For Form 1099-K, reporting thresholds $120,000? $600? $5,000? Here's What You Need to Know $5,000? Here's What You Need to Know
1099-K Reporting
The form 1099-K can be used by third-party settlement platforms or organizations (including well-known payment apps as well as online marketplaces) in order to record payments made to businesses whose annual revenue exceeds $20,000 in gross payments and at least 200 transactions during a calendar year. Form 1099-K is usually released next year, on the 31st of March.
Reducing and delaying
As part of the American Rescue Plan Act of 2021, the threshold was reduced to $600 for all gross payments with the test for transaction count being eliminated entirely. The implementation of the lower threshold was repeatedly delayed, first in 2022 before being reintroduced in 2023. What's next for 2024?
The Scoop in 2024
Late last year, the IRS all did was scrapping the threshold of $600 and settled on an undetermined threshold of $5,000 without a test to determine the total number of transactions. They are calling it a phased approach of the $600 threshold however we're not holding our breath. All we know is that the threshold for reporting in 2024 will be $5,000 -for a period.
It is a significant departure from the prior $200 and $20,000 transaction requirements that covered a larger range of businesses than before.
What Does This Mean for Sellers
In 2023, sellers were subject to 1099-K reporting if they surpassed the threshold of $20,000 in total payments, and had more than 200 transactions. But, as the threshold is dropping to $5,000 for 2024, we expect a dramatic rise in the amount of sellers receiving this form, with over 50 percent likely to be receiving the report for the first time.
At , we stay up with constant changes in tax rules and regulations so that you don't have to, allowing you to focus on growth while we handle the complexity of taxation worldwide.
To find out more read this IRS announcement below..
