IRS announces delay in new $600 1099-K tax reporting threshold

[sheila@ebay]

Please check out the 1099k reporting threshold announcement from December 29th, here. This announcement should cover the majority of 1099 questions.

Have more questions that aren't covered in the announcement? Please post your questions in this thread.

[wastingtime101]

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@hammerva wrote:

Given that I live in Virginia I don't think this will apply to me and I still have to wait for the 1099-K.  Even though I wasn't close to $20K, I was definitely over $600.   But I really won't know until January 31st at the latest

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Virginia's state min for 1099-K is $600 so you should expect to receive one at the end of the month @hammerva.

https://www.tax.virginia.gov/news/did-you-receive-1099-k-what-you-need-know

[shipscript]

States that have 1099-K filing thresholds for 2022 that differ from the IRS (note I said IRS, not federal law).

https://blog.taxact.com/understand-1099-k-form/

• Arkansas – $2,500 threshold
• District of Colombia – $600 threshold
• Illinois – $600 threshold (or $1000 and 4 transactions, stated on another site)
• Maryland – $600 threshold
• Massachusetts – $600 threshold
• Mississippi – $600
• New Jersey – $1,000 threshold
• Rhode Island – $100 threshold
• Vermont – $600 threshold
• Virginia – $600 threshold

[wastingtime101]

I suggest making the above post by shipscript about individual state thresholds a "best answer" for this thread so info is right upfront when newcomers open the discussion sheila@ebay.

[pburn]

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@shipscript wrote:

States that have 1099-K filing thresholds for 2022 that differ from the IRS (note I said IRS, not federal law).

https://blog.taxact.com/understand-1099-k-form/

• District of Colombia Columbia – $600 threshold

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FTFY.

[shipscript]

@pburn 

LOL. It was a copy/paste from TaxAct. I guess I should report both that and the discrepancy with IL.

[dbfolks166mt]

States that have 1099-K filing thresholds for 2022 that differ from the IRS (note I said IRS, not federal law).

https://blog.taxact.com/understand-1099-k-form/

• Arkansas – $2,500 threshold
• District of Colombia – $600 threshold
• Illinois – $600 threshold (or $1000 and 4 transactions, stated on another site)
• Maryland – $600 threshold
• Massachusetts – $600 threshold
• Mississippi – $600
• New Jersey – $1,000 threshold
• Rhode Island – $100 threshold
• Vermont – $600 threshold
• Virginia – $600 threshold

     Good information. The one unknown at the moment is California for the 2022 tax year. The following is from the California Franchise Tax Board. Not sure if CA will follow the Federal reprieve or if CA sellers will in fact get a 1099-K for 2022 if they exceeded $600 in sales. 

1099-K: Payment Card and Third Party Network Transactions

As of January 1, 2021, you may receive a 1099-K if you receive annual gross payments of $600 or more in settlement of third-party payment network transactions and are an app-based driver, regardless of the number of transactions.

For returns for calendar years beginning in 2022, you may receive a 1099-K if you received payments:

• From payment card transactions (e.g., debit, credit, or stored-value cards)
• In settlement of third-party payment network transactions above the minimum reporting threshold of $600 in annual gross payments.

How to report

Federal return

Report the amount indicated on the form as income when you file your federal return.

California return

This income will be included in your federal adjusted gross income, which you report to

[tealt]

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@dbfolks166mt wrote:

The one unknown at the moment is California for the 2022 tax year.

From the CA Franchise Tax Board website:

On December 23, 2022, the Internal Revenue Service announced a delay in reporting thresholds for third-party settlement organizations. New IRS guidance states that, “[a]s a result of the delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.”

Information return reporters are required to file with the FTB certain information returns, including Form 1099-K, that they are required to file with the IRS. Accordingly, for taxable year 2022 transactions, information return reporters should file with the FTB the same Form 1099-K that they file with the IRS, unless the Form 1099-K is issued for payments in settlement of third-party network transactions to an app-based driver.

Thus, as a California eBay seller (and not an app-based driver) whose gross payments processed for 2022 are less than $20,000, I should not expect a 1099K from eBay (because the IRS is not requiring one for me).

[dbfolks166mt]

From the CA Franchise Tax Board website:

On December 23, 2022, the Internal Revenue Service announced a delay in reporting thresholds for third-party settlement organizations. New IRS guidance states that, “[a]s a result of the delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.”

Information return reporters are required to file with the FTB certain information returns, including Form 1099-K, that they are required to file with the IRS. Accordingly, for taxable year 2022 transactions, information return reporters should file with the FTB the same Form 1099-K that they file with the IRS, unless the Form 1099-K is issued for payments in settlement of third-party network transactions to an app-based driver.

Thus, as a California eBay seller (and not an app-based driver) whose gross payments processed for 2022 are less than $20,000, I should not expect a 1099K from eBay (because the IRS is not requiring one for me).

     I was wondering about how CA was going to handle their 1099-K requirements for 2022 in the wake of the Federal reprieve. The app-based driver went into effect in 2021 so it will be interesting to see if the FTB rescinds that for 2022. The CA FTB threshold for 2022 was supposed to take effect for third party financial transactions that exceeded the $200. 

     I assumed the division of the app-based driver in 2021 and the third party financial processors in 2022 is what caused eBay to erroneously issue 1099's to a number of CA sellers last year. I live in VA and they have had a state issuance threshold since 2020 well before the Federal limit was due to take effect. I never exceeded the $20K threshold in prior years but still received a 1099 and expect to receive one this year. I should know in a couple of weeks at the latest. 

[shipscript]

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@dbfolks166mt wrote:
I assumed the division of the app-based driver in 2021 and the third party financial processors in 2022 is what caused eBay to erroneously issue 1099's to a number of CA sellers last year

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Yes, that division is what caused eBay's error last year. California had passed a state-level law affecting Uber drivers.  And then California merely advised that a federal threshold was coming into effect for third-party processors. California follows federal requirements, so the IRS reprieve would apply in California.

[dbfolks166mt]

@dbfolks166mt wrote:
I assumed the division of the app-based driver in 2021 and the third party financial processors in 2022 is what caused eBay to erroneously issue 1099's to a number of CA sellers last year

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Yes, that division is what caused eBay's error last year. California had passed a state-level law affecting Uber drivers.  And then California merely advised that a federal threshold was coming into effect for third-party processors. California follows federal requirements, so the IRS reprieve would apply in California.

     I didn't take it as an advisement based on the following from the CA FTB. Unless they were referring to the federal threshold.  

1099-K: Payment Card and Third Party Network Transactions

As of January 1, 2021, you may receive a 1099-K if you receive annual gross payments of $600 or more in settlement of third-party payment network transactions and are an app-based driver, regardless of the number of transactions.

For returns for calendar years beginning in 2022, you may receive a 1099-K if you received payments:

• From payment card transactions (e.g., debit, credit, or stored-value cards)
• In settlement of third-party payment network transactions above the minimum reporting threshold of $600 in annual gross payments.

[turn4419]

I have a question that is very basic. Is this correct: if my gross sales are over $600 next year although a lot of that is not income to me as I often offer free shipping not to mention the ebay fees is the onus on me to justify a smaller amount to pay taxes on for the IRS. Why can't ebay at least report the amount minus their fees?

[toomuchstuffagain35]

Because the IRS rules for a 1099 is that it must account for ALL income received with nothing deducted. It's up to the taxpayer to do the deductions for their expenses etc.

[pburn]

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@turn4419 wrote:

Why can't ebay at least report the amount minus their fees?

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eBay reports gross proceeds based on IRS regulations. It's not something they make up themselves. All entities required to issue Forms 1099-K report the same thing.

From the IRS website:

What information must the payment settlement entity report on Form 1099-K? (added October 21, 2022)

A. The gross amount of reportable payment transactions by month and the calendar year are required to be reported for each participating payee. The name, address and taxpayer identification number of each participating payee must also be reported on the form.

Why do merchant acquiring entities report the gross amount of transactions instead of the net amount...

A. IRC 6050W(a)(2) requires entities report the gross amount of the reportable payment transactions.

What is included on the Form 1099-K?

Whether you own a business, are self-employed, work in the gig economy or are selling personal items, Form 1099-K includes the gross amount of all payment transactions. You may receive a Form 1099-K from each payment settlement entity from which you received payments in settlement of reportable payment transactions. A reportable payment transaction is defined as a payment card transaction or a third-party network transaction. A third party network transactions may include a payment through a payment app.

• Payment card transaction means any transaction in which a payment card, or any account number or other identifying data associated with a payment card, is accepted as payment.
• Third party network transaction means any transaction that is settled through a third-party payment network, but only after the total amount of such transactions exceeds the minimum reporting thresholds.

The gross amount of a reportable payment does not include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

[thebricktank]

Well I got one and didnt meet either threshold last year, so I guess they’re just erring on the side of blasting them out.

[hendrik-j]

Do you live in a state with a lower threshold? If so, that probably explains it.

I’m annoyed as I had a couple thousand in sales in DC, and they’re applying the 600 minimum. Lots of hassle for no reason. 

DC is such a poorly governed and managed city.