New 1099 rules may cause headaches for payment app users come tax time
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PROVIDENCE, R.I. (WPRI) — Ilana Caparco is constantly busy styling hair at Noir Salon in Cranston.
But Caparco’s job may soon be much more complex come tax season.
“Being an independent contractor is definitely more complicated because you have to know how to save that money and allocate it towards the end of the year,” she explained.
The 2022 tax filing season will be the first since the transaction threshold was significantly lowered for the 1099-K tax form.
That means independent contractors and small businesses that rely on third-party payment systems such as Venmo, PayPal and Square will need to report more transactions than they’re used to.
“That threshold used to be $20,000 in total, or 200 transactions over the course of the year,” Gregory Porcaro, a certified public accountant with Otrando Porcaro & Associates said. “So, a really small business would probably not think about reporting a 1099-K.”
The threshold has since dropped to $600 and there is no limit on the number of transactions, meaning people who have never received a 1099-K form before will likely get one this upcoming tax season.
“You could have a yard sale in your driveway and use the Square, for example, and you might get a 1099-K,” Porcaro explained.
Porcaro warned that anyone who does any form of online business will likely get one of these forms this coming January.
“You may know people who will reimburse a friend via an app or might sell personal property like old furniture or a car using an app … now those transactions are potentially going to be reported unless the payee at the time of transaction says this is a non-business transaction,” he said.
Porcaro suggested those who use third-party payment systems for those kind of transactions label those money transfers as non-business expenses.
Meanwhile, Caparco said the change to the 1099-K form will create more work for her this upcoming tax season.
“It’s more complicated because we already have to pay so much with taxes,” she said. “They slice and dice whatever pennies they can grab.”
This article, written by Sarah Guernelli, appeared first on WPRI.
