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As millions of Americans gather paperwork to file their returns, many could see a tax form for business payments “for the first time ever,” according to the National Taxpayer Advocate.
For 2024, if you had more than $5,000 in business transactions from apps such as PayPal or Venmo, along with online marketplaces such as eBay, you could receive Form 1099-K, which reports that income to the IRS.
The 2024 reporting threshold is down from the 2023 limit of more than 200 payments worth above $20,000. For 2025, the threshold drops to more than $2,500 no matter the number of transactions, and a limit above $600 applies to calendar year 2026 and beyond, according to IRS guidance released in November.
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Congress enacted the $600 reporting threshold via the American Rescue Plan Act of 2021, but the IRS has delayed the threshold change amid bipartisan scrutiny from lawmakers and complaints from the tax community.
The IRS in 2023 unveiled phased-in limits to “avoid problems for taxpayers, tax professionals and others,” former IRS Commissioner Danny Werfel said in a statement at the time.
How to report Form 1099-K on your return
While the 1099-K reporting threshold is lower for 2024, “there are no changes in what counts as income,” said April Walker, lead manager for tax practice and ethics with the American Institute of CPA. “This is just a reporting mechanism,” Walker added.
This season, you could receive Form 1099-K after selling items, such as vehicles, furniture, clothing or concert tickets via payment apps. You could also see the form for services paid via such platforms. However, “personal payments” between family and friends should not be reported via Form 1099-K, according to the IRS.
If you made a profit selling an item — meaning the sales price is more than what you originally paid — you need to report that gain on Form 8949 and Schedule D.
You cannot deduct items sold at a loss, but you should “zero out” the gross income at the top of Schedule 1 so you don’t owe taxes on the reported income, according to the IRS. The same strategy applies if you receive Form 1099-K for personal payments.
But if you are subtracting these payments on Schedule 1, you should keep records, such as receipts, to prove the income is not taxable, Walker said.
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