You may have heard about a change in the tax law that lowered the threshold for when Payment Settlement Entities" (PSEs) are required to issue a 1099-K. 

The old rule was that the PSE ("third party network") must send the taxpayer a 1099-K if: 1) The entity made payments to the taxpayer of more than $20,000 during the year, and 2) The taxpayer processed 200 or more transactions through that Payment Settlement Entity. 

Well, now the limit is more than $600 and there is no transaction threshold.

What is a "Payment Settlement Entity"?

Here's the definition of a PSE from the IRS: "Payment settlement entities are the organizations responsible for reporting the payments made to participating payees. For payment card transactions, merchant acquiring entities are the payment settlement entities, and for third party network transactions, third-party settlement organizations are the payment settlement entities." Online payment apps such as Venmo, PayPal, and CashApp are considered Payment Settlement Entities.

What are the some of the main companies that will be issuing Forms 1099-K for tax year 2023 and beyond?

Common 1099-K issuers, whose accounting departments will be much busier under these new rules, will include but will not be limited to: Venmo, CashApp, Square, PayPal, AirBnB, Stubhub, Visa, MasterCard, Amazon Pay, and Poshmark.

So what does this mean for you?

Well, if you receive money through any of those apps or companies, you will likely receive a 1099-K for tax year 2023 even if you don’t have a business. So when January comes around and you receive a 1099-K, but don’t feel comfortable filing your own tax return, feel free to give me a call at (562) 259-7777 to schedule an appointment.

Whether the 1099 is for income earned in a side-hustle, small business, or just reimbursement from friends for their portion of dinner over the year, we know how to handle it for a reasonable fee.

To saving,

Chris