New tax laws can mean changes to your personal taxes — and can cause some stress and confusion.
If you’ve recently heard about a new rule involving tax forms for digital payments — heads up! You’ll want to know that new rule change has been delayed.
What’s new: The IRS has announced a delay to the 1099-K rule changes as outlined on this page. For tax year 2022, the rules will generally apply as they did for tax year 2021.
Find additional details below.
Payments sent via apps and online platforms, such as Venmo, eBay, or others can trigger a tax form for the person who received the payments. The rules for when the form is sent has changed — and then changed again.
What’s changed and what applies for 2022 tax returns:
In 2021, the rule for who gets a 1099-K for 2022 tax returns dropped to $600 and at least one transaction (down from $20,000 and 200 transactions) *.
On Dec. 23, 2022, The IRS delayed the $600 rule for 2022 tax returns and re-instated the previous rule ($20,000/200 transactions). Some people will still receive this form if they have enough payments.
Read on for additional details about the delay and what you could expect in the year to come.
*The original changes to Form 1099-K thresholds were part of changes from the American Rescue Plan Act passed in March 2021.
Still expecting to get form 1099-K? Don’t sweat it. We’re here to help. No matter what triggers your Form 1099-K, you can count on H&R Block to help you navigate any income you received from an online platform.
I’ve never heard of a 1099-K. What is that form?
Form 1099-K is an IRS form that shows money received for goods and services from certain third-party sites, such as payment apps, rideshare services, or other credit or debit card processing sites. If you have enough payments that fall into this category, Venmo, Facebook Marketplace, eBay, Etsy, or whichever service you work with will send you the form mentioned above by January 31.
Why was the new rule delayed?
According to the IRS, the new rule was not intended to track personal transactions such as paying friends or family for bills, or sharing the cost of a ride, gifts or rent. The delay gives taxpayers and businesses more time to understand and prepare for the changes. This extra time will decrease the likelihood tax forms will be sent for personal transactions.
Do I have to pay tax on the amount that will be reported in 1099-K?
It depends. If you’ve sold an item and made money on the sale (whether in your business, hobby, or a capital gain on your personal items), then you may owe taxes. However, you likely won’t pay taxes on the total amount shown on your 1099-K.
For example, your form may show a $100 transaction for the comic book you sold, but for your taxes, you’ll factor in what you originally paid plus any fees, which would likely lower your taxes owed. Find out more about capital gains.
Will the rule go back into effect the same way for 2023 returns (filed in 2024)?
As of now, the $600 threshold will apply again for 2023 returns (filed in 2024) unless Congress or the administration changes the amount. In the meantime, apps and platforms may adjust how they are tracking payments, so that personal transactions are excluded.
The platform I used asked me to fill out a W-9. Why is that?
The W-9 form is used to get an official record of your Social Security number (or other tax ID number). If the app or online site you use is required to send you a 1099-K, they need to have documentation of your tax ID on Form W-9.
How can I get ready for my 2024 tax filing next year? What do I need to do now?
You may want to keep receipts and other documentation related to payments for goods and services. In many cases, you won’t need to pay taxes on the transactions. For example, if you sold your $500 designer boots for $300 through a consignment app, you won’t be able to claim a loss for the sale, and you won’t have taxable income. You may not be issued a 1099-K if that’s your only transaction on the app.
If you’re reselling collectibles, it’s helpful to know what you paid for them. Don’t have your receipt? Don’t worry. There are other ways to estimate this information.
I’m not running a business, just clearing out stuff I don’t need. How do I report this?
If you’re not running a business, it makes it a little easier. If you’re selling items for less than what you bought them for, you won’t get to take money off your taxes. But, if you made money on your sale(s), you’ll report it to the IRS on Form 8949 and Schedule D.
I no longer file a tax return due to my status (retired, disabled, etc.) and am just selling personal items. Will I have to file one now?
If you haven’t been required to file taxes, it may be because your income was under a certain amount. If you have capital gains, like the ones described in the questions above, that income may push you over the limit. Review how much you have to make to file taxes.
I buy and sell mostly related to my hobby. Will I be considered a small business owner now?
No one factor determines if you should be considered a business. If you make a profit is one consideration, but there are actually several others, including your expertise and the time you spend on your activity. To dig deeper into whether or not the IRS may see you as a business, review our post on hobby taxes.
Final note: You’ll report hobby income on your tax return, but you won’t be able to deduct hobby expenses like you would be able to deduct business expenses.
What if I am running a business? How will that change my taxes?
If you’re selling as part of business activities, you’ll have a few new considerations for your taxes. This includes paying estimated taxes and filing Schedule C. Sound daunting? Don’t fret! Block Advisors, a part of H&R Block, has the expertise to cover all your small business tax needs.
Learn more about Block Advisors small business tax services.