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Important IRS Form 1099-K Reporting Threshold Changes

We have some significant updates regarding the IRS Form 1099-K reporting requirements that may affect your tax filings. The Internal Revenue Service (IRS) has recently announced a delay in the implementation of the new $600 reporting threshold for third-party payment organizations. This decision is part of a transition plan for 2023, which comes after considering feedback from taxpayers, tax professionals, and payment processors.

What’s Changing in 2023

Initially, the IRS planned to enforce a $600 reporting threshold for Form 1099-K starting in 2023. However, to alleviate potential confusion and in response to stakeholder feedback, this threshold will not be implemented as planned. For the tax year 2023, payment apps and online marketplaces will continue to issue Forms 1099-K only for taxpayers who receive over $20,000 and engage in over 200 transactions.

Phased-In Approach for 2024

To ease into the new reporting requirements, the IRS will adopt a phased-in approach. In 2024, the reporting threshold will be raised to $5,000. This gradual implementation allows the IRS to refine its processes and address concerns from various stakeholders.

Who Receives Form 1099-K

Form 1099-K is issued to individuals and businesses that use payment apps or online marketplaces to receive payments for goods or services. This includes a wide range of recipients, from those with side gigs and small businesses to casual sellers.

Navigating Form 1099-K

For recipients of Form 1099-K, the IRS offers guidance on its “Understanding Your Form 1099-K” webpage. It’s important to verify the accuracy of the reported amounts and to identify any deductible expenses that can be claimed when filing taxes.

What Not to Report

Personal transactions, such as gifts, ride-sharing expenses, or shared household bills, are not taxable and should not be reported on Form 1099-K.

Navigating the Changes

The IRS’s decision to delay the 2023 Form 1099-K reporting threshold and to introduce a phased-in approach for 2024 demonstrates their commitment to addressing taxpayer concerns and ensuring a smooth transition. As tax preparers, we are here to help you stay informed about these changes, review your Form 1099-K carefully, and make use of IRS resources to navigate tax reporting complexities.

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