US News IRS warns taxpayers about new $600 threshold for third-party payment reporting

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The IRS on Tuesday shared tips for the upcoming tax season — including a reminder about the new $600 threshold for receiving Form 1099-K for third-party payments.

The change applies to payments from third-party networks, such as Venmo or PayPal, for transactions such as part-time work, side jobs or selling goods, according to the IRS.

Before 2022, the federal Form 1099-K reporting threshold was for taxpayers with more than 200 transactions worth an aggregate above $20,000. However, Congress slashed the limit as part of the American Rescue Plan Act of 2021, and a single transaction over $600 may now trigger the form.

Aimed at closing the tax gap — a top priority of the Biden administration — the provision is estimated to bring in $8.4 billion from fiscal year 2021 to 2031, according to the Joint Committee on Taxation.

“It’s going to be a new form for a lot of people,” said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA, CPA in Windermere, Florida. “And the worst thing they can do is ignore it.”

Companies file Form 1099-K, known as an “information return,” annually to report credit card and third-party payments, with a copy going to taxpayers and the IRS.

Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, said the business income on your return must include what’s reported on Form 1099-K. Otherwise, you may trigger an automatic IRS notice or even an audit, he said.

 

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My roommate sends me his part of the rent using Zelle. I hope this does not get me in trouble. This article makes me not want to use those services like I am doing something wrong and that is not good.
 
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