Blog

We keep you up-to-date on the latest tax changes and news in the industry.

New Filing Rules for Third-Party Payment Networks

DECEMBER 2023 UPDATE: The implementation of the new $600 threshold for third-party payment apps has been postponed.

READ MORE: https://cpaconsultingservices.com/blog/irs-postpones-new-payment-app-reporting-thresholds-to-2025

Do you use Paypal, Venmo, Apple Pay, or Stripe for large transactions? Beginning in 2023, these third-party payment networks must file Form 1099-K with the IRS (and provide a copy to you, the taxpayer) when the total annual gross payment amount is more than $600.

Amounts included on Form 1099-K are generally includable as part of your gross income (though you may be able to deduct certain expenses) if received from activities such as:

  • Working as an independent driver for hire;

  • Selling items as part of a hobby or business;

  • Renting or leasing personal or real property; or

  • Similar activities.

Amounts included on Form 1099-K are generally excluded from your gross income if they were received:

  • From selling personal items at a loss;

  • As a reimbursement; or

  • As a gift.

Fortunately, there are steps you can take to prevent non-taxable items from being reported as part of your gross income.

Keep track of taxable and non-taxable transactions separately. Non-taxable transactions may include gifts, personal payments, refunds, or other non-income-related transactions.

Ensure that all non-taxable transactions are properly documented and identifiable. This could be done through an accounting system or record-keeping process that clearly categorizes transactions.

Designate specific accounts for specific transactions. For example, only use PayPal for business transactions and Apple Pay for personal/non-taxable transactions.

Begin now by going through your accounts so you are not rushed in 2024 trying to gather all of these transactions before the tax deadline.

While we will accept your reported non-taxable amount when you submit your 1099-K tax documents, know that if you are questioned or audited by the IRS, they will want a detailed transaction history of why these specific transactions are NOT taxable income.

Share this article...

Want tax & accounting tips and insights?

Sign up for our newsletter.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .
I consent to receive SMS messages