The IRS on Tuesday shared suggestions for the upcoming tax season — together with a reminder concerning the new $600 threshold for receiving Form 1099-K for third-party payments.
The change applies to payments from third-party networks, corresponding to Venmo or PayPal, for transactions corresponding to part-time work, aspect jobs or promoting items, in response to the IRS.
Before 2022, the federal Form 1099-K reporting threshold was for taxpayers with greater than 200 transactions price an mixture above $20,000. However, Congress slashed the restrict as a part of the American Rescue Plan Act of 2021, and a single transaction over $600 may now set off the shape.
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Aimed at closing the tax hole — a prime precedence of the Biden administration — the supply is estimated to convey in $8.4 billion from fiscal yr 2021 to 2031, in response to the Joint Committee on Taxation.
"It's going to be a new form for a lot of people," stated Adam Markowitz, an enrolled agent and vice chairman at Howard L Markowitz PA, CPA in Windermere, Florida. "And the worst thing they can do is ignore it."
Who may obtain Form 1099-K for 2022
Companies file Form 1099-K, often known as an "information return," yearly to report bank card and third-party payments, with a replica going to taxpayers and the IRS.
Tommy Lucas, an authorized monetary planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, stated the enterprise earnings in your return should embody what's reported on Form 1099-K. Otherwise, you may set off an computerized IRS discover and even an audit, he stated.
The problem with the brand new decrease threshold quantity of $600 for Form 1099-K is that non-public payments and reimbursements might be incorrectly reported as taxable transactions.Justin Millernational director of wealth planning at Evercore Wealth Management
It's attainable you'll obtain Form 1099-K for transactions you don't anticipate, corresponding to reselling Taylor Swift tickets at a revenue, for instance, warned Justin Miller, nationwide director of wealth planning at Evercore Wealth Management in San Francisco.
But promoting objects at a loss, corresponding to used furnishings, may be much less clear.
"Obviously, if you sell a $2,000 couch for $1,000, there's not taxable transaction there," Markowitz stated. "You don't get a capital loss for it, and you don't have a gain."
What occurs if you get a 1099-K by mistake
Although the change goals to gather taxes on earnings, not private transactions, consultants say it's attainable some filers may obtain Form 1099-K by mistake.
"The challenge with the new lower threshold amount of $600 for Form 1099-K is that personal payments and reimbursements could be incorrectly reported as taxable transactions," Miller stated.
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A ceaselessly requested questions web page from the IRS says you shouldn't obtain Form 1099-K for private transfers, corresponding to reimbursements for splitting meals, items or allowances.
However, if you obtain the shape for private transactions, the company says to contact the issuer for a correction. If the corporate doesn't repair the error, you can connect an evidence to your tax return whereas reporting your earnings accurately, the IRS says.
primarily based on website supplies www.cnbc.com