Tax Tip #118
What to do if Form 1099-K Payment Card and Third Party Network Transactions is Received for 2022
Taxpayers earning income from selling goods and/or providing services will most likely receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party network transactions of more than $600 for the year. An example of a company that will send this form is PayPal.
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 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.
Taxpayers must report all income on their tax return unless it is excluded by law. Money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
Action Point: If this form is received, when providing tax documents for the preparation of the 2022 tax return, indicate if this is an amount that is subject to tax or if this is money received that should be excluded from taxable income. If all or some of the reported amount is subject to taxable income, then keep in mind that business related expenses could be deducted as well to help lower the amount of income that is subject to tax.
