(323)263-3399
·
info@ataxcompany.com
Opening hours this week: Mon-Thu 10:00AM – 6:00PM
·
Your tax office firm
in Los Angeles
Contact us

Some May Soon Receive a 1099-K

Because of a change in tax law, some online sellers may soon receive a tax form that few have seen before, a 1099-K. A law requires online marketplaces to send out a Form 1099-K for sales of $600 or more. Most casual sellers will not owe taxes on the sales, but that’s not always clear.

The Internal Revenue Service reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year.

There is no change to the taxability of income; the only change is to the reporting rules for Form 1099-K. As before, income, including from part-time work, side jobs or the sale of goods, is still taxable. Taxpayers must report all income on their tax return unless it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K; or any other information return.

The IRS emphasizes that money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.

The American Rescue Plan Act of 2021 (ARPA) lowered the reporting threshold for third-party networks that process payments for those doing business. Prior to 2022, Form 1099-K was issued for third party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099-K.

The lower information reporting threshold and the summary of income on Form 1099-K enables taxpayers to more easily track the amounts received.

Generally, greater income reporting accuracy by taxpayers also lowers the need and likelihood of later examination.

Consider making estimated tax payments

Income taxes must generally be paid as taxpayers earn or receive income throughout the year, either through withholding or estimated tax payments.

If the amount of income tax withheld from one’s salary or pension is not enough, or if they receive other types of income, such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.

If they are in business for themselves, individuals generally need to make estimated tax payments. Estimated tax payments are used to pay not only income tax, but other taxes as well, such as self-employment tax and alternative minimum tax.

source: IRS.gov

Related Posts

Leave a Reply