Poshmark Taxes: What Sellers Need to Know

Selling on Poshmark is an excellent way to clear out your closet or build a thriving resale business. As your sales grow, however, it's essential to understand your tax obligations. Navigating the world of Poshmark taxes, from understanding income reporting to identifying deductions, can feel overwhelming.

This guide will walk you through everything you need to know. We will cover whether Poshmark reports to the IRS, how to handle the Poshmark 1099 form, and what you can do to make tax season as smooth as possible.

First, Determine Your Seller Type

How the IRS views your Poshmark activity is the single most important factor in determining your tax responsibilities. Your sales fall into one of three categories: selling personal items, operating as a hobby, or running a business.

Selling Personal Items

Many people start on Poshmark by selling personal items from their own closets. This is often called a "virtual garage sale."

If you sell a personal item for less than you originally paid for it, this is considered a non-deductible personal loss. The good news is you typically don’t owe any taxes on the money you make from the sale.

However, if you sell a personal item for more than you originally paid, that profit is taxable. The tax treatment of that gain depends on how long you owned the item.

• Long-Term Capital Gains: If you owned the personal item for more than a year before selling it at a profit, the gain is subject to capital gains tax. The rate is 0%, 15%, or 20%, depending on your overall income.
• Short-Term Capital Gains: If you owned the item for a year or less, the profit is taxed as ordinary income at your regular federal (10%-37%) and state tax rates.

Even if you sell at a loss, you should still report these transactions on your tax return, especially if you receive a tax form from Poshmark.

Hobby Seller vs. Business Seller

If you frequently sell on Poshmark or buy items specifically to resell, the IRS will likely classify your activity as either a hobby or a business. This distinction is critical because it dramatically changes how your income and expenses are treated.

If you sell goods with the intent to generate a profit, you are generally considered a business owner. If you engage in the activity for fun without a primary profit motive, it's likely a hobby.

As a hobbyist, all income you earn is taxable, but you cannot deduct any related expenses. For a business, you only pay tax on your net profit—your gross income minus your tax-deductible expenses.

Does Poshmark Report to the IRS? The Poshmark 1099-K Explained

Yes, Poshmark reports seller earnings to the IRS. This is a common question, and the answer is crucial for compliance. The IRS requires payment processors like Poshmark to issue a Form 1099-K to sellers who meet specific income thresholds.

What is a Form 1099-K?

A Form 1099-K is a tax document that reports the total gross amount of money you earned from a third-party payment processor over the calendar year. Poshmark is the processor that issues this form.

If you qualify for a 1099-K, Poshmark sends one copy to you and a matching copy to the IRS. This means the IRS knows how much gross income you received through the platform.

Poshmark 1099-K Thresholds

The requirements to receive a Form 1099-K have been changing. It's important to know the threshold for the specific tax year you are filing for.

• For the 2023 tax year: The federal threshold was at least $20,000 in gross income AND 200 or more transactions.
• For the 2024 tax year: The IRS has announced a "phase-in" threshold. You will receive a 1099-K from Poshmark if you make $5,000 or more on the app.
• For the future: The IRS intends to eventually lower the threshold to $600. The change to $600 was initially planned for the 2023 tax year but was delayed by the IRS.

Some states have lower reporting thresholds. If you live in one of these states and meet the local requirements, you will receive a 1099-K even if you don't meet the federal threshold.

What to Do With Your 1099-K

By default, Poshmark will mail your 1099-K by January 31, so you should receive it in January or February. You can update your account settings to receive a downloadable copy sooner, which will appear under "Tax Documents" on the app or website.

Your 1099-K shows your gross income. This figure includes Poshmark fees, as well as the value of refunds and canceled orders. It is not your taxable income. You must subtract these costs from your gross income to determine the amount you'll actually be taxed on.

What If You Don't Receive a 1099-K?

Even if you don't meet the threshold to receive a 1099-K, you are still legally required to report all your income to the IRS. You should assume you owe taxes if you earned at least $400 from Poshmark sales over the year.

You can access your complete sales history from the Poshmark website or app via the "My Sales Report" feature. This report will help you confirm your annual earnings and report your income accurately, whether you receive a 1099-K or not.

Tax Deductions for Poshmark Business Sellers

If your Poshmark activities are classified as a business, you can significantly lower your tax bill by deducting business expenses. These "write-offs" reduce your taxable earnings, which in turn lowers both your income and self-employment taxes.

To be deductible, an expense must be both "ordinary and necessary" for your Poshmark business.

Common Tax Deductions for Poshmark Sellers

Keeping track of your expenses is vital. Here are some of the most common write-offs for Poshmark business owners:

• Cost of Goods Sold (Inventory): If you buy clothing specifically to resell, that counts as inventory. You can deduct the cost of these items when they sell. You cannot deduct the cost of personal clothing that you later decide to sell.
• Poshmark Fees: The fees Poshmark takes from each sale are a deductible business expense. This includes the $2.95 fee for sales under $15 and the 20% commission for sales of $15 or more. You can calculate this by subtracting your Net Earnings from the Order Price on your reports.
• Packing and Shipping Supplies: This includes boxes, mailers, tape, labels, and thank-you cards.
• Marketing and Advertising: Costs for professional product pictures or other promotional activities are deductible.
• Home Office Deduction: If you use a specific area of your home exclusively and regularly for your Poshmark business, you may be able to deduct a portion of your rent or mortgage, utilities, and insurance.
• Business Portion of Utilities: You can deduct the business-use percentage of your internet and phone bills.
• Other Expenses: Other potential deductions include payments to suppliers, labor costs, inventory storage costs, business-related travel and vehicle expenses, and fees paid to a CPA or for tax software.

A Note on Sales Tax

One area of Poshmark taxes that sellers generally don't have to worry about is sales tax. As a seller, you never have to pay sales tax.

Poshmark automatically calculates, collects, and remits sales tax from the buyer to the appropriate state and local government agencies. This is handled for you in most states. Sales tax is added to the buyer's order total and is not deducted from your earnings.

The only states exempt from sales tax are Delaware, Montana, New Hampshire, and Oregon. Even if Poshmark handles remittance, some sellers may still need to file a sales tax return. If you are unsure about your obligations, consider hiring a Certified Public Accountant (CPA) for guidance.

How to File Your Poshmark Taxes: The Right Forms

The tax forms you use depend on your seller classification. It is essential to record your income and report it on the proper forms.

Selling a Personal Item at a Loss

Even though you don't owe tax, you need to report the transaction to zero out the income shown on your 1099-K. You do this on Form 1040, Schedule 1.

• Report the proceeds on Line 8z, Other Income. Use the description "Personal Item Sold at a Loss."
• Report the cost (up to the amount of the proceeds) on Line 24z, Other Adjustments. Use the same description. This makes your net income from the sale zero.

Selling a Personal Item at a Gain

If you sold a personal item for a profit, you must report the details of the sale on Form 8949, Sales and Other Dispositions of Capital Assets, and then summarize the totals on Form 1040, Schedule D, Capital Gains and Losses.

Filing as a Hobby

Hobby income is reported on Form 1040, Schedule 1. You will enter your total gross earnings on Line 8j, Activity Not Engaged in for Profit Income.

Filing as a Business

Most self-employed Poshmark sellers file as a sole proprietor. This involves two main forms:

• Form 1040, Schedule C, Profit or Loss from Business: This is where you report your gross business income and break down all your deductible expenses. The result is your net profit or loss.
• Form 1040, Schedule SE, Self-Employment Tax: You'll enter your net profit from Schedule C here to calculate the 15.3% self-employment tax you owe.

The results from these schedules then flow to your main Form 1040 tax return.

Quarterly Estimated Taxes for Business Owners

Unlike traditional W-2 employees who have taxes withheld from each paycheck, self-employed business owners are responsible for paying their own taxes throughout the year. Poshmark will not withhold any taxes from your earnings.

If you expect to owe $1,000 or more in taxes for the year, you are generally required to make quarterly estimated tax payments. This covers both your income tax and self-employment tax.

The payment due dates are typically:

• April 15 (for income earned Jan 1 - Mar 31)
• June 15 (for income earned Apr 1 - May 31)
• September 15 (for income earned Jun 1 - Aug 31)
• January 15 of the next year (for income earned Sep 1 - Dec 31)

You can avoid underpayment penalties if you pay at least 90% of the tax you owe for the current year or 100% of the tax you owed for the previous year.

Simplify Your Poshmark Taxes and Scale Your Business with Reeva

Tracking inventory costs, Poshmark fees, shipping supplies, and other expenses across spreadsheets can be a nightmare. As your resale business grows, manual bookkeeping becomes a major time drain and increases the risk of errors. This is where we can help.

Our platform is designed to accelerate growth for resale businesses by simplifying and automating the tasks that take up your valuable time, especially accounting and tax prep.

Full-Service Accounting for Resellers

Our platform includes built-in accounting tools to make tax time effortless. Say goodbye to spreadsheets. Our accounting features automate your bookkeeping so you can focus on sourcing and selling.

• Automated Transaction Tracking: Connect your bank accounts, and we will automatically record your transactions, expenses, and fees.
• Effortless Record-Keeping: Simply upload a photo and attach receipts to transactions for seamless record-keeping. Complete records are your best defense during an IRS audit.
• Smart Categorization: We categorize your income, fees, and expenses so you can easily file your taxes and understand your business's financial health.
• Clear Reporting: Generate clear profit and loss reports to help you make smarter business decisions and provide your CPA with organized information.

As our customer PCT Vintage Finds said, "No more spreadsheets. My bookkeeping is now all automated thanks to Reeva accounting."

Grow Your Business Beyond the Books

We are an all-in-one platform built for resale businesses to simplify selling, automate tasks, and grow. While our accounting tools are a game-changer for tax time, our platform also helps you sell more, faster.

• Sell Smarter and Faster: Turn photos into complete listings instantly. Our AI creates titles, descriptions, and prices for you. Then, list your items everywhere—Poshmark, eBay, Mercari, Depop—with one click.
• Save Time with Automation: We automatically share your products on Poshmark, send personalized offers to buyers, and relist stale products to keep them fresh. Our auto-delist feature prevents you from overselling an item across multiple platforms.
• Manage and Scale with Ease: Track sales and profits with powerful business analytics, manage hundreds of listings in bulk, and even give team members access with multi-user account options.

TuffNY, a New York-based reseller, found that "Since using Reeva, I've cut down my admin time by at least 30%, giving me more time to source new products and expand my business."

If you are ready to stop juggling spreadsheets and start scaling your resale business, we invite you to see how we can help. Our Business plan includes full automation and accounting features for resale businesses and teams.

Start your free 7-day trial of Reeva today and transform how you run your business.

Conclusion: Take Control of Your Poshmark Taxes

Managing Poshmark taxes doesn't have to be a source of stress. The key is to understand your obligations, keep meticulous records, and leverage the right tools.

Start by determining if you're selling personal items, operating a hobby, or running a business. Understand that Poshmark does report your gross earnings to the IRS via Form 1099-K if you meet the threshold, but you must report all income regardless. For business sellers, diligently tracking your tax-deductible expenses is the best way to lower your tax bill.

While this might seem like a lot, you don't have to do it alone. A dedicated platform can automate the most tedious parts of tax prep, giving you back time to focus on what you love—growing your business.

Ready to simplify your accounting and scale your sales? Try Reeva for free and see how our all-in-one platform can help you grow.