The Internal Revenue Service (IRS) urged taxpayers to take important steps this December to file their 2022 federal tax returns.
This is the second reminder to help taxpayers prepare for tax season. Updated “Steps to Take Now to Prepare for Your Taxes” page, available at IRS.govoutlines steps taxpayers can take now to make paying taxes easier in 2023.
Here’s what’s new and important for taxpayers to consider before filing next year.
The reporting rules for Form 1099-K have changed.
taxpayer must receive Form 1099-K, Third Party Payment Card and Network Transactions, by January 31, 2023, if they received payment from a third party in the 2022 tax year for goods and services more than $600.
There is no change in income tax. All income, including income from part-time work, freelance work or selling goods, remains taxable. Taxpayers must report all income on their tax return unless exempted by law, or receive a Form 1099-K, Form 1099-NECUnemployment benefits or other new returns.
Before 2022, a Form 1099-K is issued for third-party network transactions if the number of transactions in the year exceeds 200 and the total of those transactions exceeds $20,000 . The American Bailout Act of 2021 lowered the reporting threshold for third-party networks that process payments for those doing business.
Now, a single transaction over $600 may require the third party to issue a 1099-K. Money received through the payment network from friends and family as a personal gift or reimbursement of personal expenses is not taxed.
the IRS warns people in this category who may be receiving Form 1099 for the first time, especially “early filers” who usually file their taxes in January or early February, to be careful and get sure they have all their income. documents before submitting a tax return. A little extra care can save you extra time and effort associated with filing an amended tax return. And if they have tax-free income on Form 1099 that isn’t reflected on the tax return they originally filed, that could mean they have to pay taxes with the filed tax return. edit.
If the information on the 1099-K is incorrect, the taxpayer should immediately contact the tax preparer, whose name can be found in the upper left corner of the form. The IRS cannot correct this.
Collect your 2022 tax documents
taxpayer should develop a record keeping system, electronic or paper, that keeps important information in one place. This includes year-end income documents such as W-2 forms from employers, Forms 1099 from banks or other payers, Form 1099 -K from a third-party payment network, Form 1099-NEC for non-employee compensation, Form 1099-MISC for miscellaneous income or Form 1099-INT if you were charged interest, as well as a record of all digital business transactions.
Making sure their tax records are complete before filing helps taxpayers avoid mistakes that cause processing delays. When they have all their documents, taxpayers are in the best position to file an accurate return and avoid delays in processing or refunds. IRS documents.