The new 1099-K reporting requirements for revenue earned through third-party payment apps, including PayPal and Venmo, will not be implemented as soon as the IRS has indicated. This deferral is intended to resolve difficulties in differentiating between taxable and nontaxable transactions, specifically with regard to self-employment income, and comes after two years of delays. Freelancers and company owners are left in the dark about the impending tax season, despite the fact that the gradual implementation of these modifications is intended to improve reporting accuracy.
Photo from Google
Phased Rollout and Increased Thresholds
The IRS is planning a phased rollout of new reporting requirements for third-party payment apps, eventually mandating reporting of earnings over $600 to the IRS. For the 2024 tax season, the threshold is raised to $5,000, providing additional time for payment apps and the IRS to adapt to the changes and minimize inaccuracies in reporting.
Self-employed individuals are reminded of their responsibility to pay taxes on their total income, irrespective of whether they receive a 1099 form. The delay in implementing the new reporting requirement for 2023 means that freelancers will report their earnings as usual this tax season, with no 1099-K form from third-party apps unless they receive over $20,000 in payments across more than 200 transactions.
People who work with businesses may still receive 1099-NECs from them even if they do not receive 1099-K forms. In terms of tax year 2024, people who make more than $5,000 from side gigs or freelancing through third-party payment applications would get a 1099-K.
READ ALSO: Stimulus Check Update January 2024: $1,312 Will Be Sent To Residents In Alaska
Uncertain Future and Proactive Measures
The IRS’s decision to delay the new reporting requirement for 2023 raises uncertainty for freelancers and business owners about the upcoming tax season. It underscores the need for individuals to stay informed about any changes that may impact their reporting requirements and tax filings in the future.
As the IRS works towards implementation, individuals earning income through payment apps are advised to set up separate accounts for professional transactions. This proactive step can prevent nontaxable charges, such as those from family or friends, from being inaccurately included in the 1099-K form. Staying informed and taking proactive measures can help individuals navigate the evolving tax reporting landscape with greater ease and accuracy.
READ ALSO: Unveiling The Mystery Of The $5,000 Lincoln Penny Weight Error
