Selling handmade products on Etsy, online tutoring and web editing are a few side hustles many turned to throughout the COVID-19 pandemic. As a result of being laid off or not feeling safe to return to work, many people started the small businesses they always dreamed of. Consequently, the use of mobile payment apps such as Venmo or PayPal grew, as it was a convenient way to receive payment. In 2020 alone there were 900 million new mobile payment app users worldwide. One of the upsides of using these apps is the ability to receive payment and move the money into a personal account immediately.
Another plus? In the past, you weren’t required to report your earnings via mobile payment apps to the IRS unless you had at least 200 transactions exceeding $20,000 in total value. But starting January 1, 2022, if you make over $600 in transactions on goods and services, you will need to report your earnings for next year’s filings in 2023. If you exceed this goods and services threshold, you will receive a 1099-K form.
The change to the tax code was signed into law as part of the American Rescue Plan Act, the Covid-19 response bill passed March 2021.
What Is The 1099-K Form?
According to the IRS website, the 1099-K form is an IRS information return used to report certain payment transactions to improve voluntary tax compliance.
Essentially, this form is a way for online retailers to submit their earnings. The company, such as Paypal or Venmo, will fill out a form on your behalf and you will get a copy as well.
While this is a federal tax code change, individual states have different reporting requirements.
Examples Of State’s 1099-K Current Requirements
- Requires payment settlement entities, electronic payment facilitators or third parties that have contracted with a payment settlement entity to file the form with the Florida Department of Revenue within 30 days after the corresponding federal filing is due.
- Everyone who files a 1099-K must electronically file a copy with the Georgia Department of Revenue on or before the date it is due to the IRS.
While this is a change for the 2023 tax filing season, some states have already started implementing it. States that have already implemented the new tax code change include: Arkansas, Illinois, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Vermont, Virginia and Washington D.C.
Remember to stay ahead of your filing deadlines and liabilities, as tax legislation changes often. We frequently share tax code updates on our blog so you can stay up to date.
Have a question? Contact Monika Miles, Miles Consulting.
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