A recent tax law change by this edition of Congress now requires transaction reporting to the IRS for anyone receiving more than $600 in payments through digital payment tools like PayPal, Venmo, and CashApp. It also impacts anyone using transaction platforms to buy or sell tickets for sporting events and concerts.
Prior to 2022, the reporting threshold was $20,000 AND more than 200 transactions. But with the perceived under-reporting of income by those in the gig economy, the transaction threshold was eliminated and the dollar threshold was lowered to $600. Now the IRS will use their computer auditing to compare your 1099-Ks with what you report on your tax return and audit you if they do not match.
If you use digital payment platforms to accept payments, you will now need to provide your Social Security number and a valid name and address.
The IRS will know. Most of these transactions for those receiving funds will now have this activity reported to the IRS if the total for the year exceeds $600. This is true even when you lose money on the transaction. It will be done using Form 1099-K and will be issued to you in January.
Be aware that your taxes will be more complicated. If the IRS considers the transaction a business transaction, you will now need to report the transaction on your 2022 tax return, even for casual transactions that lose money. This is often the case when selling event tickets for a loss or taking digital payments at a garage sale.
You can expect to receive a separate 1099-K from every platform you use where you exceed the $600 threshold.
This seemingly simple change in the tax code is having a wide-reaching impact. It will further complicate filing taxes AND processing taxes for the IRS.
If you are still unsure how this will impact your 2022 tax filing, or if you would like further guidance on how to mitigate this impact, click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.
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