Form 1099-K frequently asked questions revised

February 8, 2024

By Martha Waggoner, for the Journal of Accountancy  

The IRS revised its frequently asked questions (FAQs) for Forms 1099-K, Payment Card and Third Party Network Transactions, replacing the existing FAQs with almost 50 new or updated ones.

The new and updated FAQs, published in fact sheet FS-2024-03 on Tuesday, supersede FAQs published in a March 2023 fact sheet. The new FAQs are in addition to the recently updated webpage, "Understanding Your Form 1099-K."

The revised FAQs include guidance on common situations, along with more clarity for the payment card industry on which organizations should send Forms 1099-K. A taxpayer who reasonably and in good faith relies on the FAQs will not be subject to penalties that provide a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance causes a tax underpayment, the fact sheet said.

However, because the FAQs have not been published in the Internal Revenue Bulletin, the IRS will not rely on or use them to resolve a case, it said.

In November, in Notice 2023-74, the IRS again delayed the effective date of the $600 threshold for Form 1099-K reporting for third-party settlement organizations and stated it will treat 2023 as another transition year. It said the delay in the effective date was in response to comments from taxpayers, tax professionals, and payment processors.

Among those with concerns is the AICPA, which had argued for an increased threshold of $5,000 or more in letters to Congress.

The lower reporting threshold was enacted by the American Rescue Plan Act (ARPA) of 2021, P.L. 117-2.

But the IRS is treating 2023 as an additional transition year, which applies to taxes filed this year. Reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023, although taxpayers may still receive a form for amounts less than the required reporting amount.

Third-party settlement organizations generally include banks and other organizations that process credit card transactions on behalf of a merchant and make an interbank transfer of funds to the merchant from a customer.

Meanwhile, news outlets reported that IRS Commissioner Danny Werfel will testify before the House Ways and Means Committee on Feb. 15 about why the Service is delaying implementation of the lower threshold as required by ARPA.

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