As the year-end approaches, there’s been debate around tax reporting for business transactions on payment apps such as Venmo and PayPal, along with e-commerce companies, such as eBay, Etsy and Poshmark.
Some lawmakers are pushing to increase the IRS reporting threshold for Form 1099-K, which covers third-party business payments. Taxpayers who use a payment app to process transactions for a side hustle or small business, or who sell a product or service through an e-commerce site, will receive a Form 1099-K at tax time detailing that income if their transactions exceed the threshold.
The American Rescue Plan Act of 2021 dramatically reduced the threshold, and now lawmakers are looking to change course.
“There’s bipartisan interest in the backslide because of all the misinformation that’s out there,” said Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center, who addressed the issue on CNBC’s “Squawk Box” last week.
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Before this year, you may have received Form 1099-K if you had more than 200 transactions worth an aggregate above $20,000. But the 2023 threshold is just $600, and even a single transaction can trigger the form.
That change is expected to result in a flood of Forms 1099-K in early 2024 when taxpayers typically receive so-called “information returns” from employers and financial institutions. Duplicate copies go to the IRS.
The threshold doesn’t apply to personal transfers on apps like Venmo and PayPal, such as sending a friend or family member money. But experts have expressed concern that some taxpayers may now receive a 1099-K by mistake, creating headaches at tax time.
And given that just one transaction above $600 is enough to trigger the form, even someone who makes a one-off…
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