New 1099-K Form $600 Threshold

Earlier this year I posted a change to the 1099-K information return. As we’re reaching the end of the year I wanted offer a reminder of this change so you don’t end up with a tax mess come April 15th.

Beginning in 2022, third-party payment processors like Venmo, Zelle, PayPal and Square must file a Form 1099-K for any taxpayer who receives over $600 in gross payments for goods or services during a year. Here are answers to a few of the most common questions about this new rule.

Do payments from friends and families (splitting a check, gifts, etc.) count toward the form 1099-K filing threshold?

No, only payments for goods and services count toward the $600 limit. If you receive a Form 1099-K from a payment processor that includes non-business payments like gifts or settling up with friends, contact the processor and ask for a corrected form before you file your tax return. To help prevent this issue, remind friends and family to check the “Sending money to friends and family” option when sending payments.

When will I receive a 1099-K form if my payments exceed the threshold?

Third-party payment processors must file 1099-K forms to report 2022 payments by January 31, 2023. Therefore, you should receive the form in late January or early February.

Why have I never received 1099-K forms from payment processors before?

Prior to tax year 2022, the IRS only required third-party payment processors to file Form 1099-K for individuals and businesses that received over $20,000 in gross payments in a year. As a result of the dramatic lowering of this threshold, many people who have never received a 1099-K form will get one for 2022.

Generally, you must report payments shown on a Form 1099-K as income on your tax return.

As always this post does not establish a client relationship, nor does if offer legal or tax advising services. Please seek the advice of a qualified professional as your financial profile may differ significantly from others.

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