Form 1099-K. You may receive it this tax season
Taxpayers may be alarmed to receive Form 1099-K for tax year 2024 if they sold or received payments online. This includes using Venmo / Zelle to receive money, driving for Uber / Lyft / Doordash, etc. If they received more than $5,000 per platform then the platforms, known as Third Party Settlement Organizations (TPSOs) will send a 1099-K to them and to the IRS.
This $5,000 threshold reporting limit for 2024 is way lower than the $20,000 reporting threshold for tax year 2023, which is why many more will get them for 2024. Remember, if you get a 1099-K, the IRS has it too.
If you've been lumping gig / self-employment income in your Zelle / Venmo accounts along with personal money received, like splitting a restaurant bill, then you may have to manually determine what is actually income and make an adjustment for that on your 2024 tax return. Do not assume the platform will adjust the 1099-K for you. Yes, it will be a hassle. You might consider having separate accounts for personal and business.
Form 1099-K income has not had any income taxes withheld, plus self-employment of 15.3% is also due. I do taxes and clients are often stunned at how much they owe in situations like this. Taxpayers can make estimated payments to avoid shock at tax time. If you haven't made them and think you might owe, start planning for it now. You can make estimated payments anytime on the IRS website.
TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after.
Payment card companies, payment apps and online marketplaces are required to fill out Form 1099-K and send it to the IRS each year. They must also send a copy to you by January 31.