Form 1099-K Reporting Thresholds The amount is: $20,000? $600? $5,000? Here's What You Need to Know How much is $5,000?
1099-K Reporting
The form 1099-K can be used by third-party settlement platforms or organizations (including well-known payment apps as well as online marketplaces) in order to record payments made to companies whose total annual turnover is greater than $20,000 in total payments and that have at minimum 200 transactions during a calendar year. The forms usually are issued the following year before March 31.
Reducing and delaying
As part of the American Rescue Plan Act of 2021, the threshold decreased to $600 total gross payments with the test for transaction count being eliminated entirely. However, implementation of the lower threshold has been repeatedly delayed, starting in 2022, and again in 2023. So what's the deal for 2024?
The Scoop in 2024
Late last year, the IRS all but scrapped the $600 threshold but instead settled for an undetermined threshold of $5,000, with no test for the number of transactions. The IRS is saying it's a gradual method of implementing the $600 threshold and we're not putting our breath. All we know is that the threshold to report for 2024 will be $5,000for a period.
This is an important change from the earlier $200 and $20,000 transaction requirements which covered a greater group of merchants than ever before.
What Does This Mean for Sellers
For 2023 sellers were only subject to 1099-K reporting when they had more than $20,000 in gross payments and 200 transactions. However, with the threshold being reduced to $5,000 in 2024, we anticipate an increase in the number of sellers that will receive this form. In fact, more than 50% likely to receive this form for the very first time.
At , we stay up with changes to taxes and tax regulations, so that you do not have to worry about it, which lets you focus on growth while we manage the complexities of taxation worldwide.
For more information for more information, check out the IRS's official announcement here.
