Ep 6 - The 411 on 1099-K: Don't Fear the Tax Forms

Podcast Summary:

In this episode, we dig into 1099s - specifically 1099-Ks that business owners receive from payment processors - to bring clarity to this often confusing tax form.

Outlining the recent changes requiring payment processors to send 1099-Ks for over $600 in gross sales, which has now been pushed back to 2024 with a temporary $5,000 threshold. Several states do still enforce a $600 threshold however.

I emphasize that while 1099-Ks can feel scary, they are mostly intended as an accountability mechanism to ensure income gets properly reported. As long as your record-keeping is thorough, a matching 1099-K to your books means you're all set.

If amounts seem off, reach out to the payment processor to correct discrepancies or make a note on your tax return. We also cover best practices around requesting W9s from vendors and when 1099s do/don't need to be filed.

Overall, I want to empower entrepreneurs to understand 1099 nuances so they feel in control when these tax documents arrive.

Sources:

IRS Regarding 1099-Ks: https://www.irs.gov/businesses/understanding-your-form-1099-k

Information around different state thresholds: https://cash.app/help/6524-form-1099k-qualifications

Show Notes:

Key Points:

-Recent changes require payment processors to issue 1099-Ks at $600 gross transaction threshold (pushed to 2024 tax year with temporary $5,000 threshold)

-Several states still enforce $600 threshold

-1099-Ks intended as accountability check to verify reported income

-Match 1099-K amounts to your books - if correct, you're all set

-If incorrect, reach out to correct or make note on tax return

-Best practice to request W9s from vendors to understand 1099 needs

State Thresholds Referenced:

-MD, MA, VT, VA & Washington DC: $600

-Illinois: $1,000 + 3 transactions

-Missouri - $1,200

Actions:

-Review 1099-Ks when received and compare amounts to business financial records

-Reach out to payment processor with any discrepancies

-Put system in place to request W9s from new vendors

Sources:

IRS Regarding 1099-Ks: https://www.irs.gov/businesses/understanding-your-form-1099-k

Information around different state thresholds: https://cash.app/help/6524-form-1099k-qualifications