The Internal Revenue Service (IRS) has reminded taxpayers accepting payments through payment cards and third-party network transactions that they may receive 1099-K forms for sales over $600 in early 2023.
New 1099-K Reporting Rule
The IRS noted that there are no changes made to the taxability of income but only in the reporting rules for Form 1099-K. Taxpayers are still required to report all income on their tax return unless it is excluded by law. This is whether they receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K; or any other information return.
Previously businesses would generally receive a 1099-K tax form only when their gross payments exceeded $20,000 for the year and the business conducted at least 200 transactions.
According to the new 1099-K rule, the gross payments threshold has been lowered to just over $600 for the year with the transactions threshold no longer applying. Now a single transaction exceeding $600 can trigger a 1099-K. This includes transactions through credit cards, debit cards, banks, PayPal, Uber, Lyft, and other third-party payment settlement entities.
The 1099-K form includes information about the payment processor and the company receiving payments, and a monthly breakdown of total payments, among other information.
According to the IRS, the lower information reporting threshold and the summary of income on Form 1099-K will make it easier for taxpayers to track the amounts received.
Personal Gifts, Personal Reimbursements Are Excluded
Taxpayers should also avoid mixing personal and business-related transactions in the same third-party payment service account. When it comes to money received through third-party payment or applications like PayPal or Venmo from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
The change in reporting comes as part of the American Rescue Plan Act of 2021 (ARPA) which lowered the reporting threshold to $600, with no minimum number of transactions.
Deadlines for 1099-k fillings in 2023
- Recipient copy deadline, January 31, 2023
- E-filing deadline, March 31, 2023
- Paper filing deadline, February 28, 2023
In addition to accepting tax filing through mail and tax preparers, the IRS also offers free filing software where taxpayers can file electronically. In fact, the IRS encourages e-filling as the tax software does the calculations, flags common errors, and reduces tax return errors by prompting taxpayers of missing information.
Where To Get Help with Tax Filling?
If you feel overwhelmed with filing your own tax returns, you can seek the services of an accountant, bookkeeper, or tax preparation service to help you navigate the ins and outs of your taxes.
By outsourcing your small business tax preparation process you let others help you in filing tax forms and get tax advice from professionals that have knowledge of tax laws.
Image: Depositphotos
This article, "IRS Sends Reminder About New 1099 Rules" was first published on Small Business Trends
No comments:
Post a Comment