What to know about the 1099-K tax reporting change for Venmo, PayPal

Hispanolithic | E + | Getty Images

If you’re worried about getting a receipt from a payment app like Venmo or PayPalit’s less likely that you’ll get one in 2022 — because of IRS changes.

The agency on Friday announced a one-year delay for new tax reporting rules, requiring payment services to issue Form 1099-K for business transfers of more than $600, and experts on many taxes applauded the change.

Before 2022, taxpayers and the IRS receive 1099-Ks when payments totaling more than $20,000 exceed the threshold of more than 200 transactions.

While a single transfer in 2022 could have triggered the format, the IRS has delayed the schedule by a year “to ease the transition,” IRS Commissioner Doug O’Donnell said in a statement.

Also Read :  Why cheap airfare is so hard to find this year

More from Personal Finance:
IRS Delays Tax Reporting Changes for 1099-K to Venmo, Paypal Business
From ‘quiet retirements’ to ‘hard layoffs’, will employment trends continue in 2023?
Outbound travel expected to rise in 2023 as Americans visit Asia, Europe

“You really feel it,” says Albert Campo, a certified public accountant and president of AJC Accounting Services in Manalapan, New Jersey.

He said the one-year delay for the 1099-K federal tax reporting change gives taxpayers more time to prepare. But “there has to be more leadership from the IRS,” Campo said.

‘IRS Decides Transition Period Is Necessary’

Although the agency says personal transfers won’t generate 1099-Ks, experts say some contributors may be mistaking the form, reporting personal payments as income. , which can be difficult to correct.

Also Read :  Ukraine military gains could deepen Russia's economic woes

“Due to little guidance from the public and the increased burden on the electronic payment network, the IRS has determined that a transition period is necessary,” said National Taxpayer Advocate Erin Collins in a blog post on Tuesday.

He said the delay should give taxpayers more time to “familiarize themselves with the rules” and “correctly identify business payments” to avoid errors in future 1099-K reports.

From silent departures to loud layoffs: Here are the career trends that created buzz in 2022

Although many tax experts welcomed Friday’s announcement, the American Institute of CPAs is still pushing Congress for reform.

“While the AICPA applauds the commissioner for this waiver, we urge Congress to seriously consider previous proposals to raise the threshold, perhaps in line with today’s cost of living,” AICPA President and CEO Barry Melancon said in a statement Friday.

Also Read :  'We're seeing buyers backing out': This dramatic chart reveals U-turn in the housing market as sellers slash home prices

You must report business income, even without a 1099-K

Even if you get 1099-Ks, you still have to report the business’s income on your tax return, Collins said, urging filers to track income from all sources and keep accounts. personal and corporate for payment applications.

Moreover, the delay in 1099-K reporting only applies to federal taxes, Campo said, because some states already have lower reporting limits.

If you’ve started a side business, it’s important to keep receipts for the deductions you receive to reduce your tax liability, which you’ll need to audit. “The IRS will eventually take these things,” he said.

Source

Leave a Reply

Your email address will not be published.