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What is going on with the IRS and its changes to Form 1099-K?

Learn about the latest changes to Form 1099-K and determine if it’s necessary for filing your business taxes this year.

There’s been quite a bit of chatter about Form 1099 lately, and for good reason. The Internal Revenue Service (IRS) recently changed the guidelines on these tax forms several times. Considering the fact that the U.S. tax code is already complex, these changes have led to confusion among business owners. 

If you own a business and use a payment processor (like HoneyBook) to collect payments, it’s important that you look for your Form 1099-K. After all, this form helps you accurately declare your self-employment income for the year and file your tax return. So what changes has the IRS made to Form 1099-K, and how do they impact your business?

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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

What HoneyBook members need to know

If you’re a HoneyBook user, you may or may not receive a 1099-K tax form from HoneyBook this year. Whether you do depends on the amount of money you processed through HoneyBook as well as the number of transactions you processed. 

In 2022 and prior years, members must have processed $20,000 or more through a minimum of 200 transactions via HoneyBook payments to receive a Form 1099-K. In 2023, those same thresholds apply, but that won’t be the case in 2024. You’ll receive a Form 1099-K if you process $5,000 or more through HoneyBook payments this year. 

If you reached the $20,000 payment threshold in 2023, you should have already received your Form 1099-K from HoneyBook. It’s important to carefully review this form for accuracy. If you have any questions or concerns or need to make changes to your 1099-K, our support staff is ready to help. To download your Form 1099-K, log into HoneyBook and click “Company Settings.” Then navigate to “Tax Information” to access your tax forms. 

It’s also worth noting that some states have already reduced their reportable-income thresholds for businesses that operate within their boundaries. If you’re in one of those states and you meet that state’s threshold, you may receive a Form 1099-K from HoneyBook. Here’s a list of those locations and their associated requirements:

  • Missouri: $1,200 or more
  • Illinois: $1,000 or more and three or more transactions
  • District of Columbia: $600 or more
  • Maryland: $600 or more
  • Massachusetts: $600 or more
  • Vermont: $600 or more
  • Virginia: $600 or more

How to prepare for tax season?

There are multiple forms you’ll likely need to file your taxes. These typically include Form 1099-K, Form 1099-NEC, and any W-2s you receive. It’s also important to keep track of any income and expenses you generate throughout the year and to have those documents handy at tax time. Think about any tax deductions and what you’ll need to calculate them. Moreover, if you’d like to estimate your tax rate for the year, head over to our self-employed tax calculator.

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.

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