- Community
- Topics
If you receive money through an app (and most of us do), you might be surprised to receive a new tax form. It’s called Form 1099-K and they’re “all the rage” right now! If you have no idea what this form is, let me fill you in!
Prior to 2024, payment platforms and apps such as PayPal, Venmo, CashApp and many others were only required to send a Form 1099-K to their customers who exceeded 200 transactions or over $20,000 in revenue for the year. Starting in tax year 2024, you’ll receive one if you had $5,000 in transaction revenue. That’s quite a change!
It seems the IRS is trying to track that elusive side gig and hobby income - and they don’t want anyone to feel left out! But in doing so, they may have created a confusing situation for many taxpayers who don’t have any real business or hobby income at all, yet still receive a 1099-K form.
For example, if you sell items on Facebook Marketplace that total $5,000 or more for the year, you might receive the 1099-K “invite” to report that income on your tax return. This could happen even if you were only selling personal items (like you would at a garage or yard sale). If that sounds like you, take a peek at this article about how to handle it.
Here’s a twist you might not see coming! Right now, the preferred method to send money to friends or family is through an app, right? The 1099-K form may not be only for those who sell physical items or provide services to others. Sending monetary gifts totaling over $5,000 (per year) could trigger the form. The good news is that the money-transferring platforms are working on methods to distinguish between business and personal transactions. Until then, your family member will get that Form 1099-K (and so will the IRS) for your gifts to them! Are they ready for that?!
The bottom line is if someone receives a Form 1099-K for personal transactions, they can’t simply ignore it. The IRS will expect to see it on their tax return.
And if you do have a legit business, sell online for profit, or have a little side gig - you’re better off prepared. You’ll want to learn the ins and outs of the Form 1099-K and how to reduce the amount of income you’ll pay taxes on.
Pro Tip: Don’t commingle personal and business income, especially on payment platforms.
There are still some kinks to work out with the new 1099-K reporting requirements. But until that happens, it’s best to avoid further “invites” from the IRS (in the form of letters or audits) and get your taxes done right!