{"id":663,"date":"2021-04-08T08:47:11","date_gmt":"2021-04-08T08:47:11","guid":{"rendered":"https:\/\/blog.tax1099.com\/?p=663"},"modified":"2025-09-19T10:04:36","modified_gmt":"2025-09-19T10:04:36","slug":"major-changes-to-1099-k-reporting","status":"publish","type":"post","link":"https:\/\/www.tax1099.com\/blog\/major-changes-to-1099-k-reporting\/","title":{"rendered":"2022 1099-K UPDATE: The IRS Brings Some Major Changes To Form 1099-K Reporting (HINT: Lowered Threshold Limits)"},"content":{"rendered":"\r\n

2022 1099-K Update – The IRS is lowering the transaction threshold for 2022 Form 1099-K reporting<\/a> with a view to streamlining 1099 reporting and tax compliance<\/strong>.<\/p>\r\n\r\n\r\n\r\n

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What You Need To Know About The Updated 2022 1099-K Threshold?<\/h2>\r\n\r\n\r\n\r\n

As you may already know, the IRS is streamlining its reporting and compliance regulations in order to improve the accuracy of reporting and tax transparency. The IRS has recently introduced a couple of changes to the 2022 1099-K reporting.<\/p>\r\n\r\n\r\n\r\n

This change comes after President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law on March 11th, 2021. According to Forbes<\/a>, the bill specifies the minimum threshold has been lowered for Form 1099-K, a form filed by the Payment Settlement Entities (PSEs) to report gross amounts of all reportable payment transactions.<\/p>\r\n\r\n\r\n\r\n

This law will become effective in 2022 tax year and will impact the January 2023 filings.<\/p>\r\n\r\n\r\n\r\n

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Form 1099-K 2022 Threshold Lowered From $20,000 To $600<\/h2>\r\n\r\n\r\n\r\n

Prior to the update, the IRS required the payment settlement entities to report all the payment transactions amounting to at least $20,000 in a year with a transaction limit of up to 200 (per customer). The PSE has to send a copy of Form 1099-K<\/a> to the IRS and the recipient (or customer).\u00a0<\/p>\r\n\r\n\r\n\r\n

It is also important to note that transactions that aren\u2019t related to goods or services (such as earnings on Bitcoin) are exempted from this new rule.<\/p>\r\n\r\n\r\n\r\n

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eFile Form 1099-K Online<\/strong><\/a><\/div>\r\n<\/div>\r\n\r\n\r\n\r\n
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Form 1099-K Requirements 2022<\/h2>\r\n\r\n\r\n\r\n

Now, if you are a Payment Settlement Entity, this new update means you are required to file a 1099-K and send a copy of the form to the IRS and the customer for processing transactions amounting to $600 or more in a year.\u00a0<\/p>\r\n\r\n\r\n\r\n

The transaction amount has been lowered from $20,000 to $600. The transaction limit has been lifted with the new update.<\/p>\r\n\r\n\r\n\r\n

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Why Is The 1099-K 2022 Threshold Lowered?\u00a0<\/h2>\r\n\r\n\r\n\r\n

According to this study<\/a> conducted by the IRS Tax Gap, about 80% of the gig economy workers who earn less than $20,000 in a year from a company don\u2019t receive a 1099-K. This means thousands of gig workers are misreporting their incomes, which is resulting in misreported and\/or under reported income.\u00a0<\/p>\r\n\r\n\r\n\r\n

It is also important to note that until the CARE Act forced the separation of nonemployee compensation reporting from the 1099-MISC, some employees were losing unemployment benefits like health insurance in the middle of a global pandemic.\u00a0<\/p>\r\n\r\n\r\n\r\n

Estimating the gig economy and its rising impact on the overall economy is the need of the hour. By implementing this new rule, the IRS and the government plan to get a clear picture of the gig economy and introduce appropriate revolutions.\u00a0<\/p>\r\n\r\n\r\n\r\n

PSEs must understand that reporting these transactions helps ensure tax transparency, which further helps the IRS generate revenue. This revenue is used for the welfare and development of the U.S.<\/p>\r\n\r\n\r\n\r\n

\u00a0<\/div>\r\n\r\n\r\n\r\n
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eFile Form 1099-K Online<\/strong><\/a><\/div>\r\n<\/div>\r\n\r\n\r\n\r\n
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What Does This 2022 1099-K Change Mean For You?\u00a0<\/h2>\r\n\r\n\r\n\r\n

If you\u2019re a contractor or an entrepreneur or a company that uses e-commerce platforms like e-Bay to sell or resell products or services, the Payment Settlement Entity (think PayPal or your Credit Card Operator) is involved between you and the e-commerce company would send you a 1099-K form.<\/p>\r\n\r\n\r\n\r\n

You will have to read and validate the transactions and adjust your reports accordingly. What may be treated as an income by the merchant entity may not be an income for you. So, you have to be extra conscious about your 1099-K reports and maybe even get expert tax advice from a tax professional.<\/p>\r\n\r\n\r\n\r\n

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How Does New 1099-K 2022 Threshold Affect Your Previous Filings?\u00a0<\/h2>\r\n\r\n\r\n\r\n

If you\u2019re a Payment Settlement Entity, then it\u2019s probably a good idea to audit the incomes you have generated previously through online and debit\/credit card transactions.\u00a0<\/p>\r\n\r\n\r\n\r\n

If you\u2019re a contractor who sells products on app-based companies like Etsy, ask for a 1099-K from the PSE.\u00a0<\/p>\r\n\r\n\r\n\r\n

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eFile Form 1099-K Online<\/strong><\/a><\/div>\r\n<\/div>\r\n\r\n\r\n\r\n
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States That Have Adopted The New 1099-K 2022 Threshold Rule\u00a0<\/h2>\r\n\r\n\r\n\r\n

Some states have already implemented this rule. So, if you\u2019re operating from the following states, then you must file 1099-K 2022 and send the copies to the IRS and the recipient to avoid non-compliance issues.\u00a0<\/p>\r\n\r\n\r\n\r\n