If you had a side hustle or sold items online and received money through a third-party payment network, such as Venmo, PayPal, Amazon, or Square, in 2022, here is what you need to know regarding Form 1099-K and the official changes made to the reporting threshold.
What is the Monetary Threshold?
If you received more than $20,000 with 200 sales-related transactions through third-party payment network in 2022, you should be given a Form 1099-K by January 31, 2023. You will want to confirm the form matches the information in your records. If there are any problems, contact the third-party payment network to issue a corrected form. And remember, the IRS requires taxpayers to report all taxable income on their tax return, whether a Form 1099-K was received or not.
What Will Trigger a Form 1099-K?
The 2021 American Rescue Act changed the monetary threshold to $600 with no minimum number of transactions. However, on December 23, 2022, the IRS delayed the implementation of the $600 minimum reporting threshold for one year. Therefore, the 2022 tax year will proceed with the original threshold limits of $20,000 with 200 or more transactions. The delay comes after lawmakers and advocacy groups, including the AICPA, expressed concerns that millions of taxpayers would unexpectedly receive Form 1099-K and cause an onslaught of new reporting. This would confuse the tax systems and increase the IRS correspondence and processing backlog over the next several months.
What is Notice 2023-10?
Notice 2023-10 explains the calendar year of 2022 is a transition period for the enforcement and changes made by the 2021 American Rescue Act. Returns filed for calendar years before 2023 are not required to report payments in settlement of third-party network transactions unless the gross amount exceeds $20,000 and the number of transactions surpasses 200.
What is the Cut Red Tape for Online Sales Act?
The Cut Red Tape for Online Sales Act was introduced in Congress on March 15, 2022, to increase the threshold from $600 to $5,000. The AICPA is advocating for Congress to increase the limit for consecutive years to $5,000 instead of $600 or institute a cost-of-living adjustment.
Below is a table to help make these changes easier to follow.
| Threshold Limit | Number of Transactions |
Original Threshold: 2020 | $20,000 | 200+ |
American Rescue Plan Change: 2021 | $600 | 1+ |
Cut Red Tape Proposed Change: 2022 | $5,000 | 200+ |
Official Ruling as of 12.23.2022 | $20,000 | 200+ |
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