Form 1099-K Changes

New for tax years beginning in 2022, is a much lower threshold for payment settlement entities to report payments to merchants. Prior to 2022, the threshold to report payments on Form 1099-K (Payment Card and Third-Party Network Transactions) was $20,000 in gross payments and 200 applicable transactions in a calendar year. The American Rescue Plan Act changed this threshold to $600, with no minimum number of transactions.

Reportable third-party network transactions are only those involving the provision of goods and services and do not include noncommercial transactions, such as personal gifts, reimbursements, and charitable contributions. Common examples of third-party payment processors include PayPal, Stripe, and Square. Interestingly, Zelle has taken the position that it is not a third-party payment processor because they do not hold accounts or settle funds, and thus, will not be sending out Forms 1099-K.

Because of the possible mixture of business and personal payments on third-party platforms, taxpayers may receive a 1099-K in error. Taxpayers are urged to pay attention to all 1099-Ks received and not to ignore any Forms 1099-K, as the IRS will likely focus heavily on this form due to the much-lowered threshold.
If a taxpayer receives an erroneous 1099-K, the taxpayer should contact the third-party payment processor immediately to request a corrected form. Remember, due to the lower threshold, you may be receiving a Form 1099-K for the first time, so be sure to include these 1099-K forms in your 2022 tax documents that you will be providing to your HM&M advisor during the upcoming filing season.

Please contact your friendly HM&M advisor if you have any questions.