Form 1099-K, Payment Card and Third-Party Network Transactions, is an IRS form that is used to report certain payment transactions.
If taxpayers receive a Form 1099-K, they should use that information with their other tax records to determine their correct tax liability. Taxpayers must report all their income on their tax return unless it’s excluded by law, regardless of whether they receive a Form 1099-K.
Taxpayers will receive Form 1099-K for business transactions, including income from:
• A business the taxpayer owns.
• Self-employment.
• Activities in the gig economy.
• The sale of personal items and assets.
Money received as a gift or for reimbursement does not require a 1099-K. Taxpayers can minimize the chance of an error by asking friends or family members to correctly designate that type of payment as a non-business-related transaction. The taxpayer should also make a note of what the payment was for and who sent it. Good recordkeeping is key.
What to do when a Form 1099-K is incorrect
Some taxpayers may have received a Form 1099-K for the sale of personal items, or Form 1099-K may have been issued in error – such as for transactions between friends and family, or expense sharing.
If the information is incorrect on the Form 1099-K, taxpayers should contact the issuer immediately. The issuing organization’s name appears in the upper left corner on the form. Taxpayers should keep a copy of all correspondence with the issuer for their records.
If a taxpayer receives a Form 1099-K in error and the taxpayer cannot obtain a corrected Form 1099-K, the taxpayers should follow the IRS’ updated guidance at Understanding Your Form 1099-K.
1099-K reporting threshold for tax year 2023
The American Rescue Plan of 2021 changed the reporting threshold requirement for payment apps, also known as third-party settlement organizations. The IRS announced that the new Form 1099-K reporting threshold will start in tax year 2023.
• The old threshold was $20,000 and 200 transactions per year. This applies to tax year 2022 and prior years.
• The new threshold is more than $600. This applies to tax year 2023 and future years.
The threshold change means some people may receive a Form 1099-K who have not received one in the past. There are no changes to what counts as income or how tax is calculated.
WASHINGTON ― With the tax deadline approaching, the IRS reminded taxpayers they can avoid late filing and interest penalties by submitting their tax return and any payments due by April 18. For struggling taxpayers who can’t pay by the deadline, the IRS offers several different options to help.
The IRS also provides multiple ways for people to file for an extension, get information to help file their tax return and learn about payment options if they have trouble paying by the April 18 deadline.
An extension will help to avoid penalties and interest for failing to file on time, and gives taxpayers until Oct. 16, 2023, to file. However, they still must pay what they owe by the April 18 deadline.
Except for eligible victims of recent natural disasters who have until Oct. 16 to make various tax payments, taxpayers who can’t pay the full amount of taxes they owe by April 18 should file and pay what they can to reduce total penalties and interest.
There are several ways to make electronic payments, and there are options for a payment plan or agreement.
IRS Online Account
An IRS Online Account provides access to important information when preparing to file a tax return, pay a balance or follow up on notices. Taxpayers can view their:
• Adjusted Gross Income.
• Payment history and any scheduled or pending payments.
• Payment plan details.
• Digital copies of select notices from the IRS.
Taxpayers can also use their Online Account to securely make a same-day payment for an outstanding 2022 tax balance, pay quarterly estimated taxes for the 2023 tax season or request an extension to file a 2022 return.
Interest and a late payment penalty will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges.
Other options to pay electronically
Direct Pay, available only on IRS.gov, is the fastest and easiest way to make a one-time payment without signing into an IRS Online Account.
• Direct Pay: Direct Pay is free and allows taxpayers to securely pay their federal taxes directly from their checking or savings account without any fees or preregistration. Taxpayers can schedule payments up to 365 days in advance. After submitting a payment through Direct Pay, taxpayers will receive immediate confirmation.
• Electronic Funds Withdrawal (EFW): This option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.
• Electronic Federal Tax Payment System: This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477 or visit eftps.gov.
• Debit or credit card or digital wallet: Individuals can pay online, by phone or with a mobile device through any of the authorized payment processors. The processor charges a fee. The IRS doesn’t receive any fees for these payments. Authorized card processors and phone numbers are available at IRS.gov/payments.
Other payment options:
• Cash: For taxpayers who prefer to pay in cash, the IRS offers a way to pay taxes at one of its Cash Processing Company services. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.
• Check or money order: Payments made by check or money order should be made payable to the “United States Treasury.” To help ensure that the payment gets credited promptly, taxpayers should also enclose a 2022 Form 1040-V payment voucher and print the following on the front of the check or money order:
o “2022 Form 1040”
o Name
o Address
o Daytime phone number
o Social Security number
For taxpayers who cannot pay in full
The IRS encourages taxpayers who cannot pay in full to pay what they can and consider a variety of payment options available for the remaining balance including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Taxpayers should act as quickly as possible: Tax bills accumulate more interest and fees the longer they remain unpaid. For all payment options, visit IRS.gov/payments.
Online self-service payment plans
Most individual taxpayers qualify for a payment plan and can use Online Payment Agreement to set up a payment plan (including an installment agreement) to pay off an outstanding balance over time.
Once the online application is completed, the taxpayer receives immediate notification of whether their payment plan has been approved. Taxpayers can setup a plan using the Online Payment Agreement in a matter of minutes. There’s no paperwork and no need to call, write or visit the IRS. Setup fees may apply for some types of plans.
Online payment plan options for individual taxpayers include:
• Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.
• Long-term payment plan (installment agreement) – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs, and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.
Qualified taxpayers with existing payment plans may be able to use the Online Payment Agreement to make changes including revising payment dates, payment amounts or bank information for payments made by direct debit. Go to Online Payment Agreement for more information.
Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 18, the failure to pay the tax penalty rate is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS’ Additional Information on Payment Plans webpage.
Other payment options
Taxpayers struggling to meet their tax obligation may also consider these additional payment options:
• Offer in Compromise – Certain taxpayers qualify to settle their tax liabilities for less than the total amount they owe by submitting an Offer in Compromise. To help determine their eligibility, they can use the Offer in Compromise Pre-Qualifier tool. To help taxpayers prepare their own valid Offers in Compromise, the IRS created an Offer in Compromise video playlist – also available in Spanish and Simplified Chinese – that walks them through the necessary paperwork.
• Temporary delay of collection – Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
• Other payment plan options – Taxpayers who do not qualify for online self-service should contact the IRS using the phone number or address on their most recent notice for other payment plan options. For individuals and out-of-business sole proprietors who are already working with IRS Campus Collection and who owe $250,000 or less, one available option is to propose a monthly payment that will pay the balance over the length of the Collection Statute (usually 10 years). These payment plans don’t require a financial statement, but they do require a determination for the filing of a Notice of Federal Tax Lien still applies.
For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.
Taxpayers who aren’t able to file by the April 18, 2023, deadline can request an extension before that deadline, but they should know that an extension to file is not an extension to pay taxes. If they owe taxes, they should pay them before the due date to avoid potential penalties and interest on the amount owed.
Taxpayers who request a six-month extension to file their taxes have until October 16, 2023, to file their 2022 federal income tax return.
How to request a free extension to file for a return with no tax due
Individual taxpayers, regardless of income, can use IRS Free File at IRS.gov/FreeFile to request an automatic six-month tax-filing extension. Alternatively, taxpayers can file Form 4868, Application for Automatic Extension of Time to File.
How to request an extension when making a payment for a return with taxes due
Taxpayers can choose to submit an electronic payment and select Form 4868 or extension as the payment type. The IRS will count it as an extension automatically, and taxpayers won’t need to file Form 4868.
Victims in FEMA disaster areas may have an automatic extension
The IRS may offer an automatic extension to areas designated by the Federal Emergency Management Agency. To check whether an area is included, see IRS.gov/disasters. Taxpayers in the affected areas do not need to file any extension paperwork, and they do not need to call the IRS to qualify for the extended time.
Receiving a tax refund is happy news to any taxpayer; getting it quickly is even better. Direct deposit is the safest and most convenient way to receive a tax refund. The IRS encourages taxpayers to file when they are ready and choose direct deposit to receive any refund they may be owed.
Benefits of choosing IRS direct deposit:
- It’s fast. The fastest way for taxpayers to get their refund is to file electronically and choose direct deposit. Visit IRS.gov for details about IRS Free File, Free File Fillable Forms, free tax return preparation and more. Taxpayers who file a paper return can also choose direct deposit, but it will take longer to process the return and get a refund.
- It’s secure. Since refunds are electronically deposited, there’s no risk of having a paper check stolen or lost in the mail.
- It’s easy. Taxpayers can simply follow the instructions when selecting direct deposit as a refund method and enter their account information as directed. They must enter the correct account and routing numbers when they file.
- It provides options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. They should use IRS Form 8888, Allocation of Refund, Including Savings Bond Purchases to deposit a refund in up to three accounts. This form cannot be used to designate part of a refund to pay tax preparers.
Taxpayers should deposit refunds into U.S. bank accounts in their own name, their spouse’s name or both. They should avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules.
Get a bank account
Taxpayers who don’t have a bank account can visit the FDIC website for information on banks that let them open an account online and how to choose the right account. Veterans can use the Veterans Benefits Banking Program for access to financial services at participating banks.
Mobile apps may be an option
Some mobile apps and prepaid debit cards allow for direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on a tax return. Taxpayers should check with the mobile app provider or financial institution to confirm which numbers to use.
Taxpayers must have their routing and account numbers for direct deposit available when they are ready to file. The IRS can’t accept this information after a return is filed.
There is a limit of three direct deposit refunds made into a single financial account or prepaid debit card.
More information:
Whether someone travels for work once a year or once a month, figuring out travel expense tax write-offs might seem confusing. The IRS has information to help all business travelers properly claim these valuable deductions.
Here are some tax details all business travelers should know
Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day’s work and they need to sleep to meet the demands of their work while away.
Travel expenses must be ordinary and necessary. They can’t be lavish, extravagant or for personal purposes.
Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.
Travel expenses for conventions are deductible if attendance benefits the business. There are special rules for conventions held outside North America.
Deductible travel expenses include:
• Travel by airplane, train, bus or car between your home and your business destination.
• Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel to a work location.
• Shipping of baggage and sample or display material between regular and temporary work locations.
• Using a personally owned car for business.
• Lodging and meals.
• Dry cleaning and laundry.
• Business calls and communication.
• Tips paid for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to the business travel.
Self-employed individuals or farmers with travel deductions
• Those who are self-employed can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship).
• Farmers can use Schedule F (Form 1040), Profit or Loss From Farming.
Travel deductions for the National Guard or military reserves
National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty.
Recordkeeping
Well-organized records make it easier to prepare a tax return. Keep records such as receipts, canceled checks and other documents that support a deduction.
Most of the common errors taxpayers make on their tax returns are easily avoidable. By carefully reviewing their return, taxpayers can save time and effort by not having to correct it later. Filing electronically also helps prevent mistakes. Tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers claim valuable credits and deductions. Taxpayers who qualify may use IRS Free File to file their return electronically for free.
Here are some of the mistakes to avoid:
• Filing too early. While taxpayers should not file late, they also should not file prematurely. They should wait to file until they’re certain they’ve received all their tax reporting documents, or they risk making a mistake that may lead to a processing delay.
• Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
• Misspelled names. The names of all taxpayers and dependents listed on the return should match the names on their Social Security cards.
• Inaccurate information. Taxpayers should carefully enter any wages, dividends, bank interest and other income they received to make sure they report the correct amounts. This includes any information taxpayers need to calculate credits and deductions.
• Incorrect filing status. Some taxpayers choose the wrong filing status. Publication 501 has detailed information about filing statuses.
• Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software will check it automatically.
• Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit and child tax credit. Tax software will calculate these credits and deductions and include any required forms and schedules.
• Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for them to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.
• Unsigned forms. An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney.
• Disreputable tax preparers. Taxpayers should remember they, not the tax preparer, are responsible for the information on their tax return. The IRS has resources to help taxpayers find someone to prepare their tax return. Some taxpayers may even be able to get free help from IRS-certified volunteers. Certified public accountants, enrolled agents or other tax professionals can also help taxpayers avoid errors.
WASHINGTON –The Internal Revenue Service today reminded taxpayers to choose a tax return preparer with care. Even though most tax return preparers provide honest, quality service, some may cause harm through fraud, identity theft and other scams.
When hiring an individual or firm to prepare a tax return, filers need to understand who they’re choosing and what important questions to ask.
A taxpayer’s needs will determine which kind of preparer is best for them. Whether taxpayers regularly use a tax professional to help them file a tax return or have decided to work with one for the first time, choosing a tax professional carefully is important. Taxpayers are ultimately responsible for all the information on their income tax return, regardless of who prepares the return.
When choosing a tax professional, the IRS urges taxpayers to visit IRS.gov. The Choosing a Tax Professional page on IRS.gov has information about tax return preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.
Warning signs
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number. Paid preparers must sign and include their PTIN on any tax return they prepare.
Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund. Taxpayers should avoid these unethical “ghost” tax return preparers.
A ghost preparer is someone who doesn’t sign tax returns they prepare. Unscrupulous ghost preparers often print the return and have the taxpayer sign and mail it to the IRS. For electronically filed returns, a ghost preparer will prepare the tax return but refuse to digitally sign it as the paid preparer.
Tips for selecting a tax return preparer
Here are a few tips to consider when choosing a tax return preparer:
• Look for a preparer who’s available year-round. If questions come up about a tax return, taxpayers may need to contact the preparer after the filing season is over.
• Review the preparer’s history. Check the Better Business Bureau website for information about the preparer. Look for disciplinary actions and the license status for credentialed preparers. For CPAs, check the State Board of Accountancy’s website, and for attorneys check with the State Bar Association. For enrolled agents go to IRS.gov and search for “verify enrolled agent status” or check the IRS Directory of Federal Tax Return Preparers.
• Ask about service fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own financial accounts. Be wary of tax return preparers who claim they can get larger refunds than their competitors.
• Ensure their preparer offers IRS e-file. The IRS issues most refunds in fewer than 21 days for taxpayers who file electronically and choose direct deposit.
• Provide records and receipts. Good preparers ask to see these documents. They’ll also ask questions to determine the client’s total income, deductions, tax credits and other items. Do not hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is against IRS e-file rules.
• Understand the preparer’s credentials and qualifications. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. Annual Filing Season Program participants may represent taxpayers in limited situations if they prepared and signed the tax return.
• Never sign a blank or incomplete return. Taxpayers are responsible for filing a complete and correct tax return.
• Review the tax return before signing it. Be sure to ask questions if something is not clear or appears inaccurate. Any refund should go directly to the taxpayer – not into the preparer’s bank account. Review the routing and bank account number on the completed return and make sure it’s accurate.
In recent years, the gig economy has changed how people do business and provide services. Taxpayers must report their gig economy earnings on a tax return – whether they earned that money through a part-time, temporary or side gig. The IRS’ Gig Economy Tax Center provides information and resources to help this group of entrepreneurs and workers understand and meet their federal tax obligations.
Here are key things for individuals involved in the gig economy to remember as they get ready to file in 2023.
Gig economy income is taxable
• Taxpayers must report all income on their tax return unless excluded by law, whether they receive an information return such as a 1099 or not.
• Individuals involved in the gig economy may also be required to make quarterly estimated tax payments to pay income tax and self-employment tax, which includes Social Security and Medicare taxes. The last estimated tax payment for 2022 is due Jan. 17, 2023.
Workers report income according to their worker classification
Gig economy workers who perform services, such as driving a car for booked rides, running errands and other on demand work, must be correctly classified. Classification helps the taxpayer determine how to properly report their income.
• If they are employees, they report their wages from the Form W-2, Wage and Tax Statement.
• If they are an independent contractor, they report their income on a Schedule C, Form 1040, Profit or Loss from Business – Sole Proprietorship.
The business or the platform determines whether the individual providing the services is an employee or independent contractor. The business owners can use the worker classification page on IRS.gov for guidance on properly classifying employees and independent contractors.
Expenses related to gig economy income may be deductible
Individuals involved in the gig economy may be able to deduct expenses related to their gig income, depending on tax limits and rules.
• Taxpayers may be able to lower the amount of tax they owe by deducting certain expenses.
• It is important for taxpayers to keep records of their business expenses.
Pay the right amount of taxes throughout the year
An employer typically withholds income taxes from their employees’ pay to help cover taxes their employees owe.
Individuals involved in the gig economy have two ways to cover their taxes due:
• If they have another job where they are considered an employee, they can submit a new Form W-4, Employee’s Withholding Certificate to their employer to have more taxes withheld from their paycheck to cover the tax owed from their gig economy activity.
• They can make quarterly estimated tax payments throughout the year.
More information:
Publication 525 Taxable and Nontaxable Income
Publication 1779, Independent Contractor or Employee
WASHINGTON – The Internal Revenue Service recently completed the final corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020.
The American Rescue Plan Act of 2021, which became law in March 2021, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations (up to $10,200 for each spouse if married filing joint). The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.
To ease the burden on taxpayers, the IRS took steps to review the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify taxpayers who had already reported unemployment compensation as income and were eligible for the correction. The IRS determined the correct taxable amount of unemployment compensation and tax.
Some taxpayers received refunds, while others had the overpayment applied to taxes due or other debts. In some cases, the exclusion only resulted in a reduction in their adjusted gross income. The IRS mailed a letter to these taxpayers to inform them of the corrections. Taxpayers should keep that letter with their tax records.
The IRS corrected approximately 14 million returns. This resulted in nearly 12 million refunds totaling $14.8 billion, with an average refund of $1,232.
Many of the adjustments included corrections to the:
• Earned Income Tax Credit
• Recovery Rebate Credit
• Additional Child Tax Credit
• American Opportunity Tax Credit
• Premium Tax Credit
• Advance Premium Tax Credit
If a taxpayer is eligible for the unemployment compensation exclusion and their account was not corrected by the IRS, they may need to file an amended 2020 tax return to claim the exclusion and any applicable non-refundable or refundable credits impacted by the exclusion.
Taxpayers should not file an amended return if they previously filed one claiming the exclusion. For more information about this, including eligibility requirements, taxpayers should read the 2020 Unemployment Compensation Exclusion FAQs on IRS.gov.
If they do need to amend tax year 2020 Forms 1040 and 1040-SR, taxpayers can file Form 1040-X, Amended U.S. Individual Income Tax Return, electronically with tax filing software.
Taxpayers can view their 2020 tax records in their Online Account or request that a 2020 tax account transcript be mailed to them.
This is good for touring SW’s. email or txt us if you have questions on claiming mileage over actual expenses. You can only choose one method for the life of the vehicle.
WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Notice 2023-03 contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.