Here’s a simple approach to understand how the new $600 reporting requirements impact payment apps like PayPal, Venmo, Cash App, and others.
$600 – That’s the new reporting threshold for payment card entities and third-party networks.
If you’re a third-party payment network or a payment card company, you must have enrolled hundreds of merchants to enable convenient payment experiences for them. Major payment settlement entities like PayPal, Venmo, Cash App, and more have been doing this for years.
So far, you must have issued a Form 1099-K for each participating payee to whom you’ve paid $20,000 or higher AND comprising a transaction volume of 200 or more.
This was fine… until now.
Changes To The 2022 Form 1099-K Reporting Regime
The IRS introduced a couple of changes to the Form 1099-K reporting regime for payment entities like yours.
- File Form 1099-K for each participating payee to whom you’ve paid reportable payments with a gross total of $600 or higher
- No restrictions on the transaction count
So, starting in 2022, you have to adapt to these new reporting requirements and file Form 1099-K.
How exactly will these changes translate to compliance?
How will these changes impact your business and your payees’ businesses?
Let’s take a look at all such perspectives in the following discussion.
Impact Of The New, Reduced Minimum Reportable Amount On PSEs
Payment settlement entities or third party networks (PayPal, Venmo, Cash App, etc.) and payment card networks (credit/debit cards, online wallets, gift cards) in 2022 are required to file Form 1099-K if they have paid their participating payees a gross total of $600 or more regardless of the number of transactions.
- Accelerates payment information reporting
- Removes the confusion of overlapping the previous pre-conditions
- Helps streamline the payment cycles
- Improved scope for payee vetting (now that the threshold loophole can’t be leveraged by either of the parties)
- Helps segregate low-impact payees and high-impact payees in the annual payment calendars
Also Read: American Rescue Plan Act Lowers Form 1099-K Reporting Threshold For The 2022
Impact Of The Collective 1099-K 2022 Changes On Recipients
Payees are supposed to receive their 1099-K copies from the payers on or by the IRS deadline of January 31 of the calendar year. So, if you were paid $600 or more in 2022, you should receive a Form 1099-k from your payment settlement entity by January 31, 2023.
- Increased transparency on the incomes earned through 1099-K payments
- Requires the recipients to report their incomes in accordance with payer’s reports
- Increases the tax burden on the incomes of the recipients (depending on the payments received)
Also Read: Form 1099-K Changes 2022 – What Do They Mean For Your Business?
How To eFile Form 1099-K 2022 Online?
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