Tillman Financial

Delayed Implementation of New 1099-K Rules – Did You Know?

Under a new rule enacted in 2021, third-party payment processors must issue a Form 1099-K to any individual who receives $600 or more in payments for goods or services during a year. However, IRS officials have noted that this rule could potentially cause widespread confusion, since many transactions completed through online payment platforms have no tax impacts. Examples of non-taxable transactions include settling up with friends and selling used personal items.

Therefore, the IRS will not enforce the new rules for tax year 2023. Instead, third-party payment processors may operate under the prior rules, only sending 1099-K forms to users who received over $20,000 in payments through over 200 transactions. In addition, 2024 will serve as a phase-in year, with the 1099-K reporting threshold set at $5,000.

Regardless of 1099 reporting rules, payments received through third-party platforms for self-employment activities or selling goods for profit are generally taxable income. A tax professional can help you properly report your 2023 income, and prepare for the future implementation of a lower threshold for 1099-K forms.

'Tis the Season for Important Tax Paperwork

Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February.

The most common documents include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Records of virtual currency (including crypto) transactions
- Charity donation receipts
- Health Insurance statements (like Form 1095)
- Proof of qualifying educational expenses (like Form 1098-T)
- Mortgage interest statements