The IRS has changed the way it generates 1099-Ks, which is why it is issuing this warning.
For taxpayers who typically file returns in late January or early February, the IRS offers the following advice: In 2023, you might want to take your time.
The IRS recently issued a warning that early filers may receive a 1099-K form that will track payments made through third-party services like Uber, Etsy, PayPal, Facebook Marketplace, Venmo, and Facebook Marketplace.
The tax authority stated: “The IRS advises people in this category who may be receiving a Form 1099 for the first time—especially “early filers” who typically file a tax return during the month of January or early February—to be cautious and make sure they have all of their crucial income documents before submitting a tax return.
A little extra caution could save people time and effort when filing an amended tax return. They may also need to file an amended tax return if they have untaxed income on a Form 1099 that isn’t disclosed on their initial tax return, according to the IRS.
The warning is in response to a change in how the IRS issues 1099-Ks.
Previously, 1099-Ks were generated when there were more than 200 transactions for the year and the total value of those transactions exceeded $20,000. The American Rescue Plan Act of 2021 reduced the reporting threshold from $600 from any one source to $600 from all sources.
Companies must send the 1099-K form by January 31, 2023. Due to the modification, tax professionals advise taxpayers to file in 2023 in late February or early March. That window of time enables any mail errors or delays to be fixed before taxpayers file, ensuring the correct 1099-K is obtained.
According to the IRS, changing the form does not change the taxability of income. Unless specifically exempted by law, all income, including that from side jobs, side gigs, and sales of goods, is still taxable and needs to be reported. Additionally, funds received from friends and family via payment networks as private gifts or as compensation for private expenses (such as when someone reimburses you for a gift you shared) are typically exempt from taxes.
If you do obtain a 1099-K and discover that the details on it are inaccurate, you must get in touch with the payer right away. This is the business whose name is located in the top left corner of the form. The IRS will not be able to fix the mistake.
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The IRS advises early filers to postpone their ...
[…] The IRS has changed the way it generates 1099-Ks, which is why it is issuing this warning. For taxpayers who typically file returns in late January or early February, the IRS offers the following advice: In 2023, you migh […]