Who is affected: Anyone that sells online or transfers funds to another using an app or other forms of making payments from one party to another.
Form 1099-K is used to report funds transferred via third party payment processors, such as credit card processors, PayPal, Venmo and others. It is filed by the processor and reports to the IRS all payments made to individuals or businesses by social security or EIN number that exceeds the reporting requirement for the year. The threshold for 2023 reporting is $20,000 and/or over 200 transactions. The 2024 amount is proposed to be $5000. The reporting threshold will continue to reduce until it is $600. This is significant because so many people use Venmo, Zelle and other ways to transfer funds to pay bills, purchase services and send money family and friends. Not all of the income reported on the form is taxable; however, the IRS will consider it taxable income since there is not an explanation of why the funds were transferred. It is important that your tax return is prepared in a way to reflect that. Please be certain to include any Forms 1099-K, with your other tax documents. We will work with you to ensure that non-taxable transfers are properly reported as such on your tax return.