The American Rescue Plan's provisions aim to make sure there is transparency and fairness in taxation. So, next time you score tickets to a major event and consider selling them, be aware of these new rules and act accordingly. Please note this applies to side businesses such as Etsy, and other online selling sites for goods and services. Beware and be informed.