How Much Can I Sell on Poshmark Without Paying Tax 2022?
Welcome, fellow fashion-forward thinkers and closet cleanout enthusiasts! Are you dreaming of a life where you can sell your never-worn, still-with-tags collection on Poshmark without being sent a tax bill so terrifying it should be in a horror movie? Well, grab your favorite cup of whatever, because we’re about to dive into the murky waters of taxes and online selling in 2022! Spoiler: A little more clarity is involved these days.
Breaking It Down: The $600 Rule
Once upon a time (actually, just last year), you could sell up to a whopping $20,000 on platforms like Poshmark without a single tax form being filled out—taxes, what are those?? But hold onto your designer heels, because in 2022, the IRS decided that it was time for a little change and lowered the reporting threshold to an ever-so-charming $600. That’s right, my friends—600 bucks!
So, if you sell more than $600 in net earnings in a calendar year, Poshmark politely sends your annual earnings report to Uncle Sam. This does not mean you’ll suddenly be facing the tax apocalypse if you earn just a few dollars over that sweet number, but it does bring us to a couple of caveats worth considering.
So, What Does ‘Net Earnings’ Even Mean?
Don’t worry; we’re not talking about some sort of cryptic financial jargon only understood by people who eat spreadsheets for breakfast. When we say ‘net earnings’, we mean the total amount of money made from sales after deducting permissible expenses. This is where you get to play accountant. Grab your favorite calculator, and let’s break it down!
- Sales Price: The amount you sold an item for – let’s say those Gucci loafers you bought on impulse for $750, but could only bear to sell for $400.
- Shipping Costs: If you pay for shipping (or give customers free shipping and eat that cost), it counts as an expense. Don’t forget to deduct that expense! After all, every penny counts when you’re fighting the tax monster.
- Poshmark Fees: Poshmark takes a cut of your sale (usually 20% for items sold for over $15 or a flat fee of $2.95 for items sold for $15 or less). Deduct that from your sales price before you do any fancy calculations.
So, if you sold those Gucci loafers for $400 with $20 in shipping and a $80 Poshmark fee, your net earnings would be: $400 – $20 – $80 = $300. And, because $300 is under the magical $600 line, you can rest easy knowing your financial fate is not in the grip of the IRS this year.
When Do I Need to Worry About Taxes?
Okay, so now that we’ve danced our way through the world of Poshmark sales, let’s talk about the point when those tax-related thoughts start to creep in.
If you cross the $600 threshold in net earnings, you must report that income. No ifs, ands, or ‘But I thought I was under $600’ about it! It’s like knowing your parent is waiting in the next room when you’re at home past curfew; it’s best to follow the rules. In some cases, even if you receive a 1099-K from Poshmark, Uncle Sam wants to know how much you made selling those fabulous finds online.
What Counts Towards That $600?
Here’s the kicker: Poshmark will consider those Posh parties and bulk selling strategies you’ve heard about! Everything you’ve sold throughout the year on the platform gets bundled together. If you’re throwing monthly sales and moving items like they’re hotcakes, trust that the IRS will count every dime! So, that cute vintage jacket that sold for $25 and that beautiful designer handbag that went for $200? Grade ‘A’ counted sales, folks! Who knew cleaning out your closet could lead you down such a tax-related rabbit hole?
Keeping Track of Your Sales for Tax Purposes
Now that we’ve covered what can potentially wake the tax beast in your closet, let’s discuss the rare but essential art of bookkeeping. I know, I know! Not the most glamorous part of selling your #OOTD (Outfit of the Day)—but it’s a necessary evil.
Here’s a simple plan to keep things organized:
- Use a Spreadsheet: Yes, those dreaded Excel sheets can actually work wonders. Create a spreadsheet to log what you sell, the sale price, shipping costs, and your Poshmark fees. It might just save you from crying yourself to sleep when tax time rolls around.
- Track Your Expenses: Keep receipts for any shipping supplies, such as boxes, tape, and labels. They can all be deducted from your gross sales for a lower net income come tax filing.
- Save Your 1099-K: If you reach that magical $600 threshold, Poshmark will send you a 1099-K form detailing your total sales. Keep it handy! You’ll need it for filing your taxes.
Little-Known Tax Deductions for Poshmark Sellers
Congratulations; if you’ve made it this far, you’re practically a tax-savvy Poshmark queen (or king)! Now, let’s talk about some lesser-known tax deductions you can take advantage of when filing your taxes:
- Cost of Goods Sold (COGS): If you bought items specifically to resell, you can deduct those expenses! Perfect for high-stakes bargain hunters who raid thrift stores for designer finds.
- Home Office Expenses: If you use a specific area of your home to prepare and package items, you can deduct a portion of your home utilities and space. Go ahead and claim that corner of your living room as your sales HQ!
- Shipping Supplies: Boxes, tape, label printers – the whole shebang! Gauge what you spend on your shipping supplies, and be free of that money-wasting burden.
- Depreciation of Equipment: If you use a fancy camera or phone to snap pics of your products, those costs can be depreciated over time—who knew your obsession with photography would pay off in taxes?
What If I Don’t Hit the $600 Line? Can I Still Sell?
Absolutely! If you find yourself just enjoying your little brokering gig and only sell about $500, guess what? You’re in the clear. You can keep selling your treasures without sending a panic email to your accountant. This means you can still make that cash while reveling in the joy of using your closet as a side hustle.
Just remember: it’s wise to keep records, stay organized, and prepare in case you wake up one day to discover you’ve hit the $600 threshold. Because when taxes come knocking, pretending to sell lemonade at neighborhood yard sales won’t do you any favors!
Plan Ahead: Tax Season Is Coming!
As we push deeper into the year, start prepping now instead of waiting for the last minute! No one likes a tax filing crunch. Set aside a little from every sale and consider opening a savings account specifically for your tax needs. Because nothing says “I’m a responsible adult” like saving for taxes!
Wrapping It Up
So, how much can you sell on Poshmark without paying tax in 2022? If you stay under that $600 net earnings threshold, you can dance your way through a tax season of blissful ignorance! But remember: if you want to avoid a world of tax trouble later, keep track of those sales, expenses, and maintain some semblance of organization.
Hopefully, wagging through this tax maze with me has provided some clarity—if nothing else, you now have an extra excuse to go shopping. Just remember to take notes when you sell that new favorite dress because who knows? You might be high-fiving the IRS should your closet leads you to that $600 mark. Happy Selling, and may your Poshmark listings be plentiful and your closet perennial!
