The Internal Revenue Service (IRS) has tweaked the rules for Form 1099-K, and here’s the scoop! This adjustment comes after getting feedback from taxpayers, tax pros, and payment processors. The goal? Less confusion. The IRS has hit the pause button on the new reporting threshold for 2023 and plans to ease in a $5,000 threshold for 2024 under the American Rescue Plan.
How It Affects You
So, what’s in it for you? For the tax year 2023, if you’re using payment apps or online marketplaces, the reporting rules stay the same: you should only get a Form 1099-K if you rake in over $20,000 and tally up more than 200 transactions. It’s like a warm-up year for the IRS to roll out the changes bit by bit.
The Threshold Rundown
Here’s the lowdown: Even though the reporting threshold is still $20,000 and 200 transactions for 2023, companies might still send you a Form 1099-K for any amount. But don’t sweat it; this higher threshold doesn’t mess with the tax law. All income, big or small, is taxable unless there’s a specific law saying otherwise – whether or not you get that Form 1099-K.
Who’s Getting the Form?
Wondering if you’ll be getting one of those forms? If you’re using payment apps or online marketplaces to sell stuff or other services, it’s a possibility. This includes folks with side gigs, small businesses, crafters, and solo entrepreneurs. Even if you sold personal items at a loss, you might still be in the mix, thanks to the $600 threshold.
IRS Takes a Breather
Recognizing the complexity of it all, the IRS hit the brakes and gave themselves a bit more time to make things simpler for you and others trying to navigate the reporting process.
Your To-Do List
So, what should you do? The IRS has a handy “Understanding your Form 1099-K” webpage with info on what to do if you get a Form 1099-K by mistake. Take a peek at the forms, double-check the numbers, and see if you can claim any deductions when you file your taxes.
Breaking Down Payments on Your Return
If you’re scratching your head about where to report those payments on your tax return, don’t worry. If you’re a ride-share driver, for example, you might report it on Schedule C. Let’s say you parted ways with your treadmill, selling it online for less than what you initially paid. You can zero out the payment on your tax return by doing a little reporting magic on Form 1040, Schedule 1.
Now, imagine you sold your Christmas Day football tickets and pocketed a sweet profit. In this case, you’d want to note that gain on Form 8849 and Schedule D. And don’t forget, when it comes to personal transactions like gifts, shared expenses, or household bills – there’s no tax tale to tell, so no need to mention them on Form 1099-K.
Stay in the Loop and Ask Questions
Stay in the loop, and if you’re feeling a bit tangled up in all these tax changes, don’t hesitate to reach out! We get it; taxes can be tricky. At The Retirement Planning Group, we’re here to help. We offer complimentary 10-minute consultations with our Tax Professionals to help assess your specific situation!