Form 1099-K Reporting Thresholds $120,000? $600? $5,000? Here's What You Should Know How much is $5,000?
1099-K Reporting
Form 1099-K is used by third-party platforms or settlement organizations (including the most popular payment applications and online marketplaces) for reporting payments to businesses whose annual revenue is greater than $20,000 in total payments and has at least 200 transactions in a calendar year. The forms are usually issued in the year following on the 31st of March.
Reduce and Delay
As part of the American Rescue Plan Act of 2021, the threshold dropped to $600 in total net payments, and the transaction count test scrapped entirely. However, implementation of the reduced threshold has been repeatedly delayed, first in 2022, and again in 2023. What's next in 2024?
The Scoop in 2024
In the last quarter of 2013, the IRS all but scrapped the $600 threshold and instead landed on an undetermined threshold of $5,000 that has no criteria for total transaction count. They are saying it's a gradual method of implementing the $600 threshold however we're not holding the breath of hope. We do know that the threshold for reporting in 2024 is $5,000for a period.
This is an important change from the prior $2000 and 200 transactions requirement, encompassing a much larger range of businesses than prior to.
How Does It Impact Sellers
The year 2023 was the last time sellers were allowed to report 1099-K when they reached the threshold of $20,000 in total payments, or 200 transactions. But, as the threshold is being reduced to $5,000 in 2024, we expect a dramatic rise in the amount of sellers that will receive this form. In fact, more than 50% likely to receive this form for the first time.
We keep pace with the constant shifts in taxes and tax regulations, so that you don't have to worry about it, which lets you be focused on growing while we manage the complexities of global tax.
For further information for more information, check out the IRS's official announcement on this page.
