Wisdom Wealth Strategies Logo

Tax Update: New 1099-K Rules Delayed for Gig-Related Employment

Get the latest expert financial tips and advice + access to our free financial checklists.

In a last minute about face, the IRS is rolling back the requirement for third-party payment providers to issue 1099-Ks for anyone receiving payments over $600 in 2022. They will maintain the reporting requirement of $20,000 in activity and 200 or more transactions before transitioning to the lower threshold in 2023.

The original information from the IRS

“The American Rescue Plan of 2021 changed the reporting threshold for third-party settlement organizations, including payment apps and online third-party settlement organizations. The new threshold requires reporting of transactions in excess of $600 per year; changed from the previous threshold of an excess of 200 transactions per year and an excess of $20,000. TPSOs are required to report payments for goods and services. The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member for a household bill.”

Why the change?

The bottom line? The IRS is not ready to figure out how to automate the auditing of those under-reporting their income from things like Ebay, Esty and Amazon sales or from sales of tickets and other goods through payment systems like Venmo and Ticketmaster.

The update from the IRS

“On Dec. 23, 2022, the IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of $600. For calendar year 2022, third-party settlement organizations who issue Forms 1099-K are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions.

Even though the Form 1099-K reduced reporting requirement for third-party settlement organizations was delayed, some individuals may still receive a Form 1099-K who have not received one in the past. Some individuals may receive a Form 1099-K for the sale of personal items or in situations where they received a Form 1099-K in error (i.e. for transactions between friends and family, or expense sharing). IRS is updating guidance to direct taxpayers to report these scenarios on the Form 1040, Schedule 1, for tax year 2022.”

What does not change 

While the IRS informational return reporting is temporarily changing, what is not changing is your requirement to report this income. It has always been the law that if you have activities that provide income to you, that income is reportable on your tax return.

Learn more on the IRS website or by reaching out to your qualified financial professional or tax adviser.

Download our Free Financial Planning Worksheets

Join our mailing list to receive your 2024 Tax & Financial Planning Guide, as well as your Net Worth Statement and Spending Plan.