In the fourth move in three years, the IRS in late November changed the reporting requirements for Form 1099-K. So why should you care? Well, pay attention if you’ve ever sold anything on Amazon or eBay, have sold tickets to sporting events or concerts, or received money from payment apps like Venmo.
Background
The IRS wants to track the receipt of money from third-party credit card and other payment processors. This is because much of this activity is deemed business activity and it is under-reported. The IRS uses Form 1099-K to report these transactions and for years the threshold for reporting was $20,000 and 200 transactions per payment processor. The law was then changed to lower the threshold to $600 and any number of transactions.
Current situation
After delaying the implementation of the $600 threshold two times in prior years, the IRS once again rolled back the reporting threshold for 2023 to $20,000 and 200 transactions. This repeated change, albeit a welcome one for many taxpayers, is also creating mass confusion as the delay was put in place a mere 45 days before the forms start hitting inboxes.
What you need to know
The income is reportable whether you receive the form or not. So if you have a side hustle on Amazon, or have a business reselling tickets, you are required to report it.
You may or may not receive a Form 1099-K. Given the late change, you may still receive a Form 1099-K this January or February even if the payment processor is not required to report it. So if you receive a form, please keep it. The activity is still being reported to the IRS.
The limits are still coming down, so be prepared. The recent change is only temporary. The IRS will be lowering the threshold over the next few years to get to the $600 limit, so be forewarned.
How to report business activity varies. If you have a side hustle, sell or resell tickets online, or use digital payment systems to receive payment for goods or services you are in business. This needs to be reported. How it is reported can vary so call for help.