Anthony McVeigh •
The IRS announced a rule change delaying the Form 1099-K reporting threshold change for third-party settlement organizations for calendar year 2023. Originally, the reporting threshold for Form 1099-K was going to decrease to $600, but due to potential confusion, the IRS is treating this year as another transition period. The IRS will continue using a $20,000 threshold and 200 transactions for tax year 2023.
The IRS announced a rule change delaying the Form 1099-K reporting threshold change for third-party settlement organizations for calendar year 2023. Originally, the reporting threshold for Form 1099-K was going to decrease to $600, but due to potential confusion, the IRS is treating this year as another transition period. The IRS will continue using a $20,000 threshold and 200 transactions for tax year 2023.
You may ask yourself “what is a 1099-K and how does this affect me?” Form 1099-K came into existence as part of the Housing and Economic Recovery Act. The form was implemented in 2012 for the 2011 tax year. It reports payments and transactions from online platforms, apps or payment card processors. This includes Venmo, PayPal, Etsy, Facebook Marketplace or any other site that you receive money for goods or services. For example, if you sell your clothes or furniture on Facebook Marketplace, you may receive a 1099-K if you exceed the reporting threshold. If you have a small business on Etsy where you sell trinkets you may receive a 1099-K. However, money received from friends and family as a gift or repayment for a personal expense should not be reported on Form 1099-K since these payments are not taxable income.
The Form 1099-K rule change stems from the American Rescue Plan. The rationale for the 1099-K is that it raises volunteer compliance with reporting all income. The IRS is planning to decease the threshold to $5,000 for the 2024 tax year and then $600 for the 2025 tax year. The idea is that this will give companies time to adjust and make the necessary changes to implement the new threshold.
Companies must send a copy of your Form 1099-K by January 31. Even if you do not receive a 1099-K, you must still report all your income on your tax return. If you have any questions about the 1099-K and how it affects your tax return, please reach out to Mason & Rich, and we can provide some guidance.
The Form 1099-K rule change stems from the American Rescue Plan. The rationale for the 1099-K is that it raises volunteer compliance with reporting all income. The IRS is planning to decease the threshold to $5,000 for the 2024 tax year and then $600 for the 2025 tax year. The idea is that this will give companies time to adjust and make the necessary changes to implement the new threshold.
Companies must send a copy of your Form 1099-K by January 31. Even if you do not receive a 1099-K, you must still report all your income on your tax return. If you have any questions about the 1099-K and how it affects your tax return, please reach out to Mason & Rich, and we can provide some guidance.
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