1099k 2023 and beyond

[jaxsupply14]

IRS announces 2023 Form 1099-K reporting threshold delay for third party platform payments; plans for a $5,000 threshold in 2024 to phase in implementation

FS-2023-27, Nov. 2023

Following feedback from taxpayers, tax professionals, and payment processors and to reduce taxpayer confusion, the Internal Revenue Service delayed the new $600 Form 1099-K reporting threshold requirement for third party payment organizations for tax year 2023 and is planning a threshold of $5,000 for 2024 to phase in the new law.

Third party payment organizations include many popular payment apps and online marketplaces.

The agency is making 2023 another transition year to implement the new requirements under the American Rescue Plan that changed the Form 1099-K reporting threshold for payments taxpayers get selling goods or providing a service over $600. The previous reporting thresholds will remain in place for 2023.

What this means

This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

This phased-in approach will allow the agency to review its operational processes to better address taxpayer and stakeholder concerns.

Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount.

It's important to note that the higher threshold does not affect the actual tax law to report income on your tax return. All income, no matter the amount, is taxable unless it's excluded by law whether a Form 1099-K is sent or not.

Who gets the form

The Form 1099-K could be sent to anyone who's using payment apps or online marketplaces to accept payments for selling goods or providing services. This includes people with side hustles, small businesses, crafters and other sole proprietors.

However, it could also include casual sellers who sold personal stuff like clothing, furniture and other household items that they paid more than they sold it for. Selling items at a loss is not actually taxable income but would have generated many Forms 1099-K for many people with the $600 threshold.

This complexity contributed to the IRS decision to delay the additional year to provide the agency time to update its operations to make it easier for taxpayers to report the amounts on their forms.

What to do

The IRS Understanding your Form 1099-K webpage provides resources for taxpayers who receive a 1099-K, including what to do with a Form 1099-K and what to do if you get a Form 1099-K in error.

Taxpayers who receive a Form 1099-K should review the forms, determine if the amount is correct, and determine any deductible expenses associated with the payment they may be able to claim when they file their taxes.

The payment on a Form 1099-K may be reported in different places on your tax return depending on what kind of payment it is. For example, someone who is getting paid as a ride share driver could report it on a Schedule C.

People who sold personal items must determine if the amounts on their forms were losses or gains. If taxpayers are unsure of the original price, they can learn more on how to figure out the items worth and how to establish basisPDF.

[heckofagame]

And a reminder to all: even if you do not receive a 1099-k, you are still required to report your income from eBay sales. 

[700silverv]

Well, if you are using Ebay as an online garage sale and only selling personal items at a loss then the IRS says you do not have to report that as it is not profit.

[12345jamesstamps]

And a reminder to all: there are many deductions you can report when doing your taxes from selling on eBay sales.

[12345jamesstamps]

I agree with you. Those who sell on eBay as a source of income and have a ton of items for sale are not the same as the occasional seller selling a few items a month.

[dbfolks166mt]

     Well you got the Federal plan and we all know how well their plans have worked for the last two years. I am more interested in seeing what the individual states do in 2024 and how many pass their own reporting/issuance levels. At the present time I believe there are 8 states + DC that the Federal level means nothing since they have already established their own laws. Interestingly enough the 1099 is a Federal document so the IRS is already getting the lower threshold 1099's and have been for several years. 

[toomuchstuffagain35]

I wish ebay would make a board JUST for any thread with 1099K.

It's beyond "getting old" by now.

[ljsj2757]

so why has ebay not made this announcement.. are they planning on sending them out anyway even if they dont have to.

[nobody*s_perfect]

Last year, eBay eventually made an announcement 6 days after the IRS announcement, and then had no problem sticking with the $20K threshold. I can't recall ever hearing that somebody got a 1099-K from eBay when they hadn't met the relevant federal or state threshold.

[dbfolks166mt]

Last year, eBay eventually made an announcement 6 days after the IRS announcement, and then had no problem sticking with the $20K threshold. I can't recall ever hearing that somebody got a 1099-K from eBay when they hadn't met the relevant federal or state threshold.

     Initially they had some problems with CA sellers that had not reached the threshold but were issued 1099's anyway. EBay, to the best of my knowledge, never posted the cause or the glitch that caused the issue but I suspect it had something to do with sorting out the individual state laws and those sellers that hey had to issue 1099's to even though they had not met the $20K federal threshold for the year but had met the state one. 

[nobody*s_perfect]

Ah yes, I should have remembered that -- I guess I had filed it away as a state-level error rather than an individual's problem. But IIRC, it was caught and corrected before eBay had transferred the info to the feds.

[dbfolks166mt]

Ah yes, I should have remembered that -- I guess I had filed it away as a state-level error rather than an individual's problem. But IIRC, it was caught and corrected before eBay had transferred the info to the feds.

     Yes I do remember that they caught it before the 1099's were actually released to the IRS. However, this is what concerns me about the delay and any other changes at the Federal level. It is possible that in 2024 more individual states may pass their own reporting threshold laws given the Fed's inability to get this done. It is HIGHLY probable that this will still be a quagmire at the end of 2024 but may be further complicated by additional state laws that have no consistency from state to state. We could wind up with 51 different state/district laws and one Federal law. 

[nobody*s_perfect]

Well, it won't be as bad as 51 different threshold policies because (1) some states don't have an income tax; and (2) DC and about 6 of the states that already have lower thresholds have set theirs at the same amount -- $600 with no minimum number of transactions (i.e., identical to the federal level that is being implemented slooooowly).

[lenaonce369]

I got request from ebay for SSN for 1099 form even my sales are below $600. 

[mam98031]

You have a MAJOR misunderstand like so many others. The threshold on an IRS FORM, ANY FORM, does not set the minimum for reporting income to IRS. The 1099K is merely a FORM and nothing more.



When the minimum threshold on the FORM was 20K, that met that only those that made above that got the FORM. What it DID NOT mean was that anyone below that 20K did not have to report their income to the IRS. And that is likely what will get some people in trouble because they assumed something that was not ever based in FACT. IRS does NOT HAVE a minimum requirement on reporting your income. So even when the FORM threshold was 20K, those that made 15K, 10K, 5K, 1K, etc. were still responsible for reporting their income.

Everyone needs to remember that the 1099K is ONLY A FORM and nothing more. It does NOT set the minimum requirements to report income to the IRS. That would be like saying if you don't receive a 1099K for ANY type of income you receive, you don't have to report your income and that is ridiculous. The 1099K only covers internet related payments. It doesn't cover when people are paid by check or any other form. So to think that the 1099K has the power to set the minimum standard for all of IRS, all those people that are NOT paid via the internet would not have to claim their income, which we all should know is not true.