Using Payment Apps? Be Aware of 1099-K Reporting Changes

By Ginny Graef, CPA, Partner

Using Payment Apps? Be Aware of 1099-K Reporting Changes

IRS extends $600 transaction threshold for 1099-K reporting

On November 26, 2024, the Internal Revenue Service (IRS) issued Notice 2024-85 which provides transition relief and guidance for third-party settlement organizations (TPSOs) regarding transaction reporting requirements for 2024 and beyond. TPSOs such as Venmo and PayPal will be required to report transactions via Form 1099-K when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026.

Background

The 2021 American Rescue Plan Act reduced the de minimis threshold for reportable transactions on Form 1099-K, Payment Card and Third-Party Network Transactions, from $20,000 (and over 200 transactions) to $600.

The significantly lower threshold raised concerns with TPSOs and the tax community as taxpayers would be required to report routine everyday transactions. The IRS expressed that it was not yet prepared to process the number of forms the $600 threshold would generate.

As a result of the feedback, the IRS delayed adjusting the Form 1099-K reporting threshold for calendar year 2023 and earlier, maintaining the $20,000/200+ transaction threshold. The IRS also indicated that for calendar year 2024, it would begin phasing in the more stringent reporting requirements — setting a $5,000 transition threshold.


The Keiter Tax team is closely monitoring these and other changing regulations that may impact you and your business. We will keep you updated so you can plan accordingly. Contact your Keiter Opportunity Advisor with questions specific to your unique situation.

Resource

IRS provides transition relief for third-party settlement organizations, Form 1099-K threshold is $5,000 for calendar year 2024

 

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About the Author


Ginny Graef

Ginny Graef, CPA, Partner

Ginny enjoys working closely with her clients and their team of legal and financial advisors to provide tax planning solutions that meet her clients’ specific needs and goals. Ginny’s areas of expertise include income, gift, and trust and estate compliance and planning services. In addition, she focuses on compliance and consulting related to investment partnerships.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

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