By: Morgan Gargis, CPA, Manager

On December 23, 2022, the Internal Revenue Service announced the delay in the implementation of the new $600 reporting threshold for third-party network’s Forms 1099-K.  As a result of this delay, third-party networks will not be required to report 2022 tax year transactions on a Form 1099-K to the IRS or the payee for the new $600 threshold amount.  The 2022 Calendar year will be a transition period for the new rules.  Additional details on the delay will be available in the near future along with additional information to help taxpayers.  For now, it is important to be aware of the new Form 1099-K rules so that taxpayers are not surprised when they receive these forms.  During this transition period, taxpayers will need to check their third-party network accounts for accuracy so that Forms 1099-K are issued correctly.  Errors will likely be made and will need to be corrected efficiently.

Form 1099-K is an IRS information form that reports a taxpayer’s gross amount of payment transactions on a third-party payment network when that amount is greater than $600 in the previous year.  Examples of third-party networks include applications such as Venmo, PayPal, Amazon, and Square.  The third-party network will prepare the 1099-K and distribute it to the payee.  When implemented the form will also be sent to the Internal Revenue Service, so their computer systems can cross-reference with amounts reported by taxpayers.

Payments received through third-party networks that are personal in nature are not subject to the 1099-K reporting rules.  These payments are not included in taxable income. It is important to establish accounts and transactions with third-party networks that are business in nature.  For example, Venmo allows users to set up personal or business accounts.  Business account information will most likely need to be confirmed before the 1099-Ks are issued in January 2024.  However, each network operates differently, so refer to the specific network’s website for more information.

As always, if you have any questions, please get in touch with your Dent Moses advisor.