Some taxpayers got a new earnings statement this year, a 1099-K form. The tax statement arrived because they sold more than $5,000 in products or services through apps and marketplaces.
The 1099-K, officially titled Payment Card and Third Party Network Transactions, finally was issued this year on a widespread basis. It was supposed to go out years earlier to sellers who made $600 or more. That was a change made in the American Rescue Plan Act (ARPA) of 2021 from the $20,000 in sales and 200 transactions trigger to issue the form.
All income you make, even if you don’t get an official reporting document, is taxable under the Internal Revenue Code. Lawmakers believed many individuals were evading this requirement when it comes to digital sales, so they lowered the sales amount and eliminated the transaction number triggers to ensure that the Internal Revenue Service got the information, too, and could follow up if the earnings weren’t included on taxpayers’ returns.
Confusion and complaints prompted the IRS to delay the enforcement of the ARPA change until this year. The agency announced late last year that it finally would require third-party settlement organizations, or TPSOs, — think PayPal, Venmo, Cash App, eBay, Etsy, Uber, Lyft, Airbnb, and more — to issue 1099-Ks for 2024 tax year amounts of more than $5,000.
In 2025, the earning trigger for a 1099-K will drop, per IRS Notice 2024-85, to $2,500. The ARPA-mandated $600 earnings trigger will take effect in tax year 2026 and subsequent years.
1099-Ks for 2024 tax returns: This weekend’s Saturday Shout Outs go out to a couple of items that examine the arrival of 1099-Ks, and one that serves as a general tax statement warning.
Is This the Year You Finally Get a Form 1099-K? asks National Taxpayer Advocate (NTA) Erin M. Collins in a recent NTA Blog post. Collins elaborates on the law change, and also notes a form change to help clear up one of the main areas of concern: money made on personal item sales.
The new space at the top of Form 1040’s Schedule 1, shown below, is where you report amounts included on Form 1099-K that relate to personal items you sold at a loss or payments that weren’t for the sale of goods or services (such as gifts and reimbursements).
“For example, suppose you resold concert tickets for $5,500 but originally spent $6,000 to buy them. You receive a Form 1099-K reporting gross payments of $5,500, but because you didn’t make a profit on the tickets, you report the $5,500 on this
new space on Schedule 1 and don’t owe tax on that amount,” notes Collins.
Today’s second shout goes out to Will You Recognize the Form 1099-K When You Receive it This Year? Janathan Allen, a tax attorney and co-founder of San Diego, California-based Allen Barron Inc., answers that question, and points to some strategies that sellers should avoid.
One is spreading transactions across platforms to remain under the reporting thresholds. “This strategy simply doesn’t pass any review,” says Allen, who also reminds us that U.S. taxpayers are required to report all sources of income, domestic and international, to the IRS.
A final shout out serves as a remind to pay attention to all tax statements you receive. Also double check them as soon as they arrive, just in case they aren’t correct. That’s what happened to a Tampa, Florida, 1099-K recipient.
Tampa Bay man who never used Cash App receives 1099-K tax form for $9K in earnings, reported Consumer Investigator Shannon Behnken, consumer investigator for WFLA Channel 8 news.
The statement issued by Block Inc., the company that owns Cash App, showed the Tampa man collected $9,306.57 through 427 transactions, all made last November. His attempts to resolve the issue via calls to the issuer went nowhere. He told the television station that he was instructed to make his case via the app, which he doesn’t have or use.
After Behnken contacted the company, the Tampa man was issued an amended 1099-K showing $0 in third-party transaction earnings.
He’ll need to hang on to that corrected form, just in case the IRS raises questions based on the original form.
You also might find these items of interest:
- Don't fall for Form 1099-K myths this tax filing season (March 6, 2024)
- Confused by Form 1099-K? Check out IRS' updated FAQs (Feb. 10, 2024)
- Form 1099-K to be issued for 2024 marketplace earnings of more than $5,000
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