Due to a high level of doubt, the Internal Revenue Service (IRS) published a document of frequently asked questions about Form 1099-Kwhich is used to report income for self-employed workers and people who receive funds from third parties.
The document emphasizes that 2022 will be considered a transition year for the new rule that lowers the reporting threshold to $600, so millions of Americans who use apps like PayPal to send or receive money won’t have to declare that amount on this bill. tax season.
Only those people who have gross payments over $20,000 they should receive form 1099-K 2022.
Updated IRS FAQs help taxpayers understand why they are receiving Form 1099-K and what types of income and transactions must be reported. These are the key points:
1.- When will the lower threshold of $600 dollars come into effect?
The third-party transaction limit will not be lowered to $600 for calendar year 2022, but is expected to go into effect for calendar year 2023, which means it will be something taxpayers will have to deal with. when they file their return 2023unless the IRS issues another delay or Congress takes action to modify the threshold.
2.- Who is responsible for reporting transactions?
For payment card transactions, the merchant transferring the funds to the participating payee is responsible for reporting the gross amount reportable.
When it comes to third party settlement transactions, the third party organization or your facilitator of electronic payments You are responsible for reporting the gross amounts of reportable transactions paid to participating payees in your network.
3.- Does using a credit card to make purchases for a non-profit small business and hobby generate a 1099-K report?
According to the IRS, an individual or small business owner who does not accept payment cards but uses a credit card and third-party settlement organization to purchase goods, materials, or supplies should not receive a Form 1099- K for your purchases.
4.- Should a gain or loss on the sale of a personal item be reported on Form 1099-K?
Proceeds from the sale of personal items considered taxable income and must be reported to the IRS on Form 1040, Schedule D and Form 8949, which reports the sale and disposition of capital goods.
Losses from the sale of a personal item are not tax deductible and, if a taxpayer receives a 1099-K for a sale that resulted in a net loss, you will need to make an offset entry to report the cost of the item and income received on Schedule 1 of Form 1040.
If you bought an item for $1,000 and sold it at a loss for $600, must include $600 as the sale price on one part of Schedule 1 and write “Form 1099-K Personal item sold at a loss…$600” to zero out your entry on another line of Schedule 1.
5.-Will I receive a 1099-K form if I have a Christmas crafts business?
The IRS says that a person with a Christmas craft business may receive a Form 1099-K depending on the type of transactions.
If you accept payment cards, such as credit or debit cards, you will receive a 1099-K form for the gross amount of payments made through payment cards during the calendar year. This reporting requirement has not changed and there is no minimum threshold for payments like this to trigger the reporting requirement.
You may also receive a Form 1099-K if you accepted payments from a third-party settlement organization, where the number of transactions exceeded 200 and the total amount of payments received exceeded $20,000 per calendar year.
6.- Who should taxpayers contact if they have questions about their Form 1099-K?
The IRS says taxpayers with questions about information on a Form 1099-K they received should contact whoever issued it. The filer’s contact information can be found in the upper left corner of the form.
If a taxpayer does not recognize the filer, they should contact with the payment settlement entitywhose name and phone number can be found in the lower left corner of the form above your account number.
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– Tax return 2022: which forms you should consider yes or yes according to the IRS
Source: La Opinion