New IRS tax on gig-workers is here!
Starting this year, Form 1099-Ks will be issued to people who are engaged in gig-work, casual sales of selling services or goods, receiving more than $600 in gross sales.
New IRS rule required that third-party payment networks like PayPal, Venmo, Amazon, and Square, Airbnb, Etsy, eBay, issue Form 1099-K when a user receives more than $600 in gross sales from goods and services transactions in a single year, the threshold reduced from $20k to $600 of gross sales from previous year.
Taxpayers can expect to receive Form 1099-K, Payment Card and 3rd Party Network Transactions by Jan. 31, 2024.
1099-Ks are an “information return” form, reported by the 3rd parties such as Amazon or PayPal to the IRS. The Individual taxpayers will use the information to complete their tax filings. The IRS uses 1099-K to verify income and taxes reported by taxpayers. People who engage in such side income activities have to provide personal information, including Social Security Number (SSN) or Employer Identification Number (EIN) to the 3rd-party app through which they conduct transactions. In most cases, when the transaction is above $600, the 3rd party most likely will withhold up to 30% of the payments collected via the application. This amount will be sent to the IRS and will not be returned to the individual. Taxpayer must file a tax return to reconcile these payments for tax due or tax refund.
Note: This new change can create quite a confusion in calculating tax liabilities, making accurate tax payments!
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Reference Page:
https://www.irs.gov/newsroom/get-ready-for-taxes-whats-new-and-what-to-consider-when-filing-in-2023