The Internal Revenue Service (IRS) intends to formally enact its recently introduced 1099-K reporting mandate in the current fiscal year.
Consequently, individuals who accumulate $5,000 or more in earnings through third-party payment platforms such as PayPal, Venmo, Cash App, or Zelle during 2024 will be issued a 1099-K in the subsequent year.
In the context of your tax obligations for the year 2024, with the corresponding filing period in 2025, the Internal Revenue Service (IRS) is orchestrating a gradual implementation process.
Payment Apps Affected by IRS Reporting Rule
In 2024, freelancers and business owners using third-party payment apps, including PayPal, Venmo, Zelle, and Cash App, are obligated to report income transactions to the IRS.
Platforms like Fiverr or Upwork must also comply with this reporting requirement.
To ensure accurate reporting on the 1099-K form, individuals earning income through payment apps are advised to establish separate accounts (e.g., PayPal, Zelle, Cash App, or Venmo) dedicated to professional transactions, preventing the inadvertent inclusion of non-taxable transfers.
Understanding the IRS $600 Rule
Under recent reporting mandates in the American Rescue Plan, third-party payment apps must disclose earnings over $600 to the IRS.
However, for 2024 taxes, reporting applies only to income exceeding $5,000. Self-employed individuals must fulfill tax obligations on their total income, regardless of 1099 receipt.
This adjustment signifies a procedural modification, with the IRS shifting reporting duties to payment apps for enhanced transaction oversight.
Impact of IRS 1099-K Rule on 2024 Taxes
Presently, in the fiscal year 2024, individuals will be issued tax form 1099-K if they accrue earnings exceeding $5,000 from a freelance client or side hustle facilitated by third-party payment applications.
This will impact the tax filings for the year 2025. It is conceivable that the IRS might opt to further postpone this regulation or modify the income threshold, thus indicating the potential for alterations to this requirement.