Form 1099-K Requirements 2022 – Know The New Tax Reporting Requirements For Businesses

Note: IRS delays the rollout of the $600 threshold for 1099-K reporting.
The threshold for Form 1099-K remains at $20,000 with a 200 transaction limit for the year 2023. This delay designates 2023 as a transition period, maintaining the existing requirements for reporting.

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All about the new tax reporting requirements for businesses in 2022 for Form 1099-K.

Change. 

A concept that is loved by many, but hated by many as well. 

But do you know who loves change the most? 

Your compliance specialists. 

In the tax compliance narrative, change is the one constant that enables businesses to comply better and stay in the green zone. 

The dynamics of compliance are too vast to stick to the same old regime, especially when newer and infuriatingly creative methods to defy the regulations are being devised every day. 

It’s true. 

Previously, the IRS required taxpayers to report third-party network and payment card transactions on Form 1099-K only if the total number of transactions was 200 or more AND if the gross total of reportable payments was $20,000 or higher.

A simple loophole in the grand picture of compliance. It enabled many businesses to under-report their transactions and even under-report the gross total of reportable payments to avoid paying taxes. These malpractices were one of the many influencing factors which contributed to the widening tax gap.  

The IRS was planning on tightening the regulations for a while, especially with virtual currencies taking center stage, irregularities in reporting, and unprecedented regulatory immobility due to the global pandemic.

Too much money was flowing in and out of the economy, with very little being reported to the IRS. So, naturally, the IRS, along with FinCEN, decided to pay attention to the reporting regimes within the 1099 economy. 

With a multitude of significant changes being implemented by the IRS, the changes to the reporting requirements for Form 1099-K only seem fair and too important to ignore. 

The following will detail the changes in the reporting requirements for Form 1099-K for the 2022 tax year and how to ensure compliance easily.

So, let’s get started.

What Is Form 1099-K? 

• Form 1099-K is an IRS form in the 1099 information return series. 

• It is a unique return that exclusively deals with third-party network and payment card transactions. 

• PSEs or payment settlement entities have to issue a copy of Form 1099-K to the recipient and submit the same to the IRS.

• Examples of payment settlement entities(PSEs) include Cash App, PayPal, and Venmo. 

Form 1099-K had a different set of reporting instructions prior to the new update. And taxpayer unions have mixed feelings about it. 

Let’s take a look.

What Has Changed For Form 1099-K In 2022? 

The IRS took the following measures to streamline the 1099-K reporting. 

Reducing the minimum threshold amount for reportable payments

• Before the update, the IRS required PSEs to report third-party network and payment card transactions made to participating payees in a calendar year with Form 1099-K. However, this came with a pre-qualification of filing the 1099-K return only if the gross total of the reportable payments was $20,000 or higher AND if the transaction volume was 200 or higher. 

• So, filers can still follow the above rule for returns that are to be filed or were filed for calendar years prior to 2022. 

• But you’ll need to adapt to the new rules for payments taking place after December 2021, i.e, file Form 1099-K if the gross total of the reportable payments is $600 or higher with no cap on the transaction count. 

Removing the transaction limit as a pre-qualification for reporting

As you must have observed, the IRS has removed the transaction limit as a pre-qualification for reporting 1099-K payments. This means that all third-party network and payment card transactions must be reported on Form 1099-K, regardless of the transaction count. 

Form 1099-K 2022 New Reporting Requirements For Businesses 

PSEs must issue a Form 1099-K to every participating payee to whom they’ve paid at least $600 in a gross total of reportable payments, regardless of the transaction count. This rule exclusively applies to payments made to participating payees in the calendar years after 2021. 

The new measures aim to enable information transparency, reporting accuracy, and voluntary compliance.

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