Hey there, business owners! Insogna CPA here.
Today we’re breaking down some crucial IRS updates in a way that doesn't make your eyes glaze over.
So, let's dive into the world of Form 1099-K.
This little form is used by third-party payment processors (think PayPal, Stripe) to report your business transactions to the IRS. Previously, these processors only needed to report your transactions if you crossed two thresholds:
- over $20,000 in transactions and
- more than 200 transactions in a year.
Enter the American Rescue Plan Act. This law tweaked the rules a bit, and the IRS was originally going to put it in place in 2022, and then in 2023. Now, for transactions in 2024 and beyond, third-party payment processors will have to report if you earn over $600 in a year, regardless of the number of transactions. Yep, just $600.
However, there's still a breather for 2023!
The IRS is calling this year another "transition period." So, for now, we're sticking to the old threshold of $20,000 and 200 transactions. This gives you a bit of time to adjust and prepare for the tighter reporting requirements next year.
What does this mean for you?
It's simple: keep a closer eye on your income through these platforms. While this change doesn't mean you'll owe more taxes, it does mean more of your income will be visible to the IRS. So, it's crucial to keep your records straight and report your income accurately.
Remember, staying informed is key to navigating these changes smoothly.
Let's keep the entrepreneurial spirit alive and kicking, and make smart, informed business decisions!
Remember, you can contact us if you have questions about this change.