New IRS Repotring Rules for Venmo & Paypal Payments
Small business taxpayers who may be receiving a Form 1099-K for the first time this year shouldn't rush to file their tax returns this year, according to the IRS. They should wait until they have all their information returns, including any Forms 1099-K. ( IR 2022-213 , 12/06/2022)
New rules for Form 1099-K. Before 2022, third-party payment processors (like PayPal or Venmo) issued Form 1099-K, Payment Card and Third-Party Network Transactions, only when a taxpayer had more than 200 transactions for the year and the aggregate amount of these transactions exceeded $20,000.
Beginning in 2022, taxpayers will receive a Form 1099-K when they received business payments exceeding $600 through a third-party payment processor. Payment processors must send 2022 Forms 1099-K to payment recipients by January 31, 2023.
Note. According to Zelle's website, it won't send out Form 1099-Ks because the third-party payment processor reporting rule don't apply to it.
No rush to file. Many taxpayers who receive business payments through a third-party payment processor may be receiving a Form 1099-K for the first time. These taxpayers should wait to file their returns until they have received all their information forms, the IRS cautioned. Taxpayers who don't include income reported on a Form 1099-K on their tax return may need to file an amended return and make a tax payment to cover that income.
Check tax documents carefully. Taxpayers should carefully read any Forms 1099-K that they receive and contact the payment processor immediately if any information on the form is incorrect. The contact information for the payment processor should appear in the upper left corner of the form.
Note. The IRS cannot correct mistakes on Form 1099-K; only the issuer can. If the form contains errors, get them corrected before filing a return.
The IRS recommends that all taxpayers develop a recordkeeping system that keeps their important financial information in one place. This includes all tax documents such as Forms W-2 and various Forms 1099 as well as records documenting all digital asset transactions. Keeping good records will help the taxpayer avoid making errors on their return that lead to processing delays, the IRS says.