Understanding the new 1099-K rules in 2023
September 5, 2023 | Corey Butler
Whether you sell vintage Barbie dolls on eBay or are flipping the latest Taylor Swift and Beyoncé concert tickets for big bucks on SeatGeeks, you may be in for a rude awakening by the IRS.
Prior to 2023, someone who made business transactions using those apps or similar services would only be issued a
Form 1099-K if they had more than 200 transactions for more than $20,000 in total revenue.
But not anymore.
With changes from the American Rescue Plan Act of 2021, that threshold has been cut drastically both in terms of the number of transactions and the amount of revenue earned starting this year. Affected recipients include those who use payment apps like Venmo or Cash App, or online marketplaces like Etsy and Amazon.
Now, one must only earn more than $600 in payments and there is no minimum number of transactions before the platform you’re using to sell your goods or services is required to issue a Form 1099-K. This is an important item to consider when preparing your income tax returns.
“There is no change in the tax law regarding the taxability of the income to the payee, regardless of whether a Form 1099-K is received,” said
Steve Warren, CPA, MBT, a senior manager at Schechter Dokken Kanter CPAs in Minneapolis. “Contrary to the position of those who believe
no Form 1099 means no need to include the income on their tax return, the law has always considered income generally taxable without a specific law telling us it’s not.”
It is important to note that the use of apps like Venmo for personal transfers to split a meal cost or to gift or loan a family member or friend money should not trigger an issuance of a Form 1099-K.
However, there is some concern that the companies responsible for issuing these tax documents may mistakenly send them out to people or include incorrect amounts. Therefore, it’s important to review any Form 1099-K you may receive, like you would any tax related document that is sent to you.
"If you receive a copy of an incorrectly filed Form 1099-K, your first step should be to request a corrected version,” Warren said. “If you are unable to get a corrected version, the IRS has provided detailed instructions on where and how to include the full amount and also an adjustment to get to the correct net taxable amount."
While there is some chatter on Capitol Hill about
increasing the threshold for reporting, the 2021 law remains intact at this point aside from deferring the start date for the changes.
To better understand all things 1099-K, visit the
IRS website or find a certified public account through the
MNCPA Yellow Pages.
Topics: Clients, Taxation-Individual, Business & Industry, Government, Taxation-Business
Corey Butler
Corey Butler is the MNCPA communications manager, working to enhance the professional reputations of members through content, media relations and public affairs. He's been with the MNCPA since 2013. Corey keeps busy outside of the MNCPA spending time with his wife and children, serving on his local school board, volunteering in his community and catching up on long-lost hobbies. Corey enjoys the works of John Steinbeck and Rankin/Bass Productions, and Paul Bunyan, Robin Hood and Santa Claus lore. You may reach him at 952-885-5530 or cbutler@mncpa.org.
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