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new lower threshold for 1099-K reporting

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    new lower threshold for 1099-K reporting

    This was news to me. Thank goodness, maybe as a result more tax cheats will have a harder time cheating. Of course, some of the payment processors are already starting to whine and complain even though they have a year to prepare, see the article link for more details. Who knows, maybe IRS will give them the same pampering as colleges that received something like 3 years administrative extension from the IRS to the deadline required by law to begin filing proper 1098-T forms (Box 1 amounts mandatory).

    Remember, there has been a huge loophole where 1099-NEC/MISC reporting excluded payments made by credit card on the assumption they would be picked up by 1099-K instead, but of course the very high threshold for 1099-K prior to this new law allowed for many payments to go unreported altogether.

    "Starting next year, the federal threshold for issuing the 1099-K will drop to $600 with no minimum transaction level, due to a provision in the recently enacted American Rescue Plan Act. (Some states already have lower minimums.)

    This means that in early 2023, you could receive a 1099-K for online sales you make in 2022.
    "


    https://www.cnbc.com/2021/03/26/its-...ine-sales.html
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

    #2
    The problem with a low threshold 1099-K is that I don't think the IRS can do much with them. There are so many non-business transaction that will end up on the 1099-Ks (for example, selling your personal items on eBay or personal transactions using things like Venmo).

    Comment


      #3
      Originally posted by TaxGuyBill View Post
      (for example, selling your personal items on eBay or personal transactions using things like Venmo).
      Selling personal items on eBay at a profit is taxable.

      "Pandemic good Samaritan faces $16,000 tax bill for his efforts" Here is a really sorry example of false news reporting involving 1099-K reporting (not the news itself, but the tax-related comments iin the article). For starters, 1099-K forms do not provide a calculation of the amount of tax that might be due. I was trying to figure out how anyone came up with $16K of tax on $41K, I can only assume they were taking a 24% marginal rate plus 15.3% SE tax.

      "Facebook warns users that money generated from a fundraiser on the social media platform may be taxable if more than $20,000 is raised and that a 1099 tax form will be issued." Umm no, it may be taxable if less than $20K is raised. And with the new, lower limits, 1099-Ks will be issued more frequently.

      "Meanwhile, some people in the community are now trying to help him out with the tax bill, so far sending $2,000 in checks to a post office box — not through Facebook." Umm no, that doesn't change whether or not it is taxable.

      "Goffinet is now working with a local accountant to determine how best to handle the situation. His bill is due May 17 and he expects to pay “some sort of tax burden” but isn’t sure exactly how much."

      How would you handle this taxpayer as a client? Normally I would think of going for a hobby activity and deduct expenses on Schedule A, but since that is temporarily not available, I guess I would opt for Schedule C instead under the assumption that the expenses would just about offset all the income. The donations were not gifts, because there were strings attached.






      "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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        #4
        The lower threshold will either be meaningless or a complete disaster.

        Comment


          #5
          Originally posted by TaxGuyBill View Post
          personal transactions using things like Venmo.
          This is not correct. Venmo supports both personal and business profiles. Only business profiles (payments for goods & services) are subject to 1099-K reporting.

          The FAQs explain this and also the relation between personal and business profiles. Since Venmo is owned by Paypal, without checking I am going to assume Paypal operates in a similar fashion.

          https://help.venmo.com/hc/en-us/arti...ofiles-Tax-FAQ
          https://help.venmo.com/hc/en-us/arti...s-Profiles-FAQ

          Also, several states ALREADY require the lower reporting thresholds, is there any evidence that they are "meaningless or a complete disaster"? Extraordinary claims require extraordinary evidence.
          • For residents of Massachusetts, Maryland, Vermont, and Virginia, the threshold is $600 USD, irrespective of the number of transactions 
          • For Illinois residents, the threshold is $1,000 USD with 3 or more transactions 




          "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

          Comment


            #6
            Will livestock commission companies have to issue 1099-K for the sellers of cattle through their business?
            Farmer takes his calves to the livestock commission to sell for him. They are sold through an auction. The livestock commission issues a check, less the commission expenses, to the farmer.
            Jiggers, EA

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