Many who are self-employed can expect to receive a new tax form next year following a recent rule change by the IRS. This update, however, will not impact what income must be reported to the government or how much tax is owed on it.
The new regulations require online platforms — such as Etsy, Airbnb, and Uber — and payment apps — including PayPal, Venmo, and Cash App — to issue a 1099-K to those whose annual gross payments exceed $5,000 in 2024, $2,500 in 2025, and $600 in 2026.
These income thresholds apply regardless of how many transactions are processed through a given account within the year.
Personal transactions on payment apps — such as paying back a friend or splitting expenses with a roommate — will not be included under these new regulations, only that which qualifies as earned income. It’s not immediately clear how each platform will deal with segregating repayments from payments categorized as income.
For example, transferring money to a friend using Venmo to pay them back for dinner would not be reported, but accepting payment for a product at a craft fair using Venmo would.
Zelle users will not receive a 1099-K regardless of how much taxable income is transferred using the app, as it functions only as a way to easily move money from one bank account to another.
Consequently, those using Zelle to process business transactions will need to independently track the income they have earned through the app in order to report it on their Schedule C, the form used to report business income and losses on a tax return.
Similar reporting requirements were first introduced in 2011, but the threshold at which they were triggered was significantly higher, only applying to those who earned over $20,000 and had more than 200 transactions in a single year.
In 2021, Congress passed a law dramatically lowering this threshold to just $600 regardless of transaction count in an effort to crack down on unreported taxable income.
Originally set to take effect in 2022, implementation was delayed two years in a row. The IRS then announced in 2023 that 2024 would be a transitional year wherein the threshold would be set at $5,000.
By 2026, the original $600 threshold for receiving a 1099-K from third-party apps will be in place.
A 1099-K is an official tax form representing payments received “for goods or services during the year” and are used to help calculate and verify one’s total taxable income when filing their taxes.
These forms are completed by third-party companies and sent to both the IRS and taxpayers.
The IRS officially announced the updated timeline for implementing the new 1099-K thresholds in late November, clarifying the incremental schedule over the next few years.
They also clarify in this announcement that the new threshold does not impact what income must be reported or how it is taxed, nor does it change the fact that personal payments to friends and family for things like cost sharing are not taxable income.
In order to ensure that these types of non-taxable payments are not inadvertently counted toward the new 1099-K thresholds, the IRS reminds taxpayers to note these as non-business transactions in payment apps whenever possible.
Regardless of whether or not a 1099-K is received, all earned income — including that which is accrued through online marketplaces, gig platforms, or digital payment services — must be reported to the IRS.
Click Here for More Information from the IRS on Form 1099-K
If a 1099-K is received in error — reflecting, for example, non-taxable cost-sharing payments — the IRS has said to report this information on Form 1040 as follows:
- Part I – Line 8z – Other Income – Form 1099-K Received in Error
- Part II – Line 24z – Other Adjustments – Form 1099-K Received in Error
By making these two adjustments, the net effect of the 1099-K on a taxpayer’s adjusted gross income would be $0.
Got to make sure the Feds get theirs so that it can be spent on illegals, the climate change scam, DEI in the military and laundered through Ukraine to benefit political hacks collecting THEIR fair share.
Unless you are a member of the Biden Crime family you won’t get away with tax evasion.
Lotta folks on stoney ridge road in eddington be evadin taxes while financing fentanyl runs to massachussetts
Step 1. Eliminate the IRS. Step 2. Eliminate the income tax.