Delay in Form 1099-K reporting threshold:
The $600 threshold for payment apps and online marketplaces to report payments on Form 1099-K is delayed for the tax year 2023. The IRS is planning a threshold of $5,000 for tax year 2024. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
Will I receive a 1099-K?
A Form 1099-K is used by the IRS to track how much money you have received through third-party payment networks in a given tax year. A payment app or online marketplace is required to send you a Form 1099-K if the payments you received for goods or services total over $20,000 from over 200 transactions. However, they can send you a Form 1099-K with lower amounts. Whether or not you receive a Form 1099-K, you must still report any income on your tax return. You should not receive a 1099-K for gifts or reimbursements from friends and family. Types of transactions include: goods you sell (like clothing or furniture), services you provide, property you rent, and more. If your customers or clients pay you directly by credit, debit, or gift card, you’ll get a Form 1099-K from your payment processor or payment settlement entity, no matter how many payments you got or how much they were for.
What do I do with Form 1099-K?
Review the 1099-K carefully to make sure it is correct. Should you have even received the form from the third-party payment network, and if so, is the amount accurate? Contact us at Lowe Levinson Financial Solutions to ensure your tax bill doesn’t skyrocket due to payments that are not taxable.
Will I owe more tax?
Receiving a 1099-K does not always mean your income, and therefore tax bill, will go up. If you sold personal goods, there was a loss or a gain. If you sold goods at a loss in the course of your business, then you may actually reduce your tax bill. Again, the nature of the payments makes all the difference, so speak with us at Lowe Levinson Financial Solutions today.
TYPICAL PLATFORMS FOR 1099-K
Some examples of networks and online platforms that must report payments made for goods and services if the total is $600 or more are: Etsy, Venmo, eBay, PayPal, Stripe.
