the is Internal Revenue Service (IRS) encouraged taxpayers to take important steps in December to file their 2022 federal income tax returns.
This is the second in a series of reminders to help taxpayers prepare for the upcoming tax filing season. The updated “Steps to take now to prepare for taxes” page is available at IRS.govoutlines steps taxpayers can take now to make it easier to file taxes in 2023.
Here are the new features and some key items taxpayers should consider before filing next year.
The reporting rules for Form 1099-K have changed.
taxpayers They must receive Form 1099-K and third-party payment card and network transactions, by January 31, 2023, if they received payments from third parties in tax year 2022 for goods and services that exceed $600.
There are no changes to income taxes. All income, including income from part-time work, side jobs, or the sale of goods, remains taxable. Taxpayers must report all income on their tax return unless they are excluded by law, whether they receive Form 1099-K, Form 1099-NECor compensate a non-employee or return any other information.
Prior to 2022, Form 1099-K was issued for third-party network transactions only if the total number of transactions exceeded 200 for the year and the total amount of those transactions exceeded $20,000. The American Rescue Act of 2021 lowered the reporting limit for third-party networks that process payments for those doing business.
Now, a single transaction over $600 from the third-party platform may require a 1099-K to be issued. Money received through third-party payment networks from friends and family as personal gifts or reimbursement of personal expenses is not taxed.
the tax authority He warns individuals in this category who may be receiving a Form 1099 for the first time, especially “tax return filers” who generally file a tax return during January or early February, to be careful and make sure they have all of their major income documents before filing their tax return. Being extra careful can save you more time and effort associated with filing an amended tax return for individuals. And if they have non-taxable income on their Form 1099 that isn’t reflected on the tax return they initially filed, that may mean they have to file a tax payment with an amended tax return.
If the information on the 1099-K is incorrect, the taxpayer must contact the payer immediately, whose name appears in the upper-left corner of the form. The IRS can’t correct that.
Collect your 2022 tax documents
taxpayers He must develop a record-keeping system, electronic or paper, that keeps important information in one place. This includes year-end income documents such as Forms W-2 from employers, Forms 1099 from banks or other payers, Form 1099-K from third-party payment networks, Form 1099-NEC for non-employee compensation, and Form 1099-MISC for miscellaneous income. Or Form 1099-INT if you paid interest, as well as records documenting all digital asset transactions.
Making sure their tax records are complete before filing helps taxpayers avoid errors that cause processing delays. When they have all of their documentation in place, taxpayers are in the best position to file an accurate return and avoid processing delays, refunds, or tax returns IRS letters.
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