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Form 1099-K tracks payments you’ve received through a payment settlement entity, or PSE. That includes tracking payments made via:
- Credit cards
- Online payment services like PayPal
- And even freelancing platforms like Upwork that manage client payments for you.
Form 1099-K shows the value of the transactions the PSE has processed for you in the past year, as well as any expenses paid on your behalf by your clients.
The IRS requires each payment settlement entity to send you a Form 1099-K by January 31 if it has processed at least $20,000 worth of payments and at least 200 transactions for you in the previous year. But you still could receive 1099-Ks from some PSEs even when the form isn’t required by the IRS. Many PSEs send 1099-Ks to all their vendors, even if they’ve only processed a handful of transactions and fall well short of the $20,000 threshold.
Under the American Rescue Plan, changes were made to Form 1099-K reporting requirements for third-party payment networks like Venmo and Cash App that process credit/debit card payments or electronic payment transfers. The change begins with transactions starting January 2022, so it doesn’t impact 2021 taxes. Beginning with the tax year 2022 if someone receives payment for goods and services through a third party.
payment network, their income will be reported on Form 1099-K if $600 or more was processed as opposed to the current Form 1099-K reporting requirement of 200 transactions and $20,000. This change could impact people working in the gig economy, online sellers, independent contractors, and other self-employed business owners.
You’ll need to keep all of your 1099-K forms to prepare for tax time since each form reports a portion of your self-employment income for the year. Use the information on your 1099-Ks to report both your annual and quarterly income to the IRS. But remember that just because you did not receive a 1099-K form doesn’t mean that you don’t have to report all of the income that you received.