Note: 1099-K Requirement changes Effective 2022
Don’t be caught by surprise this tax year by the new IRS Form 1099-K requirements that were enacted by the American Rescue Plan Act (ARPA).
What is Form 1099-K?
It is a tax form used for Payment Card and third-party network transactions. If you use a service to process credit or debit card transactions, the service that settled the transaction is a payment settlement entity and they will be the one to issue the 1099-K.
What are the new filing requirements for Form 1099-K?
Beginning in the 2022 tax year the following requirement changes will go into effect:
Previous New in 2022
- Aggregate $20,000 - Aggregate $600
- 200 applicable transactions - No minimum number of transactions
Payment services such as PayPal, Venmo, eBay, and Airbnb are subject to the new reporting
requirements and will issue a 1099-K for applicable payments to businesses and independent contractors. Services like Uber and Lyft will also begin to track and report applicable payments.
When is Form 1099-K filed?
Forms 1099-K must be filed by the payment service with the IRS by Feb. 28th each year, beginning for calendar year 2022. An extended deadline of March 31st is available if they are filed electronically.
However; the payee must receive their 1099-K information by January 31st despite the payment service having additional time to file the 1099-K with the IRS.
Of important note is the fact that the reporting requirements only exist when there has been a provision of goods or services. Noncommercial transactions, such as charitable contributions, reimbursements, and personal gifts will not be subject to these reporting requirements.
2022 will be an interesting year to see how each payment service implements the new reporting requirements. Payees should pay close attention to their Forms 1099-K received and reconcile the amounts with their records. The IRS is expected to place a large amount of attention on this new area of reporting and taxpayers should work with any of their payment services to resolve discrepancies in 1099-K reporting and their records.
If you are not sure how or if these changes affect you or business, please reach out to us today.
Read more from the Journal of Accountancy here. This post may not contain a complete analysis of the tax issues discussed herein and does not represent official conclusions or advice regarding the matter. The information in this post is relevant for the 2022 tax year as of the date published and may not be updated for future tax years.