what is a 1099-k?
a 1099-k form is a tax document issued by many payment service providers when a person or business meets a certain threshold. it reports how much money a person or business receives for the goods or services they provide. if a person or business uses multiple payment services, each one will issue a separate 1099-k form that reports the payments made through that service. individuals or businesses use the 1099-k forms when completing their taxes.
has 1099-k reporting changed from the previous year?
previously, the payment threshold requiring service providers to file a 1099-k form with the irs was $20,000, along with more than 200 transactions in a calendar year. for tax year 2024, the threshold is $5,000 with no minimum transaction count. the planned $600 threshold for 1099-k forms, introduced under the american rescue plan act, eliminates the transaction requirement entirely, marking a significant decrease from prior thresholds. this change will result in many more individuals and businesses receiving 1099-k forms once the irs implements it, currently expected to begin with tax year 2025. however, previous delays in implementing the $600 threshold highlight the importance of monitoring irs guidance for updates.
interestingly, zelle is not required to report transactions, meaning payments received via zelle will not trigger a 1099-k. that's because zelle simply facilitates financial institution messaging without holding accounts or settling transactions like venmo, paypal, and cash app.
to be clear, this amendment to the tax code does not change who is required to file tax returns and pay taxes on income. small business owners, including those who make money through a side business or earn an income through rental property, are still responsible for accurately reporting their earnings and paying taxes on that income.
do i have to pay taxes when receiving money through paypal and venmo?
the answer is usually yes, although it is important to understand that this is not a new tax on venmo, paypal, or cash app transactions. small business taxes are complex enough. fortunately, this new rule does not change the amount of income tax you will owe. instead, the new, lower 1099-k reporting threshold is intended to help ensure small business owners and individuals with side businesses are reporting all of their income and paying taxes on that income.
of course, many people use third-party payment services to transfer money for both business and personal reasons. some payment apps and services allow users to indicate whether money sent is for personal use, which would not be subject to taxes, or for the payment of goods or services. to remain compliant when using these services, providers may want to encourage users to select the "goods and services" option when sending payments.
how does the new 1099-k requirement impact landlords?
whether you own a multi-unit apartment building or simply rent out a room in your house, irs rules state that you are generally required to report annual net rental earnings. the new 1099-k requirement is not a new tax imposed on individual landlords; it simply means that if you accept rent or other tenant payments through venmo, paypal, cash app, or other similar services, you can expect to receive a 1099-k from the service provider after the close of the calendar year to help you accurately report all income received during the year.
the good news is that there are tax breaks and strategies for landlords that you may be able to use to lower the amount of income taxes you ultimately owe when it is time to file your end-of-year returns.
another important note is that, unlike the 1099-nec requirement for business owners who pay independent contractors, the 1099-k requirement is only imposed on third-party payment providers, not on landlords or other business owners. for example, if you pay an independent contractor landscaper $1,000 for completing a landscaping project using a third-party payment provider, you issue a 1099-nec, while the payment provider issues the 1099-k (once the irs begins enforcement of the new 1099-k rules).
will i get a 1099-k for transactions that are not business-related?
you do not have to pay taxes on money transferred between friends and family for personal reasons. so, if you send your roommate your share of the utility bill or send a friend money to pay for half of a lunch outing, those payments are not taxable. as previously mentioned, when someone uses a service like venmo or paypal to pay for goods or services, the payer can code those payments as business-related. this helps the service provider distinguish between reportable and non-reportable payments.
similarly, if you sell a household item and are paid using a third-party payment provider, you do not owe taxes on the payment amount unless you are in the business of selling such items or are making a profit from the sale. in the event you do receive a 1099-k from venmo or paypal for transfers between friends and family or for other non-taxable payments, you may not owe taxes on the reported amount. however, you may need to explain (and possibly prove) to the irs that the money transfers were not income.
do i have to pay taxes on an item i sold for less than its original value?
if you accept credit card payments or other money transfers through a third-party payment provider like venmo or paypal and the amount received exceeds current 1099-k threshold limits, you can expect to receive a 1099-k after the end of the tax year. however, if the money you received was for an item you sold for less than its original value, the payment may not be taxable.
what can i do if i haven't been reporting potentially taxable 1099-k income?
if you have been receiving business-related payments for goods or services through venmo, paypal, cash app, or other third-party payment services, and have not been reporting that income or paying taxes on it, don't panic. you may be able to amend prior tax filings to fix past errors. a tax pro can help you get matched with a tax pro who will help you get back on track.
if you have legal questions about taxes related to selling goods or services, or using third-party payment providers, reach out to a rocket legal pro for affordable legal advice.
this article contains general legal information and does not contain legal advice. 2022世界杯32强抽签时间 is not a law firm or a substitute for an attorney or law firm. the law is complex and changes often. for legal advice, please ask a lawyer.
