New Form 1099K Reporting - Don’t Pay More Than You Have To

The reduction regarding the $600 threshold for third party payment reporting was included in the American Rescue Plan Act of 2021. Simply stated, the government is working to close a tax gap which includes finding ways to ensure the working class pays for all the income received.  There is a great amount of Form 1099-Ks expected to be released in January 2023. It is important to note whichever tax forms you receive (i.e., Form W2, Form 1099, etc.), the government receives as well. Everything is matched up with your tax return…  No information will go undetected.  The worst thing taxpayers can do is omit or ignore income.

Furthermore, this information applies to transactions for work, side jobs, and selling goods. Also, there's a certain way to report income to prevent from receiving an IRS notification and/or audit. Business income on returns must include the total amount reported on Form 1099-K. Money received through third party payments from family or friends as personal gifts or reimbursement for personal expenses is not taxable. If a Form 1099-K reflects these monies as income call the issuer to correct not the IRS.

So how do you get and stay prepared? 

*Remember most income is taxable (i.e., unemployment income, ridesharing, delivery services, property/space rentals, digital assets, etc.)

*Confirm that your employer, bank, and other payers have your current mailing and email address on file.  This will ensure year-end statements are received. 

*Notate that the last estimated tax payment for 2022 is due January 17, 2023.

*Keep filed returns and supporting documents for at least three years.

*Work with your Accountant to ensure various deductible expenses associated with the income are recorded.  These items must be factored in to prevent overpaying taxes.

Need more insight for your situation?  Schedule a Tax Strategy & Client Advisory session here: https://calendly.com/latanza-parnell0810/business-q-a-session-clone