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Before 2022, Form 1099-K reporting was only required when a third-party settlement organization (TPSO) made more than 200 payments to a payee AND those payments totaled more than $20,000 for the year. However, beginning in 2022, a TPSO must report a payee’s payments once they total $600, regardless of the number of payments.

The IRS recently updated its Form 1099-K Frequently Asked Questions (FAQs) to help taxpayers understand who files the form, who receives it, and what it means. The updated FAQs are divided into five sections.

1. General

The General section of the FAQs explains that the IRS will also use Forms 1099-K for systemic computer matching to tax returns to identify potential unreported income. The agency will also use the information to develop taxpayer education and outreach efforts, as well as new approaches to audits and collection.

2. Definition

The second section of the FAQs defines several relevant terms, including:

  • Payment cards (credit cards, debit cards, gift cards, etc.)
  • Merchant category code
  • Third-party settlement organization (TPSO)
  • Merchant acquiring entity
  • Participating payee
  • Gross amount of reportable transactions.

3. Individuals

The third section of the FAQs explains who will receive a Form 1099-K and who will not. An individual who receives a form should use the information to compute gross sales and receipts, and correctly calculate gross income.

An individual who has questions about the form, believes it was issued in error, or believes it includes incorrect information should generally contact the form’s issuer. The individual may also contact the payment settlement entity (PSE) whose name and phone number appear on the form.

Q: If I am not involved in a trade or business, can I still receive Form 1099-K? (added October 21, 2022)

A: Yes. You will receive Form 1099-K, Payment Card and Third Party Network Transactions, from third party settlement organizations if you receive more than $600 of payments for the sale of goods, including personal goods (e.g., a car, refrigerator, furniture, stereo, jewelry, or silverware, etc.), or providing services (e.g., gig work). If you accept payment cards, you will also receive Form 1099-K for the gross amount of payments you receive for the settlement of payment card transactions, without regard to dollar amount. See Publication 525, Taxable and Nontaxable Income, for further guidance.

Q: If you sell personal belongings, is it taxable income? (added October 21, 2022)

A: It depends. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, etc. at a gain, your gain is taxable as a personal gain. If you sold an item you owned for personal use at a loss, the loss is not deductible. Publication 525, Taxable and Nontaxable Income, discusses many kinds of income and explains whether they are taxable or nontaxable.

4. Reporting

The reporting section of the FAQs explains due dates for filing Form 1099-K with the IRS and providing a copy to the payee. This section also reiterates that the form must report the gross amount of the payee’s reportable transactions, with no adjustments for fees, refunds, and other adjustments.

5. Filing Form 1099-K

Finally, the last section of the FAQs explains which party is responsible for filing which forms. For example, a merchant acquiring entity is responsible for filing some Forms 1099-K, while a third-party settlement organization is responsible for filing others.