Do you know that IRS Form 1099 K reporting rules have been changed? Does it affect your sales made in 2021? These are a lot of queries that come to mind when the tax season is about to start. Yes, the Internal Revenue Service implements new rules and regulations every tax year. Businesses must follow the guidelines for a successful Form 1099 Filing.
What if casual sellers forget to follow this updated info? The answer is simple, the IRS subjects you to pay penalties with interests. So, to stay a few steps away from penalties and interest it’s better to know whether the reporting rules reflect your 2021 sales or 2022 sales.
What are Form 1099 K reporting rules for 2021?
According to the IRS, business owners must file 1099 K to report the third-party network transactions or payment card transactions made in a tax year. Before 2021, businesses used the 1099 K Form when the third-party payments exceed $20,000 with 200 individual transactions. But from the tax year 2021, the IRS has changed the reporting rules. Here is the detailed information:
Report third-party/payment card transactions on 1099 K if:
- The amount exceeds $600 in a tax year via a payment card/third-party network.
- Individual transactions exceed 200 in a calendar year.
How US 1099-K Federal Tax Reporting Burdens on Casual Sellers?
As we know, the reporting rules of Form 1099 K have been changed by the IRS recently. This reporting threshold comes into effect in January 2022. So, Form 1099 K reporting has burdened the casual sellers also. Because previously third-party network transactions were reported only if the payments made throughout the year exceed $20,000. But with the new change, the casual sellers must report the payment card transaction made above $600 also.
Also, there are millions of Americans casually selling things online. This change will have a greater impact on casual sellers also.
How will this change impact your taxes?
Generally, many sales earned aren’t taxable. So, there is no specific rule that the income earned above $600 is taxable. As per the IRS rules and regulations, goods or services sold for profit are taxable. Hence, if you sell something less than what you have paid is not taxable. This means you owe taxes only when you earn profit from what you have paid. For example, if you purchased a bike for $1,000 a few years ago, and then sold it online today for $700. That $700 you made generally would not be subject to income tax. Because you are selling it less than the price for what you have purchased it. But from now on, you have to report these sales on your tax return.
What small businesses and casual sellers are doing?
The change in 1099 K form reporting requirements will impact millions of casual and small business sellers. Also, it will create great confusion, and lead to over-reporting of non-taxable income. Furthermore, it also crosses the privacy concerns of millions of Americans who are just trying to sell goods online.
Form1099Online is the best IRS-approved e-file provider & trustworthy firm. Choose us to file your 1099 returns hassle-freely. We provide 100% genuine and updated information & answer your questions in minutes via chat, phone, and mail.