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For the fourth time in three years, the IRS changed Form 1099-K reporting requirements in late November. So why should we care? Be careful if you’ve ever sold something on Amazon or eBay, sold tickets to a sporting event or concert, or received money from a payment app like Venmo.
background
The IRS wants to track deposits from third-party credit cards and other payment processors. This is because much of this activity is considered business activity and is therefore underreported. The IRS uses Form 1099-K to report these transactions, and for many years the reporting threshold was $20,000 and 200 transactions per payment processor. The law has since changed, lowering the threshold to $600 and making the number of transactions unlimited.
current situation
After delaying implementation of the $600 threshold twice in the past few years, the IRS has lowered the reporting threshold again in 2023 to $20,000 and 200 transactions. While these repeated changes are welcome to many taxpayers, they have also caused widespread confusion, as the extension was put in place just 45 days before documents would start arriving in inboxes.
What you need to know
Your income is reportable regardless of whether you receive the form. So if you have a side hustle on Amazon or a business that resells tickets, you should report it.
You may or may not receive a Form 1099-K. Because of the late changes, you may receive a Form 1099-K in January or February of this year even though your payment processor doesn’t have to report it. Therefore, if you receive a form, please save it. This activity is currently being reported to the IRS.
Limits are still going down, so get ready. Recent changes are only temporary. Please note that the IRS plans to lower the threshold over the next few years to reach the $600 limit.
There are many different ways to report business activities. If you have a side hustle, you can sell or resell tickets online and receive payment for goods and services using digital payment systems. This should be reported. Reporting methods may vary, so ask for help.
James Angell is a certified public accountant based in Willits. His office is located at 461 S. Main St. and he can be reached at 707-459-4205.
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