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Form 1099-K: Reporting of Web-Based and App-Based Transactions Will Increase Substantially in 2022

Check out one of the biggest changes impacting the gig economy beginning January 2022 – changes to the requirements for the 1099-K Form. Learn how the new rules may affect your tax return.

Record keeping just became the new superpower and here’s why. Self-employed individuals, freelancers, contract workers, or gig economists are familiar with receiving Form 1099-NEC when they  are paid $600 or more during the year for services performed, but 2022 might be a bit more complicated. Taxpayers who sell goods or services and accept payments via credit/debit cards, or through third-party settlement organizations including PayPal, Venmo, Cash App, or Zelle, will now be issued a Form 1099-K for business transactions totaling $600 or more for the calendar year. Taking stock of your non-employee income throughout the year and how you maintain those records might be some of the most important business decisions you make in 2022.

What Is a 1099-K for eBay, PayPal, or Coinbase?

Marketplaces including eBay, Uber, and Etsy, among others, will be required to issue Form 1099-K to all sellers who receive $600 or more from transactions on each individual platform. You might even see these forms referred to as an Uber 1099-K, Coinbase 1099-K, or Etsy 1099-K, to name a few of the more recognizable marketplaces, but the premise is the same. Sales of goods or services that total at least $600 over the course of the calendar year will require a 1099-K form to be completed for filing with the IRS, with a copy furnished to the seller.

Did you receive payments via Venmo, Paypal, Zelle, CashApp, or other payment platforms? The 1099-K form applies to all sales using credit/debit cards or a third-party payment processors, so the $600 minimum now applies to all of these situations. Detailed record keeping delineating between social and business transactions may be a lot more important in 2022 and a necessary way to confirm your Venmo 1099-K or PayPal 1099-K forms.

1099-NEC vs. 1099-MISC vs. 1099-K

Should you report expenses on the 1099-K, the 1099-MISC, or the 1099-NEC? That’s a great question and understanding the answer requires clarity of purpose for each of the forms.

●      1099-NEC is for reporting compensation for services performed by contractors, subcontractors, freelancers, and other non-employees. 

●      1099-MISC is for reporting other types of income payments including rent, royalties, and prize money, but is no longer used to report compensation paid to an individual for work performed.

●      1099-K is generally a form you would not file but is a form you may receive if you accept credit/debit cards or use a payment platform or app when selling goods or services to customers.

To ensure that you are not excluding reportable payments, and to prevent duplicate reporting, on more than one form, you may want to take a second look at your record-keeping practice for your small business.

We can help.

Form 1099-K is a newer tax form with an updated set of reporting criteria. Let us help you interpret its use, properly take the form into account, and prevent possible problems. KPMG Spark tax preparers provide managed, online bookkeeping with real-time support. They’ll ensure your 1099-K form information is compliant, filed accurately, and on time.

You don’t have to tackle tax preparation on your own. KPMG Spark can provide the bookkeepers and resources to support your business during tax prep and throughout the year. Contact KPMG Spark today and visit with an accounting specialist dedicated to your small to medium-sized business success. They’ll make sure your 1099-K forms are managed by one of their support teams and answer any questions you may have about taxable benefits.

 

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.

This blog article is not intended to address or provide advice concerning the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

KPMG SparkMarch 15, 2022Posted In: Tax Tips

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