Taxxtime

Summer Income Tax Reminder - Did You Know? (1/2)

Students and other young people who earn summer income, including gig economy and other self-employment income, should prepare now for potential federal tax obligations.

In particular, minors and young adults with self-employment earnings (including gig economy income) of at least $400 must file a federal tax return and may owe self-employment tax in addition to federal income tax.

Lower $600 1099-K Filing Threshold for Payment Processors – Did You Know?

A new IRS rule may affect millions of taxpayers who receive payments through third-party processors like PayPal, Venmo, Zelle and Square. The rule applies to payments for goods and services, including payments for independent contract, freelance and gig economy work.

Beginning in 2022, the annual threshold for filing a 1099-K form is $600 in gross payments for goods and services, with no minimum number of transactions. Payment processors must submit the form to the IRS and provide a copy to the recipient of the payments.

In most cases, you must report payments shown on a Form 1099-K as income on your tax return. Note that the form shows gross payment amounts, which may include processing fees. You generally must report the gross amount on your return, but you may be able to deduct processing fees and other charges as business expenses. A tax professional can help you properly figure your gross income and any deductions you are entitled to claim.