Many small business owners, sole proprietors, and gig workers accept payment for sale of goods and services through third-party payment settlement networks such as Venmo, PayPal, eBay, Etsy, and others.
The IRS originally announced that starting with the 2022 tax year, businesses receiving payments over $600 using payment settlement networks will receive a Form 1099-K that will reflect the gross amount of money received for goods or services. Previously, form 1099-K was only issued for gross receipts over $20,000 with over 200 transactions. However, that deadline to drop the threshold was delayed and pushed to 2023.
According to the IRS, the $600 threshold for payment apps and online marketplaces to report payments on Form 1099-K is delayed again. The IRS is planning a threshold of $5,000 for tax year 2024.
Dropping the threshold was included as part of the American Rescue Plan Act of 2021 and considered a way to raise extra tax revenue. Deep concern over unpreparedness to process an onslaught of tens of millions of additional 1099-K forms, and concerns over implementing the rule in a limited timeframe gave way to the delay. The current $20,000 threshold will remain in place for tax year 2023.
To avert another delay and pave the way for reporting third-party payment settlement payments, the IRS is planning to drop the threshold from $20,000 to $5,000 for tax year 2024.
This is a complex tax reporting situation for businesses. Be sure to reach out to your tax professional for guidance. The tax professionals at CironeFriedberg will provide updates as this is an ongoing and evolving issue.
For more information, visit the IRS page Understanding your Form 1099-K.
HAVE QUESTIONS?
If you need assistance or have any questions about this reporting requirement call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Darien) or email us at info@cironefriedberg.com.
