Is the IRS about to send you a surprise?
Using payment apps like Venmo, PayPal, CashApp, or Stripe might shock you this tax season. However, the lowered 1099-K threshold for 2024 could also bring some positive changes, with more people than ever receiving this form.
If you received payments for goods or services totaling over $5,000, you’ll likely get a Form 1099-K. This is a massive change from last year’s $20,000 threshold with 200 transactions. Here’s everything you need to know (and how to avoid costly tax mistakes):
What is Form 1099-K?
Form 1099-K is issued by payment apps and online marketplaces, officially known as third-party settlement organizations (TPSOs). It reports payments you received for:
- Goods you sold
- Services you provided
- Property you rented
These payments might come through payment apps, online marketplaces, car-sharing platforms, crowdfunding, or freelance websites. We understand that navigating these new rules can be complex, but we’re here to support you every step of the way, ensuring you’re not alone in this process.
Watch Out for These Tricky Situations
Personal Items Sold
Did you sell a personal item for less than what you paid initially? Say you sold your car for $15,000 through a payment app but bought it for $20,000. This isn’t taxable because it’s a net loss, but you must report it correctly. Other examples of personal items sold include electronics, furniture, or clothing.
Here’s how to handle it on your tax return:
- Part I – Line 8z: Report the 1099-K income as “Personal Item Sold at a Loss, $15,000.”
- Part II – Line 24z: Offset it with “Personal Item Sold at a Loss, $15,000.”
This ensures your taxable income isn’t incorrectly inflated. Only do this if the 1099-K was issued incorrectly or the income isn’t taxable.
Gig Workers, Freelancers, and Self-Employed
If you’re a gig worker, freelancer, or independent contractor, payments reported on Form 1099-K must go on Schedule C. Don’t forget to deduct eligible expenses—like car expenses, fees, supplies, and shipping—since the gross payment amount on 1099-K includes everything.
Shared Income
Do you run multiple businesses or have various sources of income? For instance, you might receive rental income and run a retail business, both reported on one Form 1099-K. Make sure you allocate the income to the appropriate schedules—Schedule C for retail and Schedule E for rentals.
Why It Matters
The IRS estimates that over 20 million people will receive a 1099-K this year, many for the first time, and most will not know what to do with it. However, understanding these new rules can empower you to navigate your taxes with confidence, ensuring you’re in control of your financial situation.
That’s where we come in. At Tannery Company, we don’t just plug numbers into a tax return—we help you understand your taxes and save money while staying compliant.
Ready to Make Taxes Work for You?
If you have questions about Form 1099-K or other tax concerns, now’s the time to act.
Schedule a Call or email us: team@tannerycompany.com
Not a client? Schedule a Meeting
Let’s ensure your 2024 tax season doesn’t come with surprises—except the kind that puts money back in your pocket.
