If you had a side gig in 2022 – like driving for Uber, delivering for GrubHub, or selling your handmade goods on Etsy – you might receive a Form 1099-K in January 2023 for the first time. This form reports payments from third party networks like Venmo and PayPal. Up until this year, 1099-K wasn’t required unless you had more than 200 transactions totaling more than $20,000. But now – thanks to the American Rescue Plan Act of 2021 – any transaction more than $600 can trigger it.
What should you do with Form 1099-K when you receive it? Include the information on your tax return for 2022 . . . because if you don’t, the IRS will come looking for it.
And there’s a catch (isn’t there always?). Maybe you’ve used Venmo to pay your buddy for your part of the lunch tab. Or to send some money to your kids. Or any number of other ways in which you’ve transferred money that didn’t represent some sort of payment for goods or services. The third-party network doesn’t know the difference, so if any of those transactions exceeded $600, it will trigger a Form 1099-K.
If that’s the case, contact Venmo or PayPal or Stripe or Square or whichever payment network initiated the form and ask them to correct the error (before you file your tax return). And if that doesn’t work, attach an explanation to your tax return explaining why that income isn’t reported.
And remember – any time you receive payments for providing goods or services, it’s taxable income and should be reported on your tax return. Even if you got paid in cash!