Use, Threshold, Affected Parties and Tracking of Form 1099-K
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The IRS has been making changes to the 1099-K reporting limits, which impact freelancers, gig workers, small and medium business houses, and anyone receiving payments through third-party payment platforms like PayPal, Venmo, Stripe, Square, and Etsy.
1. What Is use of Form 1099-K?
Form 1099-K is issued by third-party payment networks, like Paypal, Venmo, Stripe and Etsy, etc to report payments received for goods and services. The form is used to ensure taxpayers report all their payments/receipts form this third-party platform to the IRS.
2. New 1099-K Reporting Threshold
The IRS planned to lower the reporting threshold from $20,000 & 200 transactions to just $600 (any number of transactions) in the start of 2023. However, due to concerns from business houses and taxpayers, the IRS delayed the full implementation and introduced a phased approach:
✅ In 2023 Tax Year: The threshold remained at $20,000 & 200 number of transactions.
✅ 2024 Tax Year: A lower threshold of $5,000 is applicable, before fully dropping to $600 in the future.
3. Who Is Affected By the change in IRS threshold
Freelancers and Gig Workers (Uber, DoorDash, Etsy, etc.)
Small Business Owners accepting payments and receipt through apps like PayPal, Stripe, etc.
Side Hustlers and Resellers on the platforms like eBay, Etsy, or Facebook Marketplace
4. What Should You Do?
Track Your Income Carefully: Even if the form 1099-K, is not provided or received, yet we must report all taxable income.
Separate Business & Personal Transactions: Avoid transacting personal payments with business income in apps like Venmo, PayPal, Stripe, etc.
Set Aside Money for Taxes: If you’re self-employed, consider quarterly estimated tax payments.
