global Tax IRS Releases Major Changes to 1099-K Reporting in 2022 December 21, 2021 Does your business use cash apps like Venmo and Paypal? A new IRS rule is set to go into effect which will impact the rules for tax reporting by these third-party payment networks. *Editor's note: The IRS has delayed this threshold decrease as of December 23, 2022. Attention businesses…if you use third party payment networks such as Paypal, Amazon or Venmo, you will want to read up on what’s set to change regarding your 1099-K in 2022. What is form 1099-K? Form 1099-K is used to report transactions made via payment settlement entities (PSE). If you own a business that accepts payments via credit, debit, and third-party payment networks like Paypal, you are required to report this information on Form 1099-K. Under previous rules, the IRS required each PSE to send your business a Form 1099-K by January 31st if you received over $20,000 in gross payment volume and over 200 separate payments in a calendar year. What’s new? Starting in 2022, the threshold decreases to $600, meaning if you receive more than $600 per year (no minimum transaction requirement) through third party peer-to-peer payment apps, you will be taxed on those transactions. Many businesses can expect the number of 1099-Ks they receive to skyrocket next year due to this change. When is the change effective? The law becomes effective in 2022, thus impacting January 2023 filings. SOC Compliance From a System and Organization Control (SOC) perspective (check out our blog https://kahnlitwin.com/blogs/business-blog/what-is-a-soc-audit for the basics), make sure you review the third party payment networks’ SOC compliance. Ensuring your third party service providers have SOC reports in place is essential—through a SOC report you can ensure they have the protocols in place to protect your data. Need assistance preparing for this change? Unsure if you are required to file form 1099-K? Contact us, we can help.
