Form 1099-K Reporting Thresholds: $20,000? $600? $5,000? This is What You Must Be aware of $5,000? Here's What You Need to Know
1099-K Reporting
The form 1099-K can be used by third-party settlement platforms or companies (including the most popular payment applications and online marketplaces) in order to record payments made to companies whose total annual turnover is greater than $20,000 in total payments and has at least 200 transactions per calendar year. Form 1099-K is usually released next year, by the 31st of March.
Reducing and delaying
As part of the American Rescue Plan Act of 2021, the threshold was dropped to $600 in total gross payment, with the test of transaction count eliminated entirely. But the implementation of this reduced threshold has been repeatedly delayed, first in 2022 and then again in 2023. The question is, what's in store for 2024?
The Scoop on 2024
In the last quarter of 2013, the IRS all just scrapped the $600 threshold but instead settled for an unintentional $5,000 threshold that has no criteria for total transaction count. They are calling it a phased approach of the $600 threshold however we're not holding our breath for it. All we know is that the threshold for reporting in 2024 will be $5,000 -- - for the duration.
It is a significant departure from the prior $2000 and 200 transactions requirement which covered a greater number of retailers than before.
How This Impacts Sellers
The year 2023 was the last time sellers were required to file 1099-K reports if they surpassed $20k in gross transactions and 200 transactions. However, with the threshold dropping to $5,000 for 2024, we anticipate a dramatic rise in the amount of sellers receiving the form. More than half likely receiving this form for the very first time.
At , we keep up with constant changes in taxes and tax regulations, so that you don't need to, allowing you to focus on growth while we handle the complexity of international tax.
For further information, you can view this IRS announcement below..
