Form 1099-K Threshold 2022 – The New Rules Beginning 2022

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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A quick rundown on what’s changing for 1099-K reporting in 2022.

If you’ve been in the loop, a lot has been changing in the 1099 world. 

• Form 1099-NEC was re-introduced in 2020 for reporting non-employee compensations exclusively.
• Form 1099-MISC was renamed in 2021 from “miscellaneous income” to “miscellaneous information”. 
• You can now paper file up to 100 1099 forms. And if the limit exceeds, you’ll be required to eFile the remaining 1099 forms. 

But this is not all. 

A lot has changed specifically in the 1099-K reporting regime. 

Two major changes were introduced by the IRS but taxpayers have mixed feelings about them [1]. 

Let’s take a look at them.

Highlights of the Article:

• Reducing the reportable payments threshold from $20,000 to $600
• Removal of reportable transaction threshold of 200
• New Box: For Calendar Year

Catching Up: Here’s What’s New With Form 1099-K In 2022 

When President Joe Biden signed the bipartisan infrastructure bill into effect, a variety of reforms and plans were put into motion. This included the introduction of the American Rescue Plan Act, 2021.

This bill sheds light on the inconsistencies within the tax reporting practices across various industries and introduces certain measures to counter issues like malpractices in tax reporting, noncompliance, and tax gap. 

The changes introduced by the IRS are likely to impact the businesses around the country, especially merchants and small businesses that work with aggregators like Lyft, Uber, and others in the gig economy. 

Two major changes were introduced by the IRS to update and reform the 1099-K reporting regime. 

Let’s take a look at these changes.

Reducing The Reportable Payments Threshold From $20,000 To $600

Let’s assume that you’re a small business owner who sells hardware products. You must have connected your bank account with a third-party app like PayPal or Venmo or Cash App to make and receive payments easily. Every time a customer buys your products, the customer can via credit/debit cards or via online payment methods. 

Now, these third parties receive the payments made by your customers and settle the amount into your account, essentially “paying” you. 

Wherever a third-party network or a payment card like credit/debit cards are used to make or receive payments, the transactions are termed “reportable third-party payment transactions” by the IRS. 

Starting with the 2022 tax year, payment settlement entities like PayPal and Venmo are required to issue a Form 1099-K for each recipient to whom they’ve paid a gross total of $600 reportable third-party payments.  

Previously, this threshold was $20,000, drastically dropping to $600 in 2022. 

Removal Of Reportable Transaction Threshold Of 200 

Previously, third-party network entities and payment card entities were only required to report the reportable payment transactions only if the 1099-k payments processed totaled $20,000 AND if the total transactions were 200 or higher. 

Now, this could contradict the previous pre-condition of the $20,000 threshold for reportable third-party payments. 

Should you still file a Form 1099-K if the gross total reportable payments are $20,000 but the transaction count is below 200? Similarly, should you file a Form 1099-K if the transaction count is 200 but the total reportable payments are less than $20,000? 

These contradicting pre-conditions led to a lot of confusion and debates among taxpayers and preparers alike. It additionally gave space to malpractices wherein businesses would underreport the transaction volume or the total payments to avoid the tax burden.

When a third-party network doesn’t report the gross reportable payments properly, it has an impact on the personal income tax reported by the recipients. 

So, if the payer fails to report this information correctly, chances are that the recipient’s reports are also incorrect – leading to IRS notices, penalty assessments for wilful disregard, and so on.

Introducing New Box: For Calendar Year

BEFORE:

NOW:

The calendar year box has been added to the Jan 2022 revised version of the 1099-K form, which essentially requires the taxpayers to report the calendar year for which they’re reporting. As shown in the pictures, the calendar year box was not there in the previous 1099-K forms and must be used starting in 2022 to report payments made in a particular calendar year.

eFile Form 1099-K With Tax1099 

Starting with 2022, eFile your 1099-K returns with Tax1099, an IRS-authorized regulatory compliance ecosystem.

You must have already heard of the restrictions on 1099 paper filings. The IRS is encouraging taxpayers to eFile and ditch paper filings citing the volume of paperwork and the safety protocols during the global pandemic. 

Per the changes introduced by the IRS, taxpayers can file a total of 100 1099 forms (all form types combined) by paper. So, if you have more than 100 forms to file, you have to switch to eFiling to avoid getting your returns rejected. 

With Tax1099, you can easily file thousands of 1099 forms and other form types in just a matter of seconds. 

Create an account to get started.

Tax1099 enables you to import your payee data with accounting software integrations, such as QuickBooks, Tipalti, Accounting Suite, and other data management integrations, such as Bill, Entrata, Excel, and more. 

With end-to-end encryption, your data is always safe with Tax1099. 

You can securely eFile thousands of forms within minutes through Tax1099’s bulk eFile solutions. What’s more? You can verify your payee TINs and legal names in real-time with Tax1099’s real-time TIN Matching system. Verify 100,000+ TINs within seconds! 

Don’t believe us? Try for yourself. 

Get Started For Free (or) Get a Free Demo

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