What is a Form 1099-K? This is an IRS tax form that summarizes transactions made by third-party settlement organizations. These companies are typically payment processors such as credit card companies, PayPal, Venmo, or Square. You may receive a Form 1099-K if your business processes a significant amount of credit card sales or accepts payments through a payment processor App.
The threshold for having to file a Form 1099-K was set to drop from $20,000 or 200 transactions to $600 for 2022 filings. However, due to the compliance burden, as well and the confusion caused by lack of clear guidance, the IRS has decided to delay the $600 filing threshold by one year until January 31, 2024, the due date of the 2023 Form 1099 filings.
Reminder: This new filing threshold has no impact on the taxability of income, as you are required to report all business income regardless of Form 1099’s received. The impact of this new threshold is solely an added compliance burden for most businesses.
Tip: When using Apps such as Venmo, PayPal, and Cash App, set up a personal account as well as a business account, as this will help distinguish what business transactions should be reported on a Form 1099-K.
Authored by: Viviana M. Lisboa, CPA, Senior Accountant, Tronconi Segarra & Associates LLP