I do tax planning, tax prep and tax representation primarily in Pittsburgh and Western PA.
Do you or someone you know receive electronic payments? Venmo, Paypal, Apple Pay? How about sell pro sports tickets on an exchange like Stub Hub? Or maybe drive for Uber, Lyft, or DoorDash?
Regardless of the venue, life is about to change in a big way.
A little history first. Back in 2012, a new tax form called the 1099-K was introduced for payment transactions that took place via payment card or third-party network. At the time, third-party settlement organizations only had to report on Form 1099-K when the total number of transactions exceeded 200 AND the total sum of those transactions exceeded $20,000. These standards stayed the same through 2021. Then, Congress passed the American Rescue Plan of 2021 (Definitely didn't "rescue" any recipients of money via third party transaction). The verbiage in this legislation seemingly wiped out the 200-transaction standard and dropped the total sum measuring stick from $20,000 to $600! $19,400 disappeared with a few strokes of the pen.
Now many people, including Congressmen, accounting professional organizations (AICPA), and even the IRS itself thought that was far too big of a bite at once. So, the original standard of $20,000 and 200 transactions was kept in place for 2021. 2022 would be a "transition year" and 2023 transactions reported in 2024 filing season would fall under the new standard. As little Carol Ann from the Poltergeist movie series might say: "It's Here!"
Estimates of the revenue to be generated by the new standard sit a cool billion dollars. Yes, that's billion with a capital B. Translation, that rule change will result in A LOT of money rolling in to the coffers.
It will apply to all that ACCEPT funds through third party payment (as opposed to spend via third party payment.) So business income is in the mix, but also hobby income, gig income, sale of personal items, possibly even nontaxable transactions between friends and family IF they are not properly coded as such.
In addition, if you are a recipient of third-party payments, and you typically file your tax return early, you might want to hold up a bit in 2024. Why? Well, Form 1099-K isn't due until the end of February for paper filers and the END OF MARCH for those that electronically file the 1099-K. That's even later than Form K-1, and two months after W-2s and other 1099s! If you file your return early and get a 1099-K in early April, you might have to file a superseding return if you filed before April 18th, or an amended return if after the 18th.
The gross amount of the 1099-K you received will have to be reported on the 1040 (or 1041, 1120, 1065) and then adjustments made from there. "Netting out" outside of the return isn't permitted. Where the 1099-K is reported will also be a crap shoot because it varies. For example, on the 1040 it could be reported on Schedule 1, 1099-B, Schedule C, or E. I don't have the time, space or inclination to cover all of the scenarios.
Lastly, the sad part is for personal transactions because the "heads they win, tails you lose scenario" is in effect. That is, if you sell personal items for a gain you may have to pay a capital gains tax, but you get no credit for a personal loss, it simply cancels out. Also, if you are selling items on Ebay, be sure to have a good idea of what was sold and the value. This will prove to be maddening for those that are cleaning house to move to smaller living quarters when they age, or those liquidating a parent's estate.
Halas Consulting
Ph: 412-685-4285
Email: chalas@vennwealth.com
website: www. halasconsulting.com
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