YCD news, recently the US Internal Revenue Service issued a reminder that beginning in January 2023, taxpayers will need to download the 1099-K form for all sales of goods and services received through payment applications such as Venmo, PayPal, and Cash App that exceed US$600.
The requirement is one of the provisions of the American Rescue Plan Act passed by Congress in 2021, which amended a section of the IRS tax code, specifically Section 6050W, effective January 2022.
Section 6050W of the IRS Code details the income levels taxpayers must achieve before they must pay federal taxes. Before the recent changes, only those earning $20,000 and making more than 200 transactions were taxed. Now that number is down to $600, and there is no longer a minimum trade amount.
According to the bill, tax returns mainly include small business owners who use third-party payment platforms to receive and pay, such as credit card companies, Square, Venmo, Paypal, etc., as well as sellers who sell through third-party e-commerce platforms (Amazon, eBay).
These third-party platforms will record all sales revenue of the seller. If the seller uses an account opened by a US company, the platform will send this data to the US tax bureau every year. Therefore, the seller needs to submit the 1099 form tax declaration to the IRS based on the sales volume sent by the platform to the tax bureau. False reporting or false reporting will be severely punished.
Therefore, sellers can’t take chances, and must declare if they meet their tax obligations. It should be noted that most third-party platforms will not send you 1099K, you need to download it yourself. That’s why the IRS is sending out another reminder that many small business owners may not be aware of this tax change.
A February survey by the 1099-K Fair Coalition found that 47 percent were unaware of the IRS change that took effect Jan. 1. “Many start-up small business owners are unknowingly receiving 1099-Ks, which creates significant confusion and administrative challenges,” the coalition said.