If you receive payments through applications such as Venmo or PayPal as well as Etsy or Airbnb platforms, next year it will become more confusing and complicated preparing your tax return.
A new tax reporting rule requires third-party payment platforms to issue taxpayers and the IRS a Form 1099-K for business transaction payments if they total more than $600 dollars of income in the course of the year.
A taxable business transaction is defined as a payment for a good or service, including tips.
Previously, those platforms only issued taxpayers a 1099-K if you participated in more than 200 transactions business for which he received total payments of more than $20,000.
“Some businesses that only had to issue a couple thousand 1099-Ks under the old rules may now be looking at a lot more,” he told CNNWendy Walker, who chairs the Reporting subgroup on the Internal Revenue Service Advisory Council.
First-time 1099-K recipients will need to find out how much of the amount reported on the form is it really taxableagainst which party you represent payments that may be deductible business expenses, which would complicate the process for millions of people.
the new rule does not impose any additional tax to nobody. It also does not change your obligation as a taxpayer to always report all income from business activities to the IRS.
But the 1099-K report will make it harder for someone evade the taxes you owe by failing to report your business income.
The rule does not apply to personal transactions you make on an electronic payment platform. For example, if a friend sends you money through Venmo to help pay for a dinner.
Finally, the 1099-K reporting rule does not apply to no transactions made through Zelle.
That’s because Zelle is a payment clearinghouse that connects the payer’s bank account directly with the receiver’s bank account. But the IRS can still request reports on at least some of your business transactions made through this platform.
If there is a business-to-business payment through the Zelle network, the business making the payment must provide the receiving business and the IRS with a 1099-NEC for non-employee compensation or a 1099-MISC for other expenses.
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Source: La Opinion
