A Guide to Filing Form 1099-K for the 2022 Tax Year


There have been some major developments to the Form 1099-K for the 2022 tax year and these changes will certainly have an impact on how businesses file this form with the IRS. 

The IRS continues to update many of its tax forms on an ongoing basis, usually annually. This is done to improve the accuracy of how the forms are capturing information and to accommodate any changes to reporting. 

This is true for Form 1099-K, this form is being updated because the reporting requirements have changed in response to the American Rescue Plan Act (ARPA). The ARPA was passed in 2021 and was largely created to address the continuing COVID-19 pandemic, however, it also included some new requirements for payment transactions that are made through third parties. 

This article will provide an overview of the updates to Form 1099-K, who is required to file it, what to do if you receive a copy of this form, and more!

What is Form 1099-K?

Form 1099-K is an IRS tax form that is used by certain businesses to report payment card transactions and third-party network transactions. In addition to filing the form with the IRS, businesses must also provide a copy to the recipients of these transactions. 

 

What are the Changes to Form 1099-K for Tax Year 2022? 

On the version of Form 1099-K for the 2021 tax year, and other previous tax years, there was a threshold for transactions that needed to be reported to the IRS. This threshold was 200 transactions or $20,000 in gross volume. 

This has changed considerably for the 2022 Form 1099-K and assumably for future tax years. There is no longer any threshold. Businesses that are required to report these transactions must do so if they are $600 or more. 

This new requirement will drastically increase the number of Forms 1099-K filed with the IRS and distributed to recipients. Now that we’ve taken a closer look at Form 1099-K and its new updates, let’s dive a little deeper. 

 

Why did the IRS Update Form 1099-K? 

The ARP also set out to increase the scope and accuracy of IRS reporting for electronic payment transactions. The goal is to better capture this information from the businesses that facilitate them. 

These transactions are the basis of what has become the ‘gig’ economy, where individuals can perform goods and services as time allows, rather than being official employees or contractors of a business. 

 

Who is Required to File a Form 1099-K? 

This is a form that is mainly filed by business entities, most commonly these businesses are referred to as Third-party Settlement Organizations (TPSO) and Payment Settlement Entities (PSE). These businesses facilitate these transactions, some familiar examples would be Venmo or PayPal. 

 

Who Receives a Copy of Form 1099-K? 

If you have made card payment transactions throughout the tax year and these transactions total $600 or more, you will receive a copy of the 1099-K. This may mean that you need to include the amount on 1099-K when completing your personal income tax return, but there are some exceptions. For example, if a friend or family member reimbursed you for dinner and drinks, this isn’t income and probably wouldn’t need to be reported. 

 

When are Businesses Required to File Form 1099-K?

The Recipient copy should be filed on or before January 31st and the deadline for paper filing form 1099-K is February 28th. In case, if you’re filing through electronic filing, the deadline for Form 1099-k falls on March 31st.

Failure to file accurate forms on time to the IRS may result in penalties, depending on how late they are filed. It is always important to keep up with your business’ IRS deadline to prevent any unwanted penalties. 

 

How should Form 1099-K be Filed? 

Before you file Form 1099-K, be sure to choose an IRS-authorized e-file provider for your business. The IRS prefers electronic filing and recommends that businesses e-file their returns rather than mailing in paper copies. Choosing an IRS-authorized e-file provider is a must, this ensures that your business files its forms accurately and securely.

It is also important to note that the IRS actually has a threshold for how many forms a business is allowed to file paper copies of. Businesses filing 250 or more forms are required to file them electronically.  

As you can see, Form 1099-K reporting requirements have changed drastically, and this will impact both businesses and individual taxpayers. Despite these changes, businesses that are required to file this form can still have a smooth and successful IRS filing season. Hopefully, this has been a helpful overview and will help you in the upcoming tax season!



Image and article originally from smallbiztalks.com. Read the original article here.