1099-K Forms

Starting in 2024, third-party settlement organizations (TPSOs) like Venmo, Zelle, and Cash App will be required to issue 1099-K forms to recipients who receive $600 or more in a tax year. This requirement stems from legislation passed by Congress in 2021. Although the IRS delayed the implementation for 2022 and 2023, it is unlikely to delay it again. Therefore, TPSOs are expected to begin issuing 1099-K forms to recipients in the 2024 calendar year.

Who Will Receive a 1099-K?

TPSOs will issue 1099-K forms only to individuals who receive payments for goods and services. Businesses using TPSO apps to accept customer payments should expect to receive a 1099-K. However, 1099-K forms will not be issued for personal transactions, such as splitting a restaurant bill with friends or reimbursing roommates for rent and utilities. The IRS provides guidelines on how taxpayers should report incorrectly issued 1099-K forms on their tax returns.

Tips for TPSO Users

  1. Use Business Accounts: Always use separate business accounts for business activities to avoid commingling funds. This practice applies even to those with side gigs who might not consider themselves full-fledged businesses. Venmo, Zelle, and Cash App offer great flexibility for handling payments and receipts, but it’s crucial to maintain separate accounts for business and personal transactions.
  2. Create Transfer Memos: Labeling transfers to identify their intended purpose is helpful. For example, personal transfers can be labeled as “restaurant bill” or “my share of rent or utilities.” Similarly, business payments should include memos like “payment for supplies to XYZ Corp.” to validate business expenses. Always keep copies of receipts!
  3. Don’t Ignore 1099-K Forms: When filing your taxes, report all income, whether it’s on your 1099-K or not. Ensure that you accurately report any amounts listed on your 1099-K, including any incorrect forms. Make sure your accountant or tax preparer is aware of all the 1099-K forms you receive.

By following these practices, you can ensure compliance with the new requirements and avoid complications during tax season.

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