You will be surprised how many are impactedIn the fourth move in three years, the IRS in late November changed the reporting requirements for Form 1099-K. So why should you care? Well pay attention if you’ve ever sold anything on Amazon or eBay, have ever sold tickets to sporting events or concerts, or received money from payment apps like Venmo.
Background The IRS wants to track the receipt of money from third-party credit card and other payment processors. This is because much of this activity is deemed business activity AND it is under-reported. The IRS uses Form 1099-K to report these transactions and for years the threshold for reporting was $20,000 and 200 transactions per payment processor. The law was then changed to lower the threshold to $600 and any number of transactions. Current situation After delaying the implementation of the $600 threshold two times in prior years, the IRS once again rolled back the reporting threshold for 2023 to $20,000 and 200 transactions. This repeated change, albeit a welcome one for many taxpayers, is also creating mass confusion as the delay was put in place a mere 45 days before the forms start hitting inboxes. What you need to know The income is reportable whether you receive the form or not. So if you have a side hustle on Amazon, or have a business reselling tickets, you are required to report it. You may OR may not receive a Form 1099-K. Given the late change, you may still receive a Form 1099-K this January or February even if the payment processor is not required to report it. So if you receive a form, please keep it. The activity is still being reported to the IRS. The limits are still coming down, so be prepared. The recent change is only temporary. The IRS will be lowering the threshold over the next few years to get to the $600 limit, so be forewarned. How to report business activity varies. If you have a side hustle, sell or resell tickets online, or use digital payment systems to receive payment for goods or services you are in business. This needs to be reported. How it is reported can vary so call for help. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA
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September 2023
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