Taxpayers who earn in excess of $600 from selling goods and/or providing services could receive a Form 1099-K this year. Before 2022, Form 1099-K was issued for third party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. However, now, a single transaction exceeding $600 can trigger a 1099-K. (Money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.)
The IRS recently updated its Form 1099-K Frequently Asked Questions (FAQs) to help taxpayers understand who files the form, who receives it, and what it means. Here’s a summary of the most pertinent information:
- Forms 1099-K will be used to identify potential unreported income, to develop taxpayer education and outreach efforts, and create new approaches to audits and collection.
- Individuals that receive a Form 1099-K should use it to compute gross sales and receipts and correctly calculate gross income. If you feel the information is inaccurate, you should contact the entity that issued the form.
- Forms must be provided to the IRS by March 31, 2023 if filed electronically, and by February 28, 2023 if filed on paper. Additionally, the form must report the gross amount of the payee’s transactions, with no adjustments for fees or refunds.
Since the threshold plummeted, the number of gig workers receiving these forms is expected to skyrocket. If you have questions, consult the IRS FAQ or reach out to us.