The IRS has implemented a significant change to the income and transaction thresholds for reporting third-party payment income for this year.
Prior to 2022, a Form 1099-K was issued for gross payments that exceeded $20,000 AND more than 200 transactions. For returns after 2021, a 1099-K will be issued for gross payments for goods or services that exceed $600 with no transaction minimum.
What does this mean for you? If you provided goods or services to a business or sold anything this year on Facebook Marketplace, eBay, Etsy, Poshmark, etc., and received $600 or more, you may receive a 1099-K from the payment service and must report it as income on your 2022 tax return.
What does this mean for your business? Your books and records must reflect all of your business income, including any amounts reported on a 1099-K. When you file your income tax return, you are required to report all income you receive, which is generally cash, checks, and debit/credit card payments. When calculating gross receipts for your income tax return, you must include the aforementioned payments, as well as the amounts shown on Form 1099-K .
If you receive a 1099-K, be sure to verify the amounts reported with your payment card records and merchant statements and have documentation to support both the income and deductions that you report on your tax return.
Have questions and need help issuing 1099s or getting your 2022 taxes in order? Contact SBK for our tax services.