Form 1099: Potential Threshold Adjustments
As the gig and sharing economies develop, filing requirements do, too. In the coming years, we expect to see threshold changes for 1099 reporting. In fact, there are a couple threshold adjustment proposals in the mix right now. The proposed changes will not take affect this tax season, but are items that we're keeping an eye on.
1099-MISC and 1099-K: What are the differences?
Form 1099-MISC reports miscellaneous income. This income could be anything from services performed, to rents, to payments to an attorney. See the full list of eligible income items here.
Form 1099-K reports payment card and third party network transactions. Form 1099-K is for payments made with a credit card or through a third party sharing economy app, such as Uber.
1099-MISC and 1099-K: What are the current thresholds?
Form 1099-MISC: The current threshold for Box 7 amounts is $600. The form should also be filed if at least $10 in royalties or broker payments were issued instead of dividends or tax-exempt interest.
Form 1099-K: Currently, the IRS requires Form 1099-K to be filed when over 200 transactions, totaling over $20,000, are made in a calendar year.
Looking at these thresholds side by side, you can see the disparity. The IRS (and some states) are collecting tax on miscellaneous income beginning at $600. This is a missed opportunity to collect taxes on payments made with cards or through third party apps.
1099-MISC and 1099-K: What are the proposed thresholds?
To close the gap between reporting requirements for these two forms, the IRS is contemplating threshold changes for both forms. These changes have been brought to the table in a Senate bill, entitled "NEW GIG Act of 2017," and in a House bill, "Small Business Owners' Tax Simplification Act of 2017."
The NEW GIG Act, or the "New Economy Works to Guarantee Independence and Growth Act," suggests an increase of the 1099-MISC threshold for reporting. Instead of the current $600 threshold, the new threshold could be $1,000. The bill also knocks the 1099-K reporting requirement down from $20,000 to $1,000.
The House's version of this bill suggests increasing the 1099-MISC threshold from $600 to $1,500. The House's version also includes instructions for adjusting the threshold per year based on inflation.
Both bills have been referred to committees. At Tax1099, we track updates to filing requirements.
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