Because of the American Rescue Plan of 2021, more companies and gig workers will be receiving Form 1099-K, Payment Card and Third Party Network Transactions, starting with tax year 2023.
If you received gross payment transactions totaling more than $600 this year (regardless of the number of transactions) via payment cards (including gift cards), a third-party network like PayPal or Venmo, or an online marketplace like eBay or Amazon — the payment processors are now required to send you Form 1099-K.
Before this year, that information return was only for taxpayers who received more than 200 transactions totaling above $20,000. Reportedly, there are efforts in Congress to try to raise the threshold.
Notable exceptions for required 1099-K reporting
In the on-demand ResourcefulFinancePro online workshop “New Form 1099-K Reporting Requirements,” Tricia Richardson, CPP, SPHR, SHRM-SCP, noted these entities do not have to report online payment transactions to IRS:
- In-house accounts payable departments
- Healthcare networks, and
- Automated clearing houses.
Also, the following don’t count against the threshold:
- Payments made via Zelle (because bank-to-bank transfers aren’t held directly by Zelle the way they are by Venmo and PayPal), and
- Personal transfers on Venmo and PayPal, such as a gift from a family member or reimbursement of a personal expense.
“If you received seven different $100 payments from folks, and they used PayPal, you would get a 1099-K. If (they were) made through Zelle, you would not get a 1099-K. However, you’re still required to report that as taxable income,” Richardson said.
She also said that if you’re using a payment app that required a Social Security Number to sign up for an account, the team member who set up your company account may need to change the account settings to prevent getting a surprise information return.
If your finance team gets a call from a confused vendor trying to verify payment amounts from your company because they got a 1099-K, let them know:
- there’s a chance personal payments on a third-party app may have been erroneously reported as income
- they should reach out to the payment processing company to get that
corrected, and - it’s important to either keep separate personal and business accounts for the payment apps they use, or else get into the habit of designating payments as business-related or non-business related.
Important Form 1099 reminders
Don’t forget that IRS has made it mandatory for taxpayers to electronically file when submitting 10 or more returns in aggregate from a long list of forms, which includes all Forms 1099.
The deadline for sending Form 1099 recipient copies is January 31, 2024, the IRS paper filing deadline is February 28, 2024 and the IRS e-filing deadline is April 1, 2024.
