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Understanding Form 1099-K

Form 1099-K

IRS Form 1099-K

Form 1099-K is an IRS information return used to report payment card and third-party network transactions on a federal tax return for businesses, sole proprietors, individuals, and gig economy workers. The Form 1099-K includes the gross amount of all payment transactions from each payment settlement entity from which you received payments, including payment card transactions and third-party network transactions (via Venmo, Zelle, Cash App, PayPal, etc.).

Form 1099-K for 2022

The IRS announced on December 23, 2022 that the requirement enacted in the American Rescue Plan Act of 2021 that lowered the reporting threshold from $20,000 to $600 for third-party networks that process payments for transactions involving the selling of goods or services beginning in 2022 will be delayed. The lower threshold will not go into effect until 2023.

Reporting Venmo, Cash App, Zelle, PayPal, Apple Pay Transactions

This means that individuals who used a third-party payment network (such as Venmo, Cash App, Zelle, PayPal, or Apple Pay) to sell goods or to receive income for providing services under $20,000 during 2022 should not receive a Form 1099-K (Payment Card and Third-Party Transactions) in early 2023.

Since 2022 is considered a transition year and the change occurred so late in 2022, some individuals may have already received or will receive a Form 1099-K in early 2023 for total transactions between $600 and $20,000.

How to Report Form 1099-K Information on Your Tax Return

The following individuals who receive a Form 1099-K from a third-party network in early 2023 that was for the sale of goods in the individual’s business, for services provided, or certain sales of personal items must report this income on their federal return as follows:

Sole Proprietors and Farmers

Sole proprietors or farmers that receive income for goods and/or services related to their business or farm must include the amounts from their 1099-K with other amounts of income they received and report the total on Schedule C (Profit or Loss from Business) for sole proprietors and Schedule F (Profit or Loss from Farming)  for farmers.

Rental Income

Individuals who receive rental income either for long-term rentals or short-term must report this income on Part I of Schedule E (Supplemental Income and Loss).

Income from Gold, Silver, Coins, and Gems

Individuals who sell personal items, such as gold, silver bullion, coins, or gems that they are holding as an investment must report the sale on Form 8949 (Sales and Other Dispositions of Capital Assets) and recognize either a long-term or short-term capital gain or loss.

Selling Personal Property

Individuals who sell a personal item that resulted in a gain must report the gain as a short-term capital gain on Form 8949.

Uber and Lyft Income Tax Reporting

Individuals who do Gig work, such as for Uber or Lyft, must report this income on Schedule C.

Form 1040 Schedule 1

For individuals who receive a 1099-K for amounts between $600 and $20,000 in the following scenarios, the IRS has stated in the Form 1040 instructions for Schedule 1, line 8z and 24z how to report the following on their federal tax return:

Sold Personal Items at a Loss

If the sale of personal items such as a car, appliances, furniture, household items, etc. resulted in a loss, the amount from the Form 1099-K should be entered as follows on Form 1040, Schedule 1:

  • Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 8z and in the entry line next to line 8z enter “Form 1099-K Personal Item Sold at a Loss – $XXXX (Amount from the Form 1099-K)”.
    • Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 24z and in the entry line next to line 24z enter “Form 1099-K Personal Item Sold at a Loss – $XXXX (Amount from the Form 1099-K)”.

Received Form 1099-K in Error

If an individual received a 1099-K in error and they are unable to have it corrected by the payer, the amount from the Form 1099-K should be entered on Form 1040, Schedule 1 as follows:

  • Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 8z and in the entry line next to line 8z enter “Incorrect Form 1099-K – $XXXX (Amount from the Form 1099-K)”.
    • Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 24z and in the entry line next to line 24z enter “Incorrect Form 1099-K – $XXXX (Amount from the Form 1099-K)”.

Additional 1099-K Resources

For more information, see the following on the IRS website:

CrossLink Professional Tax Software

CrossLink Professional Tax Software

CrossLink is the industry’s leading professional tax software solution for high-volume tax businesses. Built based on the needs of busy tax offices and mobile tax preparers that specialize in providing their taxpayer clients with fast and accurate tax returns, CrossLink has been a trusted software solution since 1989. CrossLink’s in-depth tax calculations, advanced technological features, and paperless solutions allow you to prepare the most complicated tax returns with confidence and ease while providing your customers an unparalleled experience.

Mark Castro, CPA

Mark Castro, CPA

Mark has been with CrossLink Professional Tax Solutions (CPTS) since 2008, but has been in the tax industry since 1990. As the government/tax industry liaison for CPTS, Mark has been very active in working with the IRS, States, and other tax industry members to help improve communications, promote standardization, and simplification of eFile systems. Mark has also been active with industry associations as a board member of the National Association of Computerized Processors (NACTP) and the Council of Electronic Revenue Communication Advancement (CERCA) for many years. These two associations work with the IRS and States to help solve key eFile and electronic tax system issues and work to improve the operations of the State and IRS eFile systems.
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