8724.01 / What are the new 1099-K reporting requirements that apply for business owners using certain apps beginning in 2023?

Editor’s Note: The IRS advises that taxpayers who receive incorrect Forms 1099-K request a corrected form from the issuer. The name and contact information of the issuer is listed under "filer" on the top left corner of the form. Taxpayers who do not recognize that issuer should contact the "payment settlement entity" (PSE) listed on the bottom left corner (above their account number). Once they receive the corrected form, they should keep a copy, along with any correspondence from the issuer or the PSE. The IRS also reminds taxpayers that the IRS itself cannot correct the Form 1099-K. If the corrected form is not received by the tax filing deadline, the taxpayer should report the incorrect amount on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, rather than miss the tax filing deadline.¹

After a two-year delay, a new rule that will impact many self-employed individuals became effective January 1, 2024. Starting in 2024, PayPal, Venmo and other third-party payment networks must report a taxpayer’s transactions in excess of $5,000 per year to the IRS. The change was included in the American Rescue Plan Act (ARPA), which was signed into law in March of 2021. The IRS announced the new phased-in threshold decrease in IR 2023-221 and Notice 2023-74. After 2024, the threshold will decrease until it eventually reaches the originally proposed $600 level.

Under prior law, mobile payment apps only had to report transactions if a person had over 200 commercial transactions each year and the total value of those transactions exceeded $20,000. Now, apps like Venmo and Zelle must file and provide a Form 1099-K reporting any commercial income collected through the apps (personal charges between non-business parties are exempt from the new reporting rule). The rules also apply to taxpayers who make sales through internet sites, such as eBay, Airbnb, Etsy and StubHub. They also apply to taxpayers with seasonal businesses who accept credit cards through these types of apps. The apps themselves provide methods for taxpayers to identify their transactions as personal or commercial.3.

The IRS has now updated the FAQ on the new 1099-K reporting requirements. The guidance clarifies that taxpayers can report information from 1099-Ks separately or combine multiple 1099-Ks.