The IRS had introduced a delay within the discount of the revenue reporting thresholds for third-party settlement organizations (TPSOs) resembling PayPal, Venmo, and CashApp late final 12 months. Except one other IRS reporting delay is introduced quickly, the brand new regulation will impression your 2023 freelance tax submitting, particularly for Type 1099-Ok. That is critically essential if you happen to derive any revenue from these platforms since you should report all revenue to the IRS or danger an audit, penalties, and fines for not doing so.
The 1099-Ok reporting threshold in 2023 of simply $600 is way decrease than the earlier reporting threshold of 200 transactions per 12 months exceeding an combination of $20,000. It’s a requirement that TPSOs report the gross sales of every vendor on their platforms on a 1099-Ok Type. This doesn’t apply to non-public transactions between buddies or members of the family for incidental, private purchases.
The change in 1099-Ok reporting is a part of The American Rescue Plan of 2021 which adjusted the regulation starting Jan. 1, 2023 to require TPSOs to report third-party community transactions paid in 2022 with $600 in combination funds, regardless of what number of transactions had been concerned. TPSOs report these transactions by offering the IRS Type 1099 Ok to affected taxpayers.
Ideas for reporting third-party cost app revenue for the 2023 tax 12 months
Use the following tips that can assist you be sure that you monitor your whole transactions and revenue from third get together apps and all different sources of revenue.
- Report all freelance enterprise revenue in your 2023 tax return regardless of the place it comes from.
- Be sure you report all revenue in your freelance tax return except it’s excluded by regulation, whether or not you obtain a Type 1099-NEC, Nonemployee Compensation; Type 1099-Ok; or another info return.
- Be sure to think about any revenue from third-party cost platforms in your estimated tax funds on the federal, state, and native ranges.
- Plan to pay tax on the cash you earn or obtain from third-party cost platforms all year long, both by withholding or estimated tax funds. If these funds are along with a W-2 job or pension, and your tax withholding for these revenue streams is just not sufficient, you will want to make further estimated tax funds.
Put together for the impression of latest 1099-Ok thresholds in your 2023 freelance taxes
When you’ve got a number of income streams from TSPOs and different sources it is important that you could precisely monitor and report all the transactions you might be facilitating. This can assist defend you within the case of an audit and provide the most correct numbers that you need to use to plan in your tax obligations and the way a lot it’s good to report in your 2023 taxes below the brand new tax legal guidelines associated to 1099-Ok and third get together cost platforms. As a ultimate reminder, keep in mind that all revenue, regardless of the place it comes from, have to be reported in your tax return.