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Requirements for 1099-K Expanded

The Form 1099-K reports to both taxpayers and the IRS payments the taxpayer received for goods or services provided through a credit or debit card and third-party payment services like PayPal, Zelle and Venmo, online services like Uber and eBay, or any other electronic payment system (PSE third-party payment settlement entities). This is particularly relevant for taxpayers in the gig economy who are not technically employees, do not receive a W-2 form and are often paid through a PSE rather than by a check or cash. In this circumstance, it is important that the taxpayer provide the PSE with their Taxpayer Identification Number (TIN) to avoid having the PSE withhold taxes from their payments. 

Prior to 2022, the PSEs were only required to report payments for goods or services with a 1099-K to the taxpayer and the IRS if there were at least 200 transactions a year and the transaction amounts exceeded $20,000 in that year.  

The American Rescue Plan Act of 2021 changed the minimum reporting threshold in the 2022 tax year so the 1099-K is now required if the transactions with a PSE exceed $600. There is no minimum transaction limit per year; a single transaction paid through a PSE amounting to $601 will require the PSE to file a 1099-K.

If a taxpayer receives a payment from a PSE for a personal as opposed to business transaction, such as a gift or charitable contribution, the “personal” payment should not be reported on a 1099-K and it may be necessary, in that case, for the taxpayer to notify the PSE of the character of the transaction.

The 1099-Ks subject to these lower thresholds will be due in 2023 to report the 2022 transaction payments. Some states have already adopted these lower requirements. The only one of these states contingent to Texas is Arkansas.

Understanding Your Form 1099-K | Internal Revenue Service (irs.gov)

New, lower Form 1099-K threshold prompts cautions, criticisms - Journal of Accountancy


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