Whether you’ve been a freelancer for years or it’s a new pursuit, changes are coming to 1099-K tax forms that may affect how you file your taxes for 2022. Read below to learn about the 1099-K 2022 form, changes that are likely to affect many freelancers, and how to use the 1099-K to file your taxes.
The 1099-K is a tax form that informs the IRS of sales revenue received by a business or individual through a third-party network. Third-party networks can include platforms like PayPal, Venmo or Square, online marketplaces, and credit card companies.
Third-party networks are responsible for filing the 1099-K forms, and they must send a copy to you, the IRS, and your state tax department by January 31st for the previous tax year. However, this is only required if you exceed minimum reporting thresholds (more details below).
The 1099-K is used to make sure that businesses and individuals are reporting an accurate income and paying their taxes responsibly. And they can make it easier for you to file your taxes.
Many freelancers have heard about the 1099-NEC, but it’s important to understand how these two forms work together. The 1099-NEC may be filed by one of your customers if they have paid you at least $600 in that tax year, regardless of the payment method.
On the other hand, the 1099-K includes sales revenue from one third-party network, which could consist of payments from multiple customers.
Therefore, the income reported on your 1099-K and 1099-NEC could overlap if your customer uses a third-party network to make payments. It’s important to keep good records to make sure you’re not reporting your income twice.
In the tax year 2022, the minimum reporting 1099-K thresholds will be changing drastically. Up until the tax year 2021, 1099-K forms were filed for anyone who received more than $20,000 and had more than 200 transactions using one third-party network.
Beginning the tax year 2022, 1099-K forms will be filed for anyone who receives more than $600 with no minimum number of transactions using one third-party network.
This change was driven by a changing job market during the COVID-19 pandemic. More people began taking on side jobs or selling items online to supplement their income. Lowering the threshold will make it so many freelancers and sellers will receive a 1099-K form and voluntarily comply with tax law.
If you are new to freelancing, it’s essential to understand how to keep track of your business income and expenses so that you can file your taxes accurately.
One of the first things you should do with your 1099-K forms is ensure they match your financial records. You can add up the payments you received from one third-party network to make sure they match the form.
If you also received a 1099-NEC form, add up the payments you received from one customer to make sure your records match the form.
If you want to avoid confusion when using these forms to file your taxes, it can sometimes be easier to add up the amounts on your 1099-Ks. Then add the amounts from other transactions that aren’t reported on your 1099-K to make sure your total sales revenue matches what you report on your taxes.
It’s important that you report your total income to the IRS and pay the amount that you owe. However, there are ways to legally reduce your tax liability and improve your business’s cash flow. Try Lunafi for free today.
The law changes apply to certain payment networks but not to the Zelle Network. Thus, Zelle Network does not provide 1099K forms.
What is the 1099-K threshold for 2022?
The new threshold is $600in payments for the year, regardless of the number of transactions.
The change was announced as a part of The "American Rescue Plan Act of 2021" on March 9, 2021. It takes effect starting from January 2022.
Wesley began writing on the side. After several months of making a decent side hustle, he decided to go full-time and quit his job.
For 2023, the Open Enrollment period begins on November 1, and you have until December 15 to decide to have coverage as of January 1.
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