Why You Might Still Get a 1099-K This Year

Updated for tax year 2023.

Many taxpayers were preparing for a drastic change this year — new reporting requirements for third-party payment platforms that would mean issuing Forms 1099-K to those whose gross payments exceeded $600. However, the IRS made a last-minute 1099-K change in November 2023, rolling back the reporting threshold to $20,000 in gross payments and at least 200 separate transactions. Now the threshold will drop to $5,000 with no transaction minimum in 2024 and the $600 threshold will not go into effect until 2025 (unless the IRS decides to change this).

If you’re an online seller, you might have breathed a sigh of relief at this news. Now you won’t receive Form 1099-K this year, and you have one more year to prepare for the change — right?

Not necessarily. There are still instances where you might receive Form 1099-K for the 2023 calendar year, even if you made under $20,000 and had less than 200 total transactions. Let’s look at some of the reasons why you can receive Form 1099-K this tax year.

1. You were subject to backup withholding

Sometimes, if a payer does not have your correct taxpayer identification number (TIN), they must start withholding a percentage of your payments. This is called backup withholding, and it acts as a failsafe to ensure the IRS receives the required taxes on your income. The current backup withholding percentage rate that would apply to 2023 is 24%.

For example, let’s say you sold various items on an online marketplace like eBay or Etsy this year and made some decent cash doing so. Because the payer (the online marketplace) did not have your TIN (typically your Social Security number), they started withholding 24% of your payments.

In the scenario above, since you were subject to backup withholding, the online marketplace would send you Form 1099-K listing your gross payment transactions for the calendar year.

2. You live in a state with a lower 1099-K reporting threshold

Whether you receive Form 1099-K is also dependent on what state you live in. Not all states follow the IRS filing threshold and instead implement their own requirements.

Here’s a list of possible states that could issue more Form 1099-Ks for tax year 2023 due to lower reporting thresholds:

• Arkansas – $2,500 threshold
• District of Colombia – $600 threshold
• Illinois – $1,000 threshold and 4 transactions
• Maryland – $600 threshold
• Massachusetts – $600 threshold
• Mississippi – $600
• New Jersey – $1,000 threshold
• Rhode Island – $100 threshold
• Vermont – $600 threshold
• Virginia – $600 threshold

Note: The list above is subject to change, as state regulatory agencies still need to fully finalize their requirements.

3. The third-party payment network decided to implement the $600 threshold early

The IRS announcement delaying the $600 reporting threshold came at the end of 2023. Because of the lateness of this announcement, some issuers may still decide to abide by the $600 threshold, even though it is not technically required for tax year 2023.

What happens if I don’t get a 1099-K?

Remember, the $600 tax reporting threshold should not change the amount of taxable income you’re required to report. All personal and business income you make should be reported on your tax return, whether you receive Form 1099-K or not.

Will the IRS catch a missing 1099-K?

There is always a risk of penalties if the IRS finds out you failed to report all your taxable income. If you receive Form 1099-K and do not report that income, the IRS will want to know why, and you run the risk of an audit.

Think of a 1099-K as an information return and a reminder that you need to report your income. If you have been reporting your income correctly, you should not see any significant changes this tax season, and you should not have to worry about an IRS audit.

Let TaxAct help you file

Whatever your tax situation is this year, TaxAct^® is here to help you decode your tax forms and correctly report the income you made. When you file with us, we’ll ask you detailed questions about your income and fill out the necessary forms for you so you can file with confidence.

We can handle more than just simple taxes — if you run a side hustle and receive Form 1099-K, take advantage of our self-employed tax software. And if you need help at any point, you can add Xpert Assist^SM which allows you to chat with a tax expert for further guidance. Start your return for free by tapping one of the buttons below.

This article is for informational purposes only and not legal or financial advice.

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