Does Whatnot Send a 1099? What Sellers Need to Know

Selling items on Whatnot, an online marketplace for live auctions and sales, can be a way to earn income. As a seller, understanding your tax obligations, especially regarding Form 1099-K, is important. This article clarifies when Whatnot may issue a 1099-K and what sellers need to know about reporting their income.

IRS 1099-K Reporting Requirements for Online Marketplaces

Form 1099-K is an informational tax document used to report gross payment card and third-party network transactions. Online marketplaces like Whatnot, which process payments for sellers, are considered third-party payment networks. The Internal Revenue Service (IRS) mandates these platforms to issue a Form 1099-K when a seller’s transactions meet specific federal reporting thresholds.

For the 2023 tax year, the federal threshold for receiving a Form 1099-K remained at $20,000 in gross payments and at least 200 transactions.

For the 2024 tax year, the IRS implemented a phased-in approach for the 1099-K reporting threshold, setting it at $5,000 in gross payments, with no transaction minimum. The threshold is expected to be $2,500 for 2025 and $600 for 2026 and beyond. These thresholds apply to the total gross sales volume processed by the platform, not to a seller’s net profit after expenses. If a seller meets or exceeds these thresholds, Whatnot, often through its payment partners like Stripe, is legally obligated to issue a 1099-K by January 31 of the following year. The form will detail the gross amount of all reportable transactions.

Understanding and Tracking Your Whatnot Income

All income earned from selling on Whatnot is taxable, regardless of whether a Form 1099-K is received. Sellers are legally required to report all taxable income to the IRS, even if they do not meet federal or state thresholds for receiving a 1099-K. Taxable income from Whatnot sales includes the gross sales revenue received from transactions.

Maintaining meticulous records for both income and deductible expenses is essential for all sellers. The cost of goods sold (COGS) represents a significant deductible expense, calculated by adding beginning inventory to purchases and subtracting ending inventory. Whatnot sellers can also deduct various fees charged by the platform, such as seller fees, shipping label costs, and payment processing fees.

Other common deductible expenses include shipping costs, packaging supplies, and general office supplies. If a dedicated space in the home is used exclusively and regularly for business, a portion of home office expenses, such as rent, utilities, and internet, may be deductible. Business-related travel for sourcing inventory or attending trade shows, along with associated meals, can also be deducted. Utilizing spreadsheets or accounting software can aid in accurately tracking these income and expense items throughout the year.

Reporting Whatnot Income on Your Tax Return

Income generated from selling on Whatnot is considered self-employment income. This income, along with associated expenses, is reported on Schedule C, Profit or Loss From Business, an attachment to Form 1040. Schedule C is used by sole proprietors, independent contractors, and gig workers to detail their business’s gross income and ordinary and necessary business expenses.

On Schedule C, sellers report their gross income from Whatnot sales and deduct eligible business expenses. The resulting net profit or loss from Schedule C is carried over to Form 1040, impacting the seller’s overall taxable income. Self-employment income is also subject to self-employment tax, which covers Social Security and Medicare contributions. This tax is calculated on Schedule SE, Self-Employment Tax, and contributes to the seller’s total tax liability. Depending on the income, sellers may need to make estimated tax payments throughout the year to cover their tax obligations.

State-Specific 1099 Thresholds

Beyond federal requirements, many states have established their own 1099-K reporting thresholds. These state-specific thresholds can be lower than federal amounts. For instance, some states may require a 1099-K for sales totaling as little as $500 or even $1, regardless of the number of transactions.

Whatnot sellers might receive a Form 1099-K from the platform solely due to meeting a state’s reporting requirement, even if their sales did not meet the federal threshold. Whatnot, like other online marketplaces, is obligated to comply with both federal and state reporting regulations. Therefore, sellers should be aware of their specific state’s rules, as this can affect whether they receive a 1099-K and their state tax obligations.