Get up to speed on all the changes to Form-1099Ks and find out if you need one for filing your business taxes this year.
You may have noticed a lot of different information about Form 1099-Ks this year. Ultimately, the IRS has changed its guidelines on these tax forms several times, so it can be confusing for business owners.
If you own any type of business that transacts using a payment processor (including HoneyBook), you may need to ensure you receive a Form 1099-K in order to properly declare your self-employment income for the year and file taxes properly.
Here is everything you need to know about changes to Form 1099-Ks and what it means for your business this tax season.
- What is a Form 1099-K?
- How should business owners use their Form 1099-K?
- What changes has the IRS made to Form 1099-Ks?
- Why is this relevant to HoneyBook members?
- What should you do to prepare for tax season?
What is a Form 1099-K?
Form 1099-K is a document that taxpayers receive to report credit/debit card transactions and third-party network payments. It reports the gross amount of all reportable payment transactions within a calendar year.
All payment processors (HoneyBook, Stripe, PayPal, Amazon Business, eBay) are required to issue a 1099-K to users who meet specific criteria, including:
- Gross payments received must exceed $20,000, and the total number of transactions must be more than 200, though this will be gradually changing throughout 2024 and 2025.
- The individual or entity receiving payments must be a business or organization that generates income (personal transactions don’t need to be reported).
Keep in mind that even if you don’t meet these criteria, some payment processors may still send you a Form 1099-K if it typically sends one to all of its users. You only need to report the income on the form if you fall into the IRS criteria.
How should business owners use their Form 1099-K?
All payment processors are required to send Form 1099-K to relevant users by January 31. Once you start collecting your forms, be sure you’ve received them from all of the payment processors you’ve used in the past year.
Verify that all of the information on your forms is correct, especially your taxpayer identification number. It can also be a good idea to cross-check the payment information on your forms with the transactions in your own records.
When doing your taxes, you should use your Form 1099-K to accurately report your total income. Even after doing your taxes, be sure to keep your forms in your records so you can refer to them if needed.
What changes has the IRS made to Form 1099-Ks?
The IRS initially planned to make changes to the Form 1099-K reporting threshold for the 2023 tax year. However, this update has been delayed twice.
What happened in 2022?
In 2022, the IRS announced that the threshold for the 1099-K form was dropping to $600 in payments processed for the year. Near the end of 2022, the IRS decided to delay this change until the following year. The threshold for 2022 remained $20,000+ and 200 transactions.
What happened in 2023?
In November 2023, the IRS once again changed its mind on the threshold change and announced that the Form 1099-K threshold will remain $20,000+ processed and 200+ transactions. This time they announced a gradual approach to the reduction of the threshold:
- 2024: Must have processed $5,000+ of payments
- 2025: Must have processed $600+ of payments
Why is this relevant to HoneyBook members?
Any small business that hadn’t previously met the threshold will have a new form to work with at tax filing time.
For the tax years 2022 and prior, members must have processed $20,000+ and 200+ transactions via HoneyBook payments. For 2023, the same threshold still applies. However, if you typically process a lower amount of transactions, keep in mind that you may need Form 1099-Ks next year when filing your 2024 taxes. The threshold then will be lowered to $5,000+ payments.
This year, we’re sending Form 1099-Ks to any HoneyBook members who’ve reached the $20,000 threshold for payments in 2023 or the state-specific requirements detailed below. If the qualifications are met, a Form 1099-K preview will be available to HoneyBook members in early January, giving you the chance to carefully review this form for accuracy. Our support team is standing by within this time to assist with any necessary changes to the form. Forms will be filed with the IRS on January 31st and made available for download under Company Settings > Tax Information.
Some states have already moved forward with lowering their thresholds for businesses that operate in their state. That means that businesses paying taxes in these states will be issued a Form 1099-K from any payment processor they transacted with, including HoneyBook, if they meet these associated requirements:
- Missouri – $1,200 or more
- Illinois – $1,000 or more and 3+ transactions
- District of Columbia – $600 or more
- Maryland – $600 or more
- Massachusetts – $600 or more
- Vermont – $600 or more
- Virginia – $600 or more
What should you do to prepare for tax season?
Your Form 1099-K is just one tax form you need to use to report self-employed income. You’ll also need any 1099-NEC forms that you’ve received or issued, any W-2s you’ve received, and any other income or expenses. You should also be prepared with the tax deductions you’re eligible to report, which can lower your overall tax liability.
If you’d like to estimate your tax rate for the year, you can plug your information into our self-employed tax calculator to calculate your estimated taxes.
Get ahead of tax season
Disclaimer: The advice featured in this blog post is for sharing general information and knowledge. For specific legal, financial, tax, and professional advice, please consult an authorized professional.