More taxpayers to receive a Form 1099-K

The IRS reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year.

There is no change to the taxability of income – the only change is to the reporting rules for Form 1099-K. As before, income, including from part-time work, side jobs or the sale of goods, is still taxable. Taxpayers must report all income on their tax return unless it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation, Form 1099-K or any other information return.

The IRS also emphasizes that money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. If a Form 1099-K is incorrect and reflects income they didn’t earn, they should call the issuer. The IRS cannot correct it.

Additional income from Forms 1099-K may require taxpayers to begin making estimated tax payments. By law, taxpayers must pay tax on income as they earn it throughout the year. It is important for taxpayers to know they should pay at least 90% of their taxes during the year. Taxpayers should monitor their income throughout the year. For small business owners and self-employed people who don’t have withholding to adjust, this usually means making quarterly estimated tax payments.

Find more information on the Understanding your Form 1099-K and the new 1099-K Frequently Asked Questions IRS.gov webpages.

A note to payment settlement entities – Payment card transactions and third-party payment network transactions of more than $600 for the year, must be filed on a Form 1099-K by January 31, 2023. Again, there is no change to the taxability of income – the only change is to the reporting rules for Form 1099-K.