The reporting thresholds for Form 1099-K are The amount is: $20,000? $600? $5,000? This is What You Must Learn $5,000? Here's What You Need to Know
1099-K Reporting
Form 1099-K is utilized by third-party platforms or settlement organizations (including the most popular payment applications and online marketplaces) in order to record payments made to merchants whose annual activity surpasses $20,000 of gross transactions and that have at minimum 200 transactions in a calendar year. The forms usually are issued the following year before March 31.
Redue and Delay
In the American Rescue Plan Act of 2021, the threshold dropped to $600 in total gross payment, with the test for transaction count being eliminated entirely. The implementation of the reduced threshold has been repeatedly delayed, first in 2022 before being reintroduced in 2023. The question is, what's in store in 2024?
The Scoop in 2024
Late last year, the IRS all just scrapped the $600 threshold and instead landed on an undetermined threshold of $5,000 that has no criteria to determine the total number of transactions. They are declaring it to be a phased approach of the $600 threshold, but we aren't holding our breath. All we know is that the threshold for reporting in 2024 will be $5,000 -- - for the duration.
This marks a substantial departure from the previous $200 and $20,000 transaction requirements that covered a larger number of retailers than before.
How Does It Impact Sellers
In 2023, sellers were only subject to 1099-K reporting when they had more than the threshold of $20,000 in total payments, or 200 transactions. But, as the threshold is dropping to $5,000 for 2024, we are expecting an increase in the number of sellers that will receive this form. In fact, more than 50 percent likely to be receiving the form for the first time.
At , we keep up with the constant shifts in tax rules and regulations so that you don't need to worry about it, which lets you concentrate on your growth while we handle the complexity of taxation worldwide.
To find out more read this IRS announcement on this page.
