Do you sell goods or services and receive payment through a third-party settlement organization (TPSO)? If so, you must know the IRS’s new Form 1099-K reporting rules.
TPSOs include:
payment apps such as PayPal, CashApp, and Venmo;
online auction or marketplace services such as eBay and Amazon;
gig economy platforms such as Uber and Airbnb;
some cryptocurrency processors such as BitPay;
craft or maker marketplaces like Etsy ;
ticket exchange or resale sites like Ticketmaster; and
some crowdfunding platforms.
For over a decade, TPSOs filed IRS Form 1099-K, Payment Card and Third Party Network Transactions, reporting certain payments the TPSOs process for goods and services.
But a TPSO had to file Form 1099-K only if the recipient had:
gross annual earnings over $20,000, and
more than 200 transactions in the calendar year.
With these thresholds, only frequent users of TPSOs exceeded both thresholds and had their payment information reported to the IRS. If you’ve never received a 1099-K from a TPSO that processed payments on your behalf, this is why.
That is changing. Congress drastically reduced the 1099-K filing thresholds when it enacted the American Rescue Plan Act of 2021 to require TPSOs to file Form 1099-K for any recipient who is paid more than $600 during the year with no minimum transaction requirement.
The new 1099-K filing rules were supposed to go into effect for the 2022 tax year.
But the IRS delayed them until 2023. Now, the IRS has delayed them yet again, announcing that the old rules ($20,000/200 transactions) remain in place for 2023.
For the 2024 tax year, the IRS is replacing the $20,000/200 transaction threshold with a $5,000 threshold and no minimum transaction requirement.
For the 2025 tax year and later, the IRS applies the $600 threshold, again with no minimum transaction requirement.
Why all the delays? Because the IRS fears that TPSOs will mistakenly file many of the expected 44 million 1099-Ks. For example, TPSOs might mistakenly file 1099-Ks for personal payments from family and friends.
Note: all business income received is taxable whether you receive a 1099 from the payor or not.
Questions?
TrueBlaze is here to help. If you want to discuss TPSO reporting, please contact TrueBlaze Advisors.