Reminder: New Form 1099-K Requirements and Income Tax Reporting
Background / Prior InformationIn January 2022, our blog, New Form 1099-K Requirements provided a summary of the changes to the Form 1099-K because of the American Rescue Plan. The change decreased the total amount of aggregate payments needed for third-party networks to report and send out a Form 1099-Ks from $20,000 to $600, effective after December 31, 2021.
The key takeaway: Nothing will change for Uber or Lyft drivers, as they are required to report the income received as a driver whether they received a 1099. For these individuals, the lower threshold makes it more likely that they will receive a 1099-K from Uber/Uber Eats and/or Lyft.
Important: Helpful Additional IRS GuidanceForm 1099-K includes gross amount of all reportable payment transactions. What this means is that you will receive a 1099-K from each payment settlement entity from which you received reportable transactions. The gross amount does not include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. This increases the importance of keeping business books and records updated, including any amounts that may not be reported on Form 1099-K.
In addition to keeping your business books and record updated, it is also vital to do the following:
Check your receipt records and statements to confirm that the amount on your Form 1099-K is accurate.
Review your records to ensure your gross receipts are accurate, and reported correctly on your income tax return.
Determine if you have reported income from all forms of payment including cash, checks, and debit/credit cards, and stored-value card transactions.
Maintain documentation to support both income and expenses that you report on your income tax return.
What if there is incorrect information on the Form 1099-K I received?If any of the information on your Form 1099-K is incorrect including, but not limited to: not belonging to you or is a duplicate; the payee Taxpayer Identification Number (TIN) is incorrect; the gross amount of payment transactions is incorrect; the number of transactions in incorrect; and/or the Merchant Category Code (MCC) does not correctly describe your business, consider contacting the Payment Settlement Entity (PSE). The PSE will be listed on the Form 1099-K with the name and telephone number for contact on the lower-left of the form.
ALERT: Inform your Herbein tax consultant if you receive one or more Forms 1099-KPlease contact your Herbein team tax consultant through the form below if you receive a 1099-K, so that they may help you to determine on how best to report on your income tax return.
Article contributed by Emily C. Nolt.