CAUTION IN FILING THE NEW 1099-K
Caution in filing the new 1099-K. The reporting threshold required by the IRS has been changed for those who have to file form 1099-K, which is used for third party settlement entities, which must issue a 1099-K. The National Taxpayer Advocate gave a warning to those who must file this form, while the (NTUF) National Taxpayers Union Foundation was urging members of Congress to reduce the impact of the change by increasing the amount of the reporting requirement. “Payment settlement entities” include banks or other organizations that process credit cards transactions on behalf of a merchant and make an interbank transfer of funds to the merchant from a customer. Caution in filing the new 1099-K.
These payment organizations also include online payment facilitators and marketplaces connecting independent sellers with customers, such as eBay and Etsy. Some gig work platforms, including Uber and Lyft, and TaskRabbit, are either third party settlement organizations or use them to pay gig workers. For each calendar year between 2010, when Sec. 6050W requiring this reporting first took place, and 2021, payment settlement entities have been required to file Form 1099-K annually with the IRS with respect to payees and furnish it or its information to those payees, reporting gross amount of reportable payment transactions to the IRS. During this period, third party settlement organizations have been allowed a de minimis exception to filing form 1099-K with respect to payees with 200 or fewer such transactions during the calendar year with an aggregate gross amount of $20,000 or less.
However, the American Rescue Plan, amended this amount to $600 with no minimum number of transactions, effective for calendar years beginning after Dec. 31, 2021. As a result a large number of individuals who previously did not receive this form, will next year. Many of those will be caught off guard and end up with a back tax debt, and the need for the services of Tax Resolution Companies, who can help them with the IRS Fresh Start Program, to potentially stop a IRS Wage Garnishment. The IRS will be viewing this as a source of additional income, as it looks for revenue sources to fund the Covid increases by the government.