Form 1099-K Tax Return: Is there a threshold of $600 or $20,000?
The tax form is used to report income received through electronic payment transactions, such as credit card payments and online platforms.
The 1099-K forms will be used by a small number of self-employed filers this year, but the IRS wants to make their use far more widespread. As it stands, taxpayers are only required to complete the form if they receive at least $20,000 in payments from 200 transactions across 2023.
The payment services have an obligation to inform the IRS of any users who have hit those thresholds. The IRS will send out 1099-K forms to those filers.
For most recipients of the 1099-K, the form will actually make submitting a tax return much easier. The form, also known as Payment Card and Third-Party Network Transactions, allows self-employed individuals to list all of the payments received via payment app on a single form.
In the past each client would have had to be cited in a separate form.
What will change with the payment app rules?
For now most filers will continue to report payment service payments in the same way, but the IRS is making changes for next year. The changes only relate to the way in which income is reported on tax returns, and will not see filers required to pay a different amount of tax.
From next year, payment services will be required to report any filers who earn more than $5,000 via their platforms. In many cases this will be a combination of business and personal payments, and the latter would not be subject to tax.
The IRS will require filers to identify which payments are personal and which are business, doing so via the 1099-K form.