The $600 tax rule for Ticketmaster refers to the requirement for the company to report gross sales over $600 for ticket resellers to the IRS. This rule went into effect in 2021 and aims to increase tax compliance for third-party ticket sellers who use Ticketmaster and other platforms.
What prompted the $600 tax rule?
The $600 tax rule for reporting third-party sales to the IRS was introduced as part of the American Rescue Plan Act signed into law in March 2021. It lowered the reporting threshold for third-party payment settlement organizations like Ticketmaster from $20,000 in gross sales and over 200 transactions down to $600 with no transaction minimum.
The major aim of reducing the 1099-K reporting threshold to $600 was to help close the “tax gap” between taxes owed and taxes paid. It was estimated by the IRS that the tax gap was around $440 billion annually in 2019. The new lower reporting limit for third-party transactions was projected to generate an additional $8.4 billion in tax revenue over 10 years.
What is the tax gap?
The tax gap refers to the difference between the amount of taxes legally owed to the government and the amount actually paid on time. It is caused by:
- Underreporting of income
- Underpayment of taxes owed
- Non-filing of tax returns
By requiring third-party settlement organizations like Ticketmaster to report gross sales over $600, the government aims to reduce the tax gap by catching unreported income. This is because Ticketmaster will now issue 1099-K forms to sellers over the $600 threshold so their earnings are reported to the IRS.
Who does the $600 Ticketmaster rule apply to?
The $600 reporting threshold applies to third-party sellers who use Ticketmaster or other facilitator platforms to resell tickets. This includes:
- Individual ticket resellers
- People or businesses selling tickets as a side hobby or business
- Full-time ticket brokers and resellers
It does not apply to original ticket issuers like venues or primary ticket sites. Only third-party resellers on facilitator marketplaces like Ticketmaster are subject to 1099-K reporting over $600.
What counts as a gross sale?
For purposes of 1099-K reporting, gross sales include:
- The total ticket price including fees and charges
- The total amount paid by the ticket buyer
- Service and processing fees like delivery charges
So if a reseller sold a ticket for $100 plus $20 in fees, the gross sale reported to the IRS would be $120. This gives a more accurate picture of total earnings.
How will Ticketmaster report sales to the IRS?
For third-party sellers over the $600 gross sales threshold, Ticketmaster will report their earnings to the IRS using a 1099-K form. This includes:
- Gross payment amounts over $600
- Seller’s name, address, tax ID number
- Ticketmaster’s name and federal ID number
1099-K forms are informational returns that get submitted to both the IRS and sellers for tax purposes. Ticketmaster will file them with the IRS by January 31st each year.
What if sellers don’t provide a TIN?
Third-party sellers are required to provide Ticketmaster with their Taxpayer Identification Number (TIN) such as a Social Security Number (SSN) or Employer Identification Number (EIN). If they don’t, Ticketmaster will withhold 24% of their gross sales over $600 for backup withholding tax under the new rule.
When did the lower 1099-K threshold take effect?
The American Rescue Plan Act that introduced the $600 reporting threshold was signed into law on March 11, 2021. However, the lower 1099-K reporting requirement didn’t take effect until January 1, 2022 for third-party payment platforms like Ticketmaster.
So transactions dated January 1, 2022 or later will be subject to the new $600 threshold when the 2022 tax year reporting occurs.
Why 2022?
Despite being signed into law in March 2021, the rule wasn’t implemented until 2022 to allow time for third-party platforms to update their systems and procedures. This gave Ticketmaster and other facilitators time to ramp up 1099-K reporting capabilities to handle the much lower threshold.
What are the penalties for violating the rule?
There are penalties for both third-party sellers and facilitators like Ticketmaster that violate the new 1099-K reporting requirements:
- Sellers – Failure to report 1099-K income over $600 may result in tax evasion penalties, interest, and unpaid tax liabilities.
- Facilitators – Failure to issue 1099-Ks to qualifying sellers can lead to penalties of $250 per form, up to $3 million annually.
However, there are “safe harbor” provisions that waive penalties for facilitators like Ticketmaster that can show a “good faith” effort to comply with the new requirements.
How does this affect sellers’ taxes?
The new 1099-K reporting threshold at $600 will significantly increase tax form filings for third-party Ticketmaster sellers. Gross sales that may have gone unreported before will now be reported to the IRS.
Sellers will owe taxes on gross sales over $600, reduced by deductions for business expenses. Reported 1099-K income will need to be included as taxable income on their tax return.
Will sellers owe more taxes?
The $600 limit may not necessarily increase taxes owed. But it will increase tax reporting and make unreported casual selling income much more visible to the IRS. Filers will need to be sure to accurately report any 1099-K income and pay any additional tax owed.
What about hobby sellers?
The threshold affects casual hobby sellers who occasionally resell tickets. Gross sales over $600 from even a side hobby now must be reported. If total profits are under $600 there may not be additional tax owed. But the income still has to be reported via 1099-K.
How can sellers prepare for the new rule?
Here are some tips for third-party Ticketmaster sellers to prepare for the new 1099-K reporting threshold:
- Carefully track gross sales across all platforms, not just Ticketmaster.
- Gather business receipts to document deductions.
- Have an EIN if selling as a business.
- Save for any tax liability on reported income.
- Consult a tax professional if needed.
Will the $600 threshold be permanent?
Currently the $600 third-party reporting threshold is permanent and not scheduled to revert back to the old $20,000 level. However, there have been some calls in Congress to revisit the figure:
- Some lawmakers argue it burdens platforms like Ticketmaster and small sellers.
- A bipartisan bill has been proposed to raise the threshold to $5,000.
- The outcome remains uncertain at this point.
For now, Ticketmaster and other facilitators must continue following the new $600 gross sales 1099-K reporting requirements for tax years 2022 onward. Sellers should assume the rule applies unless otherwise changed by Congress.
Conclusion
The $600 tax reporting threshold for Ticketmaster and other third-party facilitators aims to close the tax gap and increase compliance. With more reseller income reported via 1099-K, taxpayers will find it much harder to underreport earnings. Sellers should track sales closely across platforms and be prepared to pay taxes on grossed over $600.
