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IRS Sex workers taxes

IRS Form 1099-K: Will You Get One From Venmo, PayPal, or Cash App?

A new $600 reporting threshold for IRS Form1099-K involves payment networks like Venmo, PayPal, Amazon, Square, and Cash App.

Did you get paid more than $600 in 2022 for goods or services through a third-party payment network like Venmo, PayPal, Amazon, or Square? Then, due to a changed tax reporting rule, you will most likely receive an IRS Form 1099-K from your payment network—even if you haven’t received a 1099-K in the past. That’s because the 1099-K tax reporting rule now requires third-party payment networks to send a 1099-K if those payments exceed the $600 reporting threshold. (A higher, $20,000, threshold previously triggered the Form 1099-K.)

This “$600 rule” means that more people than in the past who have side hustles, and gigs, or part-time jobs, and businesses, and are paid through networks and apps like Venmo, Amazon, Square, and PayPal, will receive a 1099-K Form in January. But it’s important to note that the new reporting threshold doesn’t change the fact that the IRS has always required taxpayers to report all taxable income, whether they receive a 1099-K form or not.

However, since this is a key tax reporting change, it’s good to have information about what IRS Form 1099-K is, and what the new threshold could mean for you.

What is a 1099-K?

Form 1099-K is basically an IRS information reporting form. The form contains information, for your tax return, about the gross amount of payment transactions that you had on a third-party payment network when that amount exceeds $600 in the previous year. Companies that are required to send a 1099-K provide a copy to you, and to the IRS.

When you receive the Form 1099-K, you will want to make sure that it matches the information that you have in your records. If there are any problems with your 1099-K (e.g., the amounts listed don’t belong to you or other information on the form is incorrect), you should contact the third-party payment network that sent the form. They might be able to issue a corrected 1099-K.

1099-K Threshold for 2022: What Triggers a 1099-K?

Previously, to receive a 1099-K from a third-party payment network, you had to exceed $20,000 in transactions for goods and services and have more than 200 business transactions in a year.

Now, because of changes made under the American Rescue Plan Act, anyone with transactions that exceed a much lower $600 threshold amount (with no minimum number of transactions) in a year will likely receive a Form 1099-K from their third-party payment network. So, for example, under the changed rule, a single transaction for goods and services, that exceeds $600, could trigger the 1099-K.

Will You Get a 1099K From Venmo, PayPal, or Cash App?

Some people are wondering if they will receive a 1099-K from Venmo, or PayPal, because of the new $600 reporting threshold. The answer is maybe. Venmo, PayPal, Amazon, Square, Cash for Business through Cash App, and other third-party payment network providers, like Stripe, are required to report payments for goods and services to the IRS on Form 1099-K when those payments exceed the $600 threshold.

However, personal transactions (e.g., personal payments to friends and family) on the payment networks including VenmoPayPal, etc., are not considered payments for goods and services. This is because the1099-K third-party payment network reporting rule applies to payments made for goods and services. It doesn’t apply to payments made through the payment networks that were gifts, or other personal payments of money to family and friends.

For example, if you received payment through a personal Cash App account during the year, those transactions won’t be reported on a 1099-K. That’s because that personal Cash App account is designed for noncommercial use, like sending a friend money because you’re splitting the cost of a meal. But if you have a Cash for Business account with Cash App(opens in new tab), and your transactions exceed the $600 tax reporting threshold, you will likely receive a 1099-K.

If, for some reason, personal transactions from any of the third-party payment providers get reported on your Form 1099-K, contact the payment network to see if you can get a corrected form. If you can’t get a correction, your own records should show personal payments made on the network versus payments for goods and services. Good records can help support the amount of income that you claim on your tax return.

Do You Have to Report a $600 Income?

The 1099-K reporting requirement means that the 1099-K Form will go to you and to the IRS. So, the likelihood that the IRS will notice a difference on your federal income tax return between your income reporting, and the reporting on your 1099-K form, (if there are differences) is relatively high.

Also, the IRS requires taxpayers to report all taxable income, so it’s best to report your taxable income and to keep good records that substantiate that income.

If you’re worried about tax liability from your side hustle, consider whether some tax deductions and credits might help reduce your tax bill, and double check other important tax changes for the 2022 tax year.

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Sex workers

Good recordkeeping year-round helps taxpayers avoid tax time frustration

Wading through a pile of statements, receipts and other financial documents when it’s time to prepare a tax return can be frustrating for people who haven’t managed their records. By knowing what they need to keep and how long to keep it, people can develop a good recordkeeping system year-round and make filing their return easier.
Good recordkeeping can also help taxpayers understand their situation when they receive letters or notices from the IRS.
Good records help:
• Identify sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from non-business income and taxable from nontaxable income.
• Keep track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
• Prepare tax returns. Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.
• Support items reported on tax returns. Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.
In general, taxpayers should keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.
Records to keep include:
• Tax-related records. This includes wage and earning statements from all employers or payers including payment apps or cards, such as Form W-2, 1099-K, 1099-Misc, 1099-NEC. Other records include interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents that support income, a deduction, or a credit reported on their tax return.
• IRS letters, notices and prior year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action takes place occurs on the taxpayer’s account.
• Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
• Business income and expenses. Business taxpayers should find a bookkeeping method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
• Health insurance. Taxpayers should keep records of their own and their family members’ health care insurance coverage. If they’re claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.

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Sex workers

Reminder: Service providers, others may receive 1099-Ks for sales over $600 in early 2023

If you are a Sex Worker Pay attention to this:  If you receive gifts, tributes, or any other payments from any cash site like cashapp, Venmo, PayPal etc you will receive a 1099-K if you received more than $600. IRS gets a copy of this form too. Don’t ignore it. If you have questions contact us We can help.

IR-2022-189, Oct. 24, 2022
WASHINGTON — The Internal Revenue Service reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year.
There is no change to the taxability of income; the only change is to the reporting rules for Form 1099-K. As before, income, including from part-time work, side jobs or the sale of goods, is still taxable. Taxpayers must report all income on their tax return unless it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K; or any other information return.
The IRS emphasizes that money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
The American Rescue Plan Act of 2021 (ARPA) lowered the reporting threshold for third-party networks that process payments for those doing business. Prior to 2022, Form 1099-K was issued for third party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099-K.
The lower information reporting threshold and the summary of income on Form 1099-K enables taxpayers to more easily track the amounts received.
Generally, greater income reporting accuracy by taxpayers also lowers the need and likelihood of later examination.
Consider making estimated tax payment
Income taxes must generally be paid as taxpayers earn or receive income throughout the year, either through withholding or estimated tax payments.
If the amount of income tax withheld from one’s salary or pension is not enough, or if they receive other types of income, such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.
If they are in business for themselves, individuals generally need to make estimated tax payments. Estimated tax payments are used to pay not only income tax, but other taxes as well, such as self-employment tax and alternative minimum tax.

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IRS Sex workers taxes

Parents can boost their back-to-school budget by claiming tax credits and refunds

Summer is slipping away and another school year is starting. As kids head back to the classroom, parents are ticking items off the school supply list. If they want to boost their back-to-school budgets, parents and guardians should make sure they aren’t missing out on their 2021 refunds and tax credits.
Many people don’t get their tax refund because they didn’t file a federal tax return. Some people choose not to file a tax return because they didn’t earn enough money to be required to file. Generally, they won’t receive a failure to file penalty if they are owed a refund – but they won’t receive their refund either.
A refund isn’t the only money people might be missing out on when they don’t file. If they’re eligible for tax credits, like the child tax credit and the earned income tax credit, they’re leaving that money on the table as well.
The child tax credit
The child tax credit helps families with qualifying children get a tax break. People may be able to claim the credit even if they don’t normally file a tax return.
Taxpayers qualify for the full amount of the 2021 child tax credit for each qualifying child if they meet all eligibility factors and their annual income isn’t more than:
• $150,000 if they’re married and filing a joint return, or if they’re filing as a qualifying widow or widower.
• $112,500 if they’re filing as a head of household.
• $75,000 if they’re a single filer or are married and filing a separate return.
Parents and guardians with higher incomes may be eligible to claim a partial credit. The Interactive Tax Assistant can help people check if they qualify.
The earned income tax credit
The earned income tax credit helps low- to moderate-income workers and families get a tax break. If someone qualifies, they can use the credit to reduce the taxes they owe – and maybe increase their refund.
Low- to moderate-income workers with qualifying children may be eligible to claim the earned income tax credit if certain qualifying rules apply to them. People may qualify for the EITC even if they can’t claim children on their tax return. Visit IRS.gov to learn how to claim the EITC without a qualifying child.
People who qualify for the EITC, may also qualify for other tax credits, including:
• Child tax credit and the credit for other dependents
• Child and dependent care credit
• Education credits
• Recovery rebate credit

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IRS Sex workers taxes

Taxpayers: File when ready, don’t wait until October 17 to file a 2021 tax return

For people who requested an IRS extension to file, the October 17, 2022, deadline may seem far away, but it’s coming up fast. Taxpayers who haven’t filed, whether they requested an extension or not, should file a complete and accurate return as soon as possible. For people who have all their paperwork in hand, filing sooner and filing electronically could help them avoid possible processing delays later.
Here are some resources and information to help taxpayers avoid getting caught up in a last-minute filing rush.
Resources for people preparing their tax return
• IRS.gov The IRS webpage has tools and resources to help taxpayers and answer FAQs.
• Online Account Access individual account information to get info from the most recently filed tax return, including adjusted gross income, Economic Impact Payments and advance child tax credit payments.
• Interactive Tax Assistant Taxpayers can enter their info to get answers for their specific tax situation. This tool can determine if an individual must file a tax return, their filing status, if they can claim a dependent, if an income type is taxable, and their eligibility to claim a credit or deduct certain expenses.
• Tax professionals Tax pros can also help taxpayers prepare their tax returns. Authorized IRS e-file providers are qualified to prepare, transmit and process e-filed returns. Taxpayers should choose a tax preparer wisely. The IRS online directory can help people find a local tax pro.
Taxpayers can file electronically for the fastest turnaround.
E-filing is fast, accurate and secure. When taxpayers choose direct deposit, their refund goes directly into their bank account. The IRS processes most e-filed returns and issues direct deposit refunds in less than 21 days.
• IRS Free File Eligible individuals can use the IRS Free File program to prepare and file their 2021 federal tax return for free. Taxpayers can choose the brand-name tax preparation software company that is best for them. Some companies even offer free state tax return preparation. Those who earned more than $73,000 have the option to use IRS Free File Fillable Forms.
• MilTax online software MilTax online software is also available for members of the military and certain veterans, regardless of income. This software is offered through the Department of Defense.
• Commercial software The software uses a question-and-answer format that makes doing taxes easier. The return is signed electronically and transmitted through IRS-approved electronic channels.
An extension to file a tax return is not an extension to pay taxes.
Taxpayers who owe taxes can review all payment options online. The IRS has options for people who can’t pay their taxes, including applying for a payment plan on IRS.gov. Here are some other things to know:
• Generally, there’s no penalty for not filing a return if due a refund, but there’s also no statute of limitations for assessing and collecting taxes due if no return has been filed.
• Interest is charged on any tax not paid by the April due date and will accrue until paid in full. Penalties will accrue for each month tax remains unpaid until maxed out at 25% of the unpaid tax.
• Submitting a tax return and paying the amount owed as soon as possible can help taxpayers avoid further interest and penalties.

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IRS Sex workers taxes

Taxpayers should be sure to have all their info before going to a tax pro

Taxpayers using a professional tax preparer should make sure they have all their information readily available before their appointment. Collecting their information and getting copies of any missing documents before taxpayers sit down to prepare their return is critical to filing an accurate tax return. Having organized records and information in hand helps prevent filing errors and will likely create a smoother filing experience.
Here’s a list of information taxpayers may need. Not all information applies to all taxpayers.
• Social Security numbers of everyone listed on the tax return.
• Bank account and routing numbers for direct deposit or information to make a tax payment.
• Forms W-2 from employer(s).
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
• Form 1099-INT for interest received.
• Other income documents and records of virtual currency transactions.
• Form 1095-A, Health Insurance Marketplace Statement.
• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.
• Information to support claiming other credits or deductions, such as receipts for child or dependent care, college expenses or donations.
Taxpayers can get information about their Economic Impact Payments and advance child tax credit payments through their IRS online account.
Taxpayers who don’t have their letters about their Economic Impact Payment to claim missing stimulus payments and advance child tax credit payments to claim their full child tax credit have an online option. They can log in to their IRS online account and get the information from the Tax Records tab.
For taxpayers who are married filing jointly, each spouse will need to have their own Economic Impact Payment and advance child tax credit information.
What taxpayers should do if they’re missing other documents
Taxpayers who didn’t receive a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.
If they still can’t get the forms, they can use Form 4852, Substitute for Form W-2, Wage and Tax Statement or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If a taxpayer doesn’t receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. They can use Form 4852 to report this information on their federal tax return.
Find an authorized e-file provider
Taxpayers who are looking for a tax pro should use the Authorized IRS e-file Provider locator service. This is a nationwide listing is of all businesses that have been accepted to participate in the IRS e-file program. These businesses are authorized IRS e-file providers. They are qualified to prepare, transmit and process e-filed returns.

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IRS Sex workers taxes

Tax Court Approves Vehicle Deductions for Side Gig

Do you client have a “side hustle” going on in addition to their full-time job? If you qualify, you may deduct certain expenses incurred by the self-employed business, including costs attributable to your vehicle.

The recent Tax Court case Gonzalez, TC Summary Opinion 2022-13, 7/18/22 found that it is indeed OK to deduct vehicle expenses related to a side-gig, as long as the filer follows strict rules.

Generally, expenses relating to use of a car, van, pickup or panel truck used for business are deductible. For example, if they drive their own passenger car to visit clients or customers, they may write off the portion of their vehicle’s costs that is attributable to business use, subject to some special limits. If they use their car 80 percent for business, they can deduct 80 percent of the costs.

The vehicle expenses are deductible under one of two methods:

1. Standard mileage rate: This is a flat rate adjusted by the IRS at least annually. For 2022, the deduction is 58.5 cents per business mile for the first half of the year and 62.5 cents for the second half. Also, they can add in business-related parking fees and tolls.

2. Actual expenses: Alternatively, they can deduct actual expenses based on the percentage of business use. This includes gas, oil, insurance, repairs, licenses, tires, etc., plus a generous depreciation allowance.

The actual expense method often provides a bigger deduction than the standard mileage rate. However, they must keep receipts, invoices and other documentation to show costs and establish the identity of the vehicle for which the expenses were incurred. For depreciation purposes, they must show the original cost of the vehicle and any improvements, as well as the date it was placed in service.

The IRS has issued detailed regulations covering the substantiation of vehicle expenses under the actual expense method. The best way to secure a deduction is to keep a contemporaneous log or comparable record of expenses and business use.

Facts of the new case: The taxpayer, a resident of California, had a full-time job at Stanford University. After moving to Palo Alto, she started a small clothing design business in Los Angeles.

During the year at issue, the taxpayer traveled to a patternmaker workshop in Los Angeles and Inglewood in southern California approximately every other weekend. She made the 800-mile round-trip by car. Although the taxpayer stayed with family and friends in the area during these trips, the primary purpose of the travel was business-related.

At trial, the taxpayer submitted a mileage log detailing the dates traveled, distances traveled and the purpose of each trip. She also submitted vehicle service receipts corroborating the miles driven. The taxpayer testified credibly as to the business nature of her trips.

End of the road: The Tax Court determined that the taxpayer has satisfied her burden of proof for substantiating vehicle expenses. Accordingly, it approved a deduction of more than $12,000 for vehicle expenses for the year at issue.

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IRS Sex workers taxes

Extension filers: IRS.gov & SWTaxes is the source for summertime tax help; agency encourages people to file soon

WASHINGTON — With millions of people still waiting to file their tax returns, the IRS reminds them to file as soon as possible and take advantage of special tools available on IRS.gov that can help them file.
Summer may be a busy time for many, but it’s a great time to start tax planning – whether you still need to file a 2021 tax return or start planning for next year’s tax season. IRS.gov is the fastest and most convenient way to get tax-related information and help. The online tools are available any time, so taxpayers can use them at their convenience.
Here are some important reasons for taxpayers to visit IRS.gov this summer.
Get tax information 24/7
Taxpayers can use IRS.gov to:
• View the filing page to get information on most federal income tax topics.
• Access the Interactive Tax Assistant tool for answers to many tax law questions.
• Sign into their individual IRS online account to view their balance an tax records, manage communication preferences, make payments and more.
• Find the most up-to-date information about their tax refunds using the Where’s My Refund? tool. Taxpayers can check the status of their refund 24 hours after the IRS acknowledges receipt of an e-filed return.
Taxpayers can also download the official IRS mobile app, IRS2Go, to check their refund status, make payments, find free tax preparation assistance, sign up for helpful tax tips and more.
Adjust withholding now to avoid tax surprises next year
Summer is a great time for taxpayers to check their withholding to avoid a tax surprise next filing season. Life events like marriage, divorce, having a child or a change in income can affect taxes.
The IRS Tax Withholding Estimator on IRS.gov helps employees assess their income tax, credits, adjustments and deductions, and determine whether they need to change their withholding. If a change is recommended, the estimator will provide instructions to update their withholding with their employer either online or by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.
File electronically
Taxpayers who requested an extension to Oct. 17 or missed the April 18 deadline can still prepare and e-file returns. The IRS accepts electronically filed returns 24/7. There’s no reason to wait until Oct. 17 if filers have all the information and documentation they need to file an accurate return today. They can get their refund faster by choosing direct deposit. Contact us today to file your return.

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IRS Sex workers taxes

Here are some things gig economy workers should know about their tax responsibilities

Many people take up gig work on a part-time or full-time basis, often through a digital platform like an app or website. Gig work, such driving a car for booked rides, selling goods online, renting out property, or providing other on-demand work, is taxable and must be reported as income on the worker’s tax return.
Here are some things gig workers should know to stay on top of their tax responsibilities:
Gig work is taxable:
• Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time or part-time.
• Gig workers may be required to make quarterly estimated tax payments.
• If they are self-employed, gig workers must pay all their Social Security and Medicare taxes on their income from the gig activity
Proper worker classification:
While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they should be classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Paying the right amount of taxes throughout the year:
• An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
• Gig economy workers who aren’t considered employees have two ways to cover their income taxes:
o Submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck if they have another job as an employee.
o Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.

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Sex workers

IRS reminds taxpayers who haven’t filed yet to choose their tax preparer wisely

Taxpayers who have not yet filed their 2021 tax return may file electronically when they are ready rather than wait until the October 17, 2022, extension deadline. If they are considering hiring a tax preparer, it’s important to choose wisely. Taxpayers are responsible for all the information on their tax return, no matter who prepares it for them or when it’s filed.

There are different kinds of tax return preparers, and a taxpayer’s needs will determine which kind of preparer is best for them.

Here are some things taxpayers should do when choosing a tax return preparer
• Check the IRS Directory of Federal Tax Return Preparers. This searchable and sortable public directory helps taxpayers find a tax return preparer with specific qualifications.
• Check the preparer’s history with the Better Business Bureau. Taxpayers should check for any disciplinary actions for credentialed tax return preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For enrolled agents, verify the agent’s status on IRS.gov.
• Ask about 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. They should be wary of tax return preparers who claim they can get larger refunds than their competitors.
• Ask if the preparer plans to use IRS e-file. Taxpayers should make sure 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.
• Make sure the preparer is available. Taxpayers should consider whether the tax return preparer will be around after the filing deadline has passed. Taxpayers should do this because they might need the preparer to answer questions about the preparation of the tax return. Avoid fly-by-night preparers.
• Ensure the preparer signs and includes their preparer tax identification number. All aid tax return preparers must have a PTIN to prepare tax returns. Preparers must sign returns and include their PTIN.
• Understand the preparer’s credentials. Enrolled agents, CPAs, and attorneys have unlimited practice rights and can represent taxpayers on any tax matter before the IRS. Tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights and may only represent taxpayers whose returns they prepared and signed, and only for exams and for customer service and Taxpayer Advocate Service inquiries.

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