This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing how a 2022 IRS tax reporting change could affect people who are self-employed or whose side job pays through an app or online platform:
A provision of the 2021 American Rescue Plan requires third-party payment processors to report business transactions totaling over $600 per year by issuing a Form 1099-K to the taxpayer and the IRS.
In prior years, the reporting threshold was much higher (200 business transactions and $20,000).
Here are a few things you should probably know about this far-reaching new rule:
Business transactions are deﬁned as payments for goods or services, including tips.
Money received from the online sale of personal items like old clothing or furniture, which are normally sold at a loss, is not taxable and does not need to be reported. However, those in the business of reselling goods for a proﬁt should carefully track the original costs of their purchases.
Peer-to-peer payment apps are not required to report personal transactions intended as gifts or used to pay back friends for dinner or trips, or to split other costs. How will third-party apps know the diﬀerence? The payer will be asked to…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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