WASHINGTON, D.C. — To streamline the tax filing process, the Internal Revenue Service (IRS) is debunking common misconceptions surrounding Form 1099-K. This proactive approach is intended to ensure taxpayers understand the intricacies of this form, which channels reporting on Payment Card and Third Party Network Transactions.
The IRS observed that misinformation had become widespread, and the agency hopes to demystify the circumstances surrounding receiving and dealing with Form 1099-K, to arm taxpayers with the information they need to file accurately.
One persistent myth that the IRS is eager to debunk involves personal payments from friends and family. Despite frequent rumors, these payments, which can range from sharing the dinner bill to chipping in for travel expenses, ought not to be reflected on Form 1099-K. This form is designed to record payments for goods and services, not personal transactions, regardless of the sum involved.
Another falsehood circulating among taxpayers is the notion that they aren’t obliged to report income if they didn’t receive a Form 1099-K. Contrarily, federal law stipulates that all income is taxable unless an exclusion is explicitly stated in tax law. Thus, earnings from selling goods or services must be reported, regardless of whether or not a Form 1099-K was received.
This brings us to another crucial point of confusion. The IRS wants to make it abundantly clear that individuals may receive a Form 1099-K for goods or services sold under the $20,000 and 200 transactions threshold set for 2023. This threshold is a reporting requirement, but payment apps and marketplaces may still send a Form 1099-K for transactions below this amount. Moreover, states may impose lower thresholds which may result in some individuals receiving a Form 1099-K for amounts below the federal minimum.
One more critical correction needs to be made that taxpayers do not owe taxes on the gross amount reported on Form 1099-K. While the form does include the total payments, the amount owed in taxes is calculated through the form and other tax records when filing their tax return.
The IRS also knocked down a myth that only business owners are liable to receive a Form 1099-K. In fcat, anyone who used online marketplaces or payment apps to sell goods or services may receive this form.
Lastly, the IRS stressed the importance of not dismissing Form 1099-K upon its receipt. This form should be used along with other tax records to calculate the correct taxes owed.
For individuals who received a Form 1099-K erroneously, the IRS has outlined steps that should be taken. Furthermore, to aid understanding and accurate completion of the form, the IRS has made a host of resources available online.
The IRS’s aim with this debunking exercise is to arm taxpayers with accurate information to avoid mishaps and help them fulfill their tax obligations correctly. The full details of the facts and myths outlined are available for further exploration online.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.