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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
September/October 2023
Understand the New Rules for Third-Party Payments
Being self-employed has its perks, but it also has its challenges. If you work from home or have a side business, you are responsible for keeping accurate records and paying your fair share of income taxes. The IRS wants to make sure of that, too, and Form 1099-K helps the IRS - and you - do just that.
What It Does
Form 1099-K provides a record of the amount that third-party payment networks transferred to you during the tax year. Prior to 2023, if you received payments from payment card transactions (including credit cards, debit cards or stored-value/gift cards) and/or in settlement of third-party payment network transactions (e.g., PayPal, Venmo, Zelle), the threshold for receiving a 1099-K was gross payments exceeding $20,000 and more than 200 transactions.What’s Changed?
Starting in 2023, the dollar threshold for reporting transactions from third-party payment networks dropped to $600, with no transaction threshold. Each payment settlement entity from which you received income will send you a 1099-K for any transaction in which a payment card — or an account number associated with a payment card — is accepted as payment, or for any transaction settled through a third-party payment network, once the total exceeds the $600 threshold.Keeping Track
The purpose of sending out a 1099-K is to ensure business owners report their business income. The $600 threshold is an aggregate of all the money sent to your business through third-party networks. The amount doesn’t have to come from one third-party network transaction. Several smaller transactions that add up to $600 will result in your business receiving a 1099-K.Help with Your Tax Return
A 1099-K can help you calculate the amount of business income you received during the year. Receiving the form doesn’t necessarily mean you will owe taxes on that money, since tax deductions may offset some of your business income. However, it’s important to keep accurate records of all forms of payment received, including cash and checks, so that you don’t underreport your business income or overpay your income taxes.A change in your business structure could affect the information on the 1099-K form, so verify that everything is correct.
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