The IRS is set to implement its new 1099-K reporting requirement for individuals earning income through third-party payment apps like PayPal, Venmo, Cash App, and Zelle.
Originally scheduled for 2022, this change will require payment apps to report income over $600 to the IRS. Previously, only users who received $20,000 in commercial payments across 200 transactions received 1099-Ks. The IRS has delayed the implementation of this rule for two years to allow payment apps to prepare. One challenge is distinguishing between taxable and nontaxable transactions, leading to confusion and incorrect reporting. The phased rollout will now require payment apps to report freelancer and business owner earnings over $5,000 instead of $600.
This higher threshold aims to reduce inaccuracies and provide more time for compliance. The delays and changes have left many freelancers uncertain about what to expect for the upcoming tax season and beyond. If you earn self-employment income, it’s important to be aware of these developments.
