On Tuesday, IRS shared tips and tricks for the coming tax season. Consisting of a reminder too about the fresh $600 threshold for getting Form 1099-K for third-party payments. According to IRS, for those payments for third-party networks, the changes will apply to them only. It includes PayPal or Venmo for transactions like side jobs, part-time work, and selling goods.
Before the year 2022, taxpayers with more than 200 transactions totaling more than $20,000 were required to file federal Form 1099-K reports. As part of the American Rescue Plan Act of 2021, Congress reduced the threshold, and now a single transaction above $600 may initiate the process. The main priority of the Biden administration is to aim at the closing tax gap.
Adam Markowitz (Vice President and Enrolled Agent) stated, “It’s gonna be new for many people. And the first anyone can do is ignore it.”
Who Can Get Form 1099-K in 2022
It is also known and called “information return”, as organizations file Form 1099-K, to report third-party payments and credit cards, annually. And also, with a copy that has been sent to IRS and taxpayers.
According to Tommy Lucas, a certified financial planner and enrolled agent with Moisand Fitzgerald Tamayo in Orlando, Florida, the Form 1099-K information must be included in the company revenue on your return. If not, you can automatically receive an IRS letter or possibly be subject to an inspection, he said. If you didn’t expect some transactions, there is a possibility you will still receive Form 1099-K.
What Happens if You Will Receive a 1099-K By-Mistake
However, the change focuses on collecting taxes on income and not on personal transactions. Experts said, there is a possibility, some filers could get Form 1099-K by mistake. Personal payments and reimbursements can be mistakenly reported as taxable transactions under the new lower threshold of $600 on Form 1099-K, Miller stated.