During both our Fall and Year-end sessions, all instructors addressed various issues concerning the NEW 1099-K reporting. IRS at the time of the classes had failed to issue any definitive guidance, so we discussed possible options of reporting on the Sch C and Sch D if a gain is the result.
IRS issued guidance in the form of FAQs on December 23, 2022, and we suggest taking the time to read, as it does address many of the questions we had concerning proper reporting. The reporting is delayed but we believe that many third-party settlement organizations were geared to report and will report information on the 2022 1099-K.
Frequently asked questions about Form 1099-K
The questions below were address at the year-end sessions and are summarized here based on the new guidance.
| In using the Form 1040 Sch C for the 1099K “nonbusiness “use, do we enter 9999 as the NAICS code? Or is there another code available for these non-business reporting?
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There is no code for this as of now that I am aware of. Look at the codes and do your best to get close as possible, I would not use 9999 etc.
Note: On December 23, 2022, IRS announced the delay in implementation of the new 1099-K rules. This delay allows the third-party settlement organizations to not be required to report information for the 2022 tax year. As part of this, the IRS released guidance outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) that would have generated Form 1099-Ks for taxpayers. I would review the FAQs as reporting information appears to not require Sch C in some cases. IRS FAQ’s issued provided additional guidance on sale of personal items: https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
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| Wouldn’t a personal 1099-K transaction sold for a profit still need to go on Sch D?
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Yes, but generally profit is not an issue. The above link to the FAQ’s addresses reporting on the Sch D – this was issued on December 23, 2022. Finally, some guidance – but to late for our classes.
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| Client has Sch C and receives 1099-K. Should that income be separately stated or can it be combined with other income. Which lines to use?
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IRS FAQ’s issued provided additional guidance on sale of personal items: https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
We now have the above guidance which addresses more specifically how to address the 1099 K issue. Q6: Is a good example of a personal loss that is not deductible and IRS guidance states to report on Schedule 1 as “Other Income”. If you would have to report on the Sch C due to the facts and circumstances then I would report on a separate Schedule C, or report as other income on the Schedule C. |
| What is the best way to handle someone who receives 1099-NEC and 1099-K on the same income (so the total of the 1099’s is now in excess of the actual income)? I’ve heard to ignore it…
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I would not ignore- I would report and the zero out the 1099-NEC as the 1099-K is related to the same business. Our job is to avoid a notice I believe.
Review the new FAQs on the 1099 K and guidance on reporting. |
| Not sure if you will address this, but what about the taxpayer who uses Venmo, etc. to pay back friends for random reimbursements.
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https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
Q8 of the FAQs does address this issue. |
| How do you report a 1099k that has multiple sources of income rent, family reimbursement, and sales of items?
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The newly released FAQs partially address your issue in various questions posed. You will have multiple reporting depending on the type of income. I would review the FAQ’s https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
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| We purchased a car from an individual this year for $6500. Are we required to issue a1099K to that individual?
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Did they pay with a credit card?, More than likely you would not accept a credit card as you are not in a business. If you just purchased from another individual no 1099 K is required. Only third-party vendors are involved in this through payment made by credit card.
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| What if you get a 1099k for cypto and you used it and loss it most of with no gains. Do your report your loss on Schedule D?
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Did you sell the crypto? Then Schedule D. If you did not sell the losses cannot be taken until sale of the crypto.
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| All 1099K have gross sales which include sales tax, so how are you reflecting that the net amount is really the sales amount
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You would report a gross on the tax form and then you would be able to deduct sales tax.
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| Client bought and resold Taylor Swift tickets for over $600.00 thru StubHUB and they are going to issue him a 1099NEC rather than a 1099K?
He is not a business of reselling tickets. How will this affect how he reports the income on his tax return? Is the 1099NEC going to force him to file a business Sch C?
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He will need to report it on Sch C as IRS will be matching and looking for that report.
I would report as income the amount he sold them for and take as a deduction his cost – as I assume there was some profit issues. If profit under $400 no SE tax but technically he would have income.
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| My son is paying me for a car I purchased using VENMO. If I get a 1099-K from Venmo, what form do I put it on and how do I zero it out since it is not income but a payback?
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You can put the gross box 1a amount on Schedule 1 and then subtract it out as “personal use” or some such language.
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| Where can you zero out income from Form 1099-K that should not be taxed?
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It’s just going to depend on the situation. If it’s trade or business income that shouldn’t be taxed, for whatever reason, it’ll be subtracted on Other Expenses on Schedule C. It might be sale of “stuff” in which case you’d put it on Schedule1 or possibly Form 8949. Every situation will be a bit different.
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| Do you have to reconcile the 1099K to the actual tax return form 1040, 1120 etc.?
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You want to make sure the amount on the K shows up on whichever tax return it’s being reported for. If the client’s SSN, then it needs to show up on the 1040. If an EIN, then it needs to show up on the business return, whatever that might be.
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