After two years of delay, the 1099-K threshold changes to $5000 for the 2024 tax year, which might impact your 2024 tax return.
A 1099-K is a tax form that reports income received via a third-party payment platform from a non-permanent job, such as a side hustle, freelance agreement, or contractor position where taxes are not withheld.
What is 1099-K?
IRS Form 1099-K is an IRS form used to report the settlement of reportable payment transactions made through payment cards or third-party networks for each calendar year.
Form 1099-K reports payments made through payment cards and third-party networks, while Form 1099-MISC is typically used for miscellaneous payments made through cash or check. Form 1099-NEC, on the other hand, is specifically used to report non-employee compensation made through cash or check.
Who sends Form 1099-K?
Payment card companies, payment apps, and online marketplaces are required to fill out Form 1099-K and send it to the IRS each year. They must also send a copy to you by January 31.
Some of the common types of entities that are required to file 1099-K include,
- Online payment apps such as PayPal, Venmo, and Cash app.
- Auction sites
- Ticket selling platform
- Car rental platform
- Craft or maker marketplace
- Real estate marketplace
- Crowdfunding platform
- Freelancer marketplace.
Recap of the 1099-K reporting threshold changes
For tax year 2023, online payment platforms are only required to report transactions to the IRS once you hit an annual threshold of $20,000 in gross payments and at least 200 transactions.
Beginning Jan. 1, 2024, these thresholds have dropped significantly. With the change, payment platforms (like PayPal, Square, Venmo, etc.) must report payments totaling $5,000 or more in a calendar year, with no transaction minimum. This is part of a phase-in process by the IRS to eventually implement the $600 threshold originally brought about by the American Rescue Plan.
Be Prepared for 1099-K Threshold Change for TY 2024
You need to file Form 1099-K for payments exceeding $5,000 received through third-party payment platforms (like PayPal, Venmo, etc.), here’s what you should do:
- Collect Payment Information: Gather all the payment details from the third-party platforms where you received payments totaling more than $5,000.
- Prepare Form 1099-K: Use the collected payment information to fill out Form 1099-K. Ensure that all amounts are accurately reported.
- Submit the Form: File Form 1099-K with the IRS by the required deadline, which is typically January 31st of the following year. Also, provide a copy to the recipient of the payments.
- Keep Records: Maintain detailed records of all transactions and the filed Form 1099-K for your records and future reference.
Looking for an efficient way to file your 1099-K returns online? Now you can file Form 1099-K with ease through the IRS-approved Tax1099. eFile your 1099-K forms, verify your vendor TINs, and comply with the IRS easily.
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