For Form 1099-K, reporting thresholds $120,000? $600? $5,000? This is What You Must Be aware of $5,000? Here's What You Need to Know
1099-K Reporting
Form 1099-K is used by third-party platforms and settlement organizations (including well-known payment apps as well as online marketplaces) in order to record payments made to businesses whose annual revenue exceeds $20,000 in gross payments and at least 200 transactions in a calendar year. The forms are usually issued the following year by the 31st of March.
Reducing and delaying
In the American Rescue Plan Act of 2021, the threshold reduced to $600 for all net payments, and the test of transaction count eliminated entirely. However, implementation of the lower threshold was repeatedly delayed, starting in 2022, and again in 2023. So what's the deal in 2024?
The Scoop in 2024
Late last year, the IRS all just scrapped the $600 threshold but instead settled for an undetermined threshold of $5,000 that has no criteria for total transaction count. They're saying it's a gradual approach of the $600 threshold however we're not holding our breath for it. We do know that the reporting threshold for 2024 will be $5,000- period.
This marks a substantial departure from the previous $2000 and 200 transactions requirement, encompassing a much larger number of retailers than prior to.
What Does This Mean for Sellers
In 2023, sellers were subject to 1099-K reporting when they reached the threshold of $20,000 in total payments, or 200 transactions. With the threshold dropping to $5,000 for 2024, we are expecting a dramatic rise in the amount of sellers that will receive this form, with over 50% likely to receive this form for the first time.
At , we stay up with changes to taxes and tax regulations, so that you do not have to keep up, and you can be focused on growing while we manage the complexities of international tax.
To find out more for more information, check out an IRS official statement here.
