Attention businesses and anyone that receives payments from PayPal, Venmo, eBay, etc…the IRS has issued new FAQs which provide updated guidance on filing requirements, penalties and more. Let’s dive in.

Background

Form 1099-K is used to report payments made for goods or services via third party settlement organizations (TPSO). If you own a business that accepts payments via credit, debit, and third-party payment networks like Venmo or PayPal, you are required to report this information from Form 1099-K on your tax return.

Note – see our recent blog here regarding the IRS delaying the lower filing thresholds for Form 1099-K. However, some companies had already instituted the lower thresholds in their tax reporting and have sent out 1099-Ks for 2023 using those lower amounts.

Updated 1099-K FAQs: Highlights

The FAQ revisions include significant updates and additions across each of the following sections:

• Basic 1099-K details
• Steps to take upon receiving Form 1099-K
• Common situations
• Third party 1099-K filers
• Should your organization prepare, file and furnish Form 1099-K?

Here’s a look at some of the questions that were added:

Steps to take upon receiving Form 1099-K

• Are all the payments reported on my Form 1099-K taxable?
  • Whether a payment is taxable or not isn't solely determined by its appearance on Form 1099-K. Likewise, the absence of a payment on this form doesn't automatically deem it nontaxable. The method of reporting Form 1099-K payments on your tax return varies depending on the nature of the payments you've received.
• I’m living abroad and received a Form 1099-K. Am I required to report the amount included on it?
  • Whether you’re in the U.S. or abroad, the rules for filing income tax returns and making estimated tax payments are typically the same. Keep in mind it’s important to report all income that you received during the year on your tax return, even if you did not receive a 1099-K.
• What if I received a Form 1099-K for selling a personal item, but I don’t remember what I originally paid for it?
  • It’s always a good idea to keep accurate records for personal items you sell, but if you cannot find a record of the sale, you can contact the bank or credit card company used to purchase the item who can furnish copies of old statements. You can also contact the seller who may have record of the sale.
• How does a payment app or online marketplace know if I receive payments for goods or services vs. money from friends and family?
  • Online marketplaces and apps have their own processes to analyze a payment’s nature. It helps to review all apps and marketplaces’ policies.
• Why did the ticket sale app or online marketplace ask for my social security number?
  • A lot of third-party ticket sales apps or internet marketplaces monitor an individual's ticket sales revenue, disclosing this revenue to the IRS and reporting payment details to the seller via a Form 1099-K. Your social security number must be disclosed on the Form 1099-K. Neglecting to provide it might lead to backup withholding.
• Can I provide my ITIN instead of an SSN or employee identification number (EIN) when I sell items online? What should I do if the number on file with the payment app or online marketplace is incorrect?
  • Yes, you can provide an ITIN. If the number on the 1099-K is incorrect, you should be in touch with the issuer to ensure you will not be subject to backup withholding.

Common situations and how to approach them

• Will my child get a Form 1099-K if I send them money using payment apps?
  • Form 1099-K is used to report certain payments received for selling goods or providing services. Money sent to family and friends should not be reported on the form.
• What if I receive multiple Forms 1099-K from different payment apps with some gifts, reimbursements or other personal payment types that should not have been reported?
  • Check your records to see how much you received in personal payments, like gifts or reimbursements from friends and family, and how much needs to be reported on your tax return. You should ask the payer for a corrected 1099-K. The FAQs link to the IRS website which explains what to do if you can’t get a corrected Form 1099-K
• If I received a Form 1099-K for donations I received through crowdfunding, am I required to report the proceeds reported?
  • You might get a Form 1099-K for crowdfunding earnings. Some of this money might be taxable and needs to be reported on your tax return, but some might be considered a gift and not taxable.

View the complete list of updated and added FAQs and answers here.