IR-2022-189, October 24, 2022
WASHINGTON — The Internal Revenue Service reminds taxpayers earning
income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network
transactions of more than $600 for the year.
There is no change to the taxability of income; the only change is
to the reporting rules for Form 1099-K. As before, income, including from part-time work, side jobs or the sale of goods, is still taxable. Taxpayers must report all income on their tax return unless
it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K; or any other information return.
The IRS emphasizes that money received through third-party payment
applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
The American Rescue Plan Act of 2021 (ARPA) lowered the reporting
threshold for third-party networks that process payments for those doing business. Prior to 2022, Form 1099-K was issued for third party payment network transactions only if the total number of
transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099-K.
The lower information reporting threshold and the summary of income
on Form 1099-K enables taxpayers to more easily track the amounts received.
Generally, greater income reporting accuracy by taxpayers also
lowers the need and likelihood of later examination.
Consider making estimated tax payments
Income taxes must generally be paid as taxpayers earn or receive
income throughout the year, either through withholding or estimated tax payments.
If the amount of income tax withheld from one's salary or pension is
not enough, or if they receive other types of income, such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.
If they are in business for themselves, individuals generally need
to make estimated tax payments. Estimated tax payments are used to pay not only income tax, but other taxes as well, such as self-employment tax and alternative minimum tax.
Publication 17, Your Federal
Income Tax (For Individuals), provides general rules to help taxpayers pay the income taxes they owe.
Additional helpful information is available in Chapter 5, Business
Income, of Publication 334, Tax Guide for Small Business; Publication 525, Taxable and Nontaxable Income and on IRS.gov at Understanding Your Form 1099-K.
Form 1099-K, its instructions and a set of answers to frequently asked questions are available on IRS.gov.