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5 Form 1099-K Myths You Probably Believe That Aren’t True

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Note: IRS delays the rollout of the $600 threshold for 1099-K reporting.
The threshold for Form 1099-K remains at $20,000 with a 200 transaction limit for the year 2023. This delay designates 2023 as a transition period, maintaining the existing requirements for reporting.

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Do you believe any of the following 1099-K myths? Get your 1099-K facts right with Tax1099.

When you hear something being stated as a “fact” enough times, you’ll start to believe it to be true.

That’s how disinformation works.

However, a quick fact-check and research can easily prove the claims as false.

Form 1099-K underwent drastic reporting changes in the recent past after the enactment of the American Rescue Plan Act (ARPA) of 2021.

The update potentially aims to improve revenue by accelerating reporting accuracy and transparency, while making it easy for TPSOs to report their payment information on Form 1099-K.  

However, a quick google search on Form 1099-K reporting changes will leave you puzzled. 

The information is distorted and sometimes, you may come across false claims.

So, let’s check 5 myths that are believed to be true but are factually wrong.

Myth-1: Form 1099-K Imposes A New Tax On The Recipient

This is false.

Form 1099-K doesn’t impose any new tax on the recipient of third-party payments.

When a third-party payment settlement organization makes a payment to the participating payee, the TPSO sends a Form 1099-K to the payee summarizing the gross total of payments over $600 made in settlement of third-party network and payment card transactions.

The recipient only needs to validate the 1099-K payment information reported in the copy of Form 1099-K issued by the payer.

Paid your merchants $600 or more? eFile Form 1099-K with Tax1099 here.

Myth-2: Personal Payments Are Also Reportable On Form 1099-K

This is false.

1099-K tax reporting regulations are only applicable on goods and service transactions. Personal payments do not constitute 1099-K reporting.

1099-K payments are payments made in settlement of third-party payment network and payment card transactions.

In this context, the payer is the third-party payment settlement organization and the payee is the retail seller or merchant.

So, if you’ve paid your friend some $40 as your share of the dinner bill via Venmo, neither you nor your friend has to worry about paying taxes on this transaction.

It simply doesn’t qualify as a 1099-K payment.

Myth-3: Monetary Gifts Are Reportable On Form 1099-K

This is false.

Form 1099-K exclusively deals with third-party network transactions and payment card (debit/credit card) transactions with a gross total of $600 or more, made in a calendar year.

1099-K reporting rules don’t apply to personal gifts.

Look at this guide from the IRS on what qualifies for gift tax and who needs to pay it.

Myth-4: You Only Need To File Form 1099-K If The Gross Total Payments Is $20,000 Or Higher

This is subjective and isn’t exactly a myth.

If you’re filing returns for calendar years before 2021, Form 1099-K older reporting requirements must be followed, which state the following.

File Form 1099-K only IF:

  • The gross total of payments exceeds $20,000, AND
  • The transaction count is above 200

However, these rules don’t apply to returns that have to be filed for calendar years after 2021.

For calendar years after 2021, you need to file a Form 1099-K only if the gross total exceeds $600 with no limits on the transactions.

Myth-5: New Form 1099-K Reporting Changes 2022 Also Apply To Payments Prior To 2021 – H2

This is false.

The old rules are completely different from the current reporting requirements.

The old 1099-K reporting requirements only apply to returns that are to be filed for calendar years before 2021.

The new 1099-K reporting requirements apply to returns that are to be filed for calendar years after 2021.

eFile Form 1099-K With Tax1099

Paid your participating payees more than $600 in a calendar year?

You probably need to file a Form 1099-K.

eFile Form 1099-K with Tax1099, an authorized agent of the IRS, enabling digital tax compliance and regulatory reporting.

Trusted by 200,000+ businesses, Tax1099 offers a suite of solutions to help address your 1099-K filing requirements.

With Tax1099, you can:

Automate 1099-K eFiles | Schedule a Free Demo to Explore Tax1099

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