By: d-mars
The Associated Press
If you are a freelancer, self-employed, or someone that does gigs every now and then, you are more than likely receiving income from all kinds of common apps. The tax laws are adjusting to how we can best report this money.
According to the Associated Press, tax reporting requirements will change for the 2024 tax year. While the law reportedly won’t affect the amount of taxes owed, it will change how to report the income with 1099-K forms.
For the current tax year, AP says that freelancers and small business owners still only need to use 1099-K forms to report third-party app payments totaling $20,000, and any number of payments above $200. But beginning next year, that threshold will be just $5,000, which will eventually be lowered to $600.
Experts say that it can be difficult to keep track of every payment, which can ultimately lead to confusion and underpayment.
AP says here is what you should know about these changes:
Get ready for the 1099-K reporting threshold
If you’re already keeping track of your income from freelancing as paid via Venmo, Zelle, Cash App, PayPal, and other sites, you should be in good shape.
“The main difference will be that these platforms will issue you additional forms for every transaction,” AP states in an article. “This should make correct reporting to the IRS even easier, though there will be more paperwork.”
Currently, if someone paying a freelancer through Venmo, Zelle, or CashApp sends a form to the IRS reporting that pay, but the freelancer doesn’t report the income with the same form, that creates a “matching error” for the agency.
Mistakenly received a 1099-K form?
As a result of some of the changing guidance, the IRS says platforms may send taxpayers 1099-K forms in error this year — such as for transactions between family and friends or for expense sharing between roommates.
You can get an updated form by contacting the company that issued the form incorrectly. If you can’t get one in a timely manner, the IRS advises you to zero out the income on your tax return with the description “Form 1099-K Received in Error.” The line appears on Form 1040 – Additional Income and Adjustments to Income. There, you should write, as follows: “Part I – Line 8z – Other Income – Form 1099-K Received in Error.”
Did you make a mistake reporting income on your 1099-K forms?
The IRS will let you know if they see discrepancies between income reported on 1099-K forms by taxpayers and companies issuing the forms. YouTube ads and Patreon subscriptions, must be reported in this way, AP advises.
The IRS has an online Gig Economy Tax Center that focuses specifically on the tax questions and needs of freelancers and other workers in the informal economy.
The tax-filing deadline is April 15.
