Did You Receive an Unexpected 1099-K?
Companies like Ebay, Paypal, Venmo, CashApp, and many others are still sending IRS form 1099-K for transactions over $600 even though the IRS issued guidance in December that the new IRS 1099-K rules were postponed for one year.
I’m hearing many reports that these companies and payment settlement entities are incorrectly sending out 1099K’s under next year’s rules even though the IRS said not to..
In this video, I’ll show you what you need to do if you receive an IRS form 1099-K, that was in error. You can’t just ignore it. I’ll presume you already know about the new 1099K reporting rules.
You probably are already aware that in December, the IRS announced that they were postponing the new $600 1099K reporting rules for another year.
So, it would not affect your 2022 tax year. It goes into effect for your 2023 tax return. The one you would file in early 2024.
Now, if you were one of the many who received a 1099-K, despite the IRS saying that you shouldn’t have received one… we’ll you’re kind of out of luck.
You do have a couple of options though.
- You can contact the issuer and ask them to correct or cancel the 1099-K. Explaining that you shouldn’t have received one. Tell them the IRS postponed implementation of the $600 reporting.
Unfortunately, they’ll probably tell you to pound sand. So lets go to your second option.
- If the income reported to you on the 1099-K is actually correct, then you should report it on your tax return. After all, whether you receive a tax form or not, income is taxable. Right?
I know some people don’t follow this way of thinking, but that’s how it’s supposed to be done folks.
Now, if the 1099-K was completely sent to you in error, maybe it was a friends and family transaction. If so, then you still need to report it on your tax return.
According to the latest IRS guidance, you would need to report that on your tax return as other income, and then back it out as an other adjustment. I’ve already discussed how to do this in another video, which I’ll link up here.
What if you’ve already filed your tax return, then you get a pesky 1099-K form?
You shouldn’t ignore it since it will likely create a matching error with the IRS, and then you’d get a letter in the mail from the IRS with a balance due.
The same thing I mentioned earlier applies. You will want to amend your tax return. Either report the additional income, wherever it needs to be reported. Or even if it was sent in error, like a friends and family transaction, you still want to report it as other income and back it out as an other adjustment. Net effect is zero, but that’s what I would do.
I had a feeling this would happen. Even though the IRS postponed the reporting requirement in December. These companies including payment settlement entities were already geared up to send them out under the “new” rules, so it was probably too late to reprogram their systems.
You can’t really blame them. You can blame Congress.
Finally, if you have a question about a 1099-K form that you received, the IRS says don’t call them. Contact the issuer. Their number can be found on the top left corner of the 1099-K tax form.
To sum it up, if you received a 1099K form, you shouldn’t ignore it. Follow the steps I’ve outlined earlier to properly report that on your tax return. If you don’t report it, you risk receiving a notice from the IRS for not reporting all of your income.
This additional reporting is definitely inconvenient for taxpayers..
Thanks for reading and see you in the next blog post!
