1099-K
If you get a 1099-K you likely have a side-hustle in the gig economy or sell goods or services through a third party. When you receive payments through a third party your third-party settlement organization (TPSO) will likely issue you a 1099-K. If so, you must know the IRS’s new reporting rules.
TPSOs include:
- payment apps such as PayPal, CashApp and Venmo (not Zelle);
- online auction or marketplace services such as eBay and Amazon;
- gig economy platforms such as Uber and Airbnb; (read post: Don't Miss Tax Deductions for Uber, Lyft and other Ride Share Drivers)
- some cryptocurrency processors such as BitPay;
- craft or maker marketplaces like Etsy ;
- ticket exchange or resale sites like Ticketmaster; and
- some crowdfunding platforms.
TPSOs Used-To File 1099Ks for $20K or 200 Transactions
For over a decade, TPSOs filed IRS Form 1099K, Payment Card and Third Party Network Transactions, reporting certain payments the TPSOs process for goods and services.
But a TPSO had to file Form 1099-K only if the recipient had
- gross annual earnings over $20,000, and
- more than 200 transactions in the calendar year.
With these thresholds, only frequent users of TPSOs exceeded both thresholds and had their payment information reported to the IRS. If you’ve never received a 1099-K from a TPSO that processed payments on your behalf, this is why.
Now Filing Form 1099-K for $600
That is changing. Congress drastically reduced the 1099-K filing thresholds when it enacted the American Rescue Plan Act of 2021 to require TPSOs to file Form 1099-K for any recipient who is paid more than $600 during the year with no minimum transaction requirement.
The new 1099-K filing rules were supposed to go into effect for the 2022 tax year.
But the IRS delayed them until 2023. Now, the IRS has delayed them yet again, announcing that the old rules ($20,000/200 transactions) remain in place for 2023.
2024 1099-K for $5,000
For the 2024 tax year, the IRS is replacing the $20,000/200 transaction threshold with a $5,000 threshold and no minimum transaction requirement.
2025 1099-K for $600
For the 2025 tax year and later, the IRS applies the $600 threshold, again with no minimum transaction requirement.
Why all the delays? Because the IRS fears that TPSOs will mistakenly file many of the expected 44 million 1099-Ks. For example, TPSOs might mistakenly file 1099-Ks for personal payments from family and friends.
Questions About Your 1009-K Filing Requirements
As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."
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