Form 1099-K is an official Internal Revenue Service (IRS) instrument used to report some specific payment transactions. This document is sent to taxpayers who are involved in commercial transactions whose income originates from one of the following sources:
• Taxpayer-owned business.
• Activities in the Gig Economy (alternative jobs like Uber, for example).
• Sale of goods and personal items.
Data contained on the form 1099-K is to be used by taxpayers, along with other tax records, to determine an individual’s correct tax obligations. Remembering that all income, except those excluded by law, must be reported on the income tax return, with or without receipt of the form 1099-K.
The IRS informs that money received as a gift or reimbursement does not require the issuance of the Form 1099-K, it is enough to report that gain as a non-business transaction.
What should I do when the Form 1099-K form is issued in error?
If the Form 1099-K is issued in error – which can happen in situations where personal items are sold and for a transaction between friends and family, for example – or contains incorrect information, the taxpayer immediately should contact the document issuer to request data correction. The name of the issuing company or person appears in the upper left corner of the form.
Form 1099-K reporting threshold for tax year 2023
The IRS has announced a new limit on the amount received for filing the Form 1099-K reports that will begin to take effect in tax year 2023:
• The old limit was $20,000 and 200 transactions per year. This applies to the 2022 tax year and prior ones.
• The new limit is greater than $600. This applies to the 2023 tax year and beyond.
As of this change, people who previously would not receive the Form 1099-K can now receive it.
Do you have any question about filing income tax in the United States? Contact Drummond Advisors. Our team of experts will be happy to help you!
Written by Aline Ribeiro, Senior Communications Consultant