Did the American Rescue Plan of 2021 contain a provision to lower reporting requirements for 1099-k income to $600?
February 23, 2023Does it cost money to file a tax extension for my small business?
February 23, 2023What is a 1099k? Should I worry about them?
A 1099-K is a tax form used by payment settlement entities to report payment transactions to the IRS. It is typically used for businesses that accept payments through third-party payment processors, such as PayPal, Stripe, or Square.
If you are a business owner who receives payments through one of these payment processors and your transactions meet certain thresholds, you may receive a 1099-K form at the end of the year. The thresholds are $20,000 or more in gross payments and 200 or more transactions.
You should worry about 1099-K forms because they are used to report your income to the IRS. Failing to report your income accurately can result in penalties and interest charges, which can be expensive. It’s important to keep accurate records of your payments and to reconcile them with the amounts reported on your 1099-K form. If you believe there is an error on your 1099-K form, you should contact the payment processor to request a correction.
Be prepared for for an audit if you have not been paying taxes on this type of income in the past. A tax professional may be necessary to navigate these changes.
