Announced 12/23/22: IRS to delay implementation of new 1099K rules until 2023. News Release
Starting with the 2022 tax year there is a new reporting requirement for third party payment processors, such as Venmo, Paypal, Amazon, Square and Cash App. The reporting threshold has been lowered from $20,000 to $600 this year. More taxpayers therefore will be receiving these 1099s as part of their tax paperwork this year.
What is a 1099-K?
Form 1099-K is an informational tax form that is required to be filed by third-party payment processors. It reports the gross value of payments for goods and services received by the taxpayer through their systems. Companies are required to provide a copy of the form to the IRS and one to you.
Will you get a 1099-K for personal transactions?
Hopefully, not. The payment networks should be excluding gifts and other “friends and family” payments sent through their networks. It’s important to review the dollar value of any 1099-K received to confirm that the payment truly was for goods or services provided. If it’s wrong, you must contact the payment processor to have them re-issue a new 1099-K.
Does this change my tax requirements?
No, the tax code has not changed. You should have been reporting the income received via these third-party payment processors regardless of whether you received a 1099-K in previous years. Income from “side-hustles” is reported on a Schedule C and subject to self-employment tax.
What happens if you sell a personal item(s) online for over $600?
This is the one area where I can genuinely see issues for taxpayers who sell personal items online on websites such as Ebay and Poshmark. Unless you have kept record of the original cost of the item that you sold, you may be required to include the full sales value of the item as taxable income. We will discuss the options available if this situation applies to you.