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
- 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
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.