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1099-K New Reporting Requirements 

 

Form 1099-K is an information return similar to Forms 1099-MISC or 1099-NEC (Nonemployee Compensation).  Form 1099-K is used to report certain payment transactions for goods and services.  Recent legislation has significantly decreased the filing threshold for this form.   

 

In tax years before 2023, third party payment networks (PayPal, Venmo, Visa, etc.) were required to send you a Form 1099-K if you had more than 200 transactions that totaled $20,000 or more processed on their network.  

 

Starting with tax year 2023, you are supposed to be issued a 1099-K by these organizations if you receive payments over $600 with any number of transactions for the year.   

 

What does receiving this form mean for you?  It means the IRS will be looking for the amount reported to you on the form to be reported as income on your tax return.

     

Note that the changes to the reporting threshhold are NOT intended to track personal transactions, such as sharing the cost of a meal, gifts, or reimbursement for personal expenses.  

 

What should you do if you receive a Form 1099-K in error (such as for personal reimbursement of an expense)? 

 

Contact the issuer of the Form 1099-K and ask them to issue a corrected form. If they are unable to issue a corrected form, the IRS recommends reporting the information as follows: 

 

        Part I – Line 8z – Other Income: Form 1099-K Received in Error 

        Part II – Line 24z – Other Adjustments: Form 1099-K Received in Error 

 

The net effect on your income of the two adjustments will be zero. 

 

What is the difference between a Form 1099-K, Form 1099-NEC and Form 1099-MISC? 

 

        Form 1099-NEC reports compensation payments of $600 or more for services provided to someone, not as an employee. 

        Form 1099-MISC reports other types of income, such as rents, royalties, prizes or awards paid to third parties. 

        Form 1099-K reports payment card and third-party network transactions. This form will come from the payment settlement entity,             rather than from the business or person who pays for the goods or services.  

 

Businesses and individuals must keep careful records to determine how the payments should be reported, but it is possible that transactions could be duplicated. Note that businesses should carefully consider the classification of someone as a non-employee versus an employee.  

 

PayPal and Venmo offer the option to tag their transactions as either personal/friends and family OR goods and services. Note that if you are selling a personal item, such as concert tickets, this should be considered a goods/services transaction.  

 

The IRS Fact Sheet can provide more details.

 

Please contact our office if we can be of help.