Here’s how the IRS says you should handle 1099-K tax reporting mistakes on your return

Over the past year, there's been a question of disorder astir taxation reporting for payment apps similar Venmo and PayPal, on with e-commerce companies specified arsenic eBay, Etsy and Poshmark. But the IRS provided clarification successful an update this week.

The 2022 threshold for Form 1099-K, which reports third-party concern payments to the IRS, is inactive much than 200 transactions worthy an aggregate supra $20,000.

That's slated to alteration for adjacent taxation play when the 2023 threshold drops to $600 for adjacent a azygous transaction.

While much taxpayers are expected to person Form 1099-K adjacent season, it's imaginable immoderate companies whitethorn person issued the 2022 signifier to definite filers by mistake for idiosyncratic transfers, oregon reported incorrect amounts.

Here's wherefore it matters: If the IRS receives taxation forms and you don't see those connected your return, it creates a "matching error" for the agency, explained certified fiscal planner Jim Guarino, a CPA and managing manager astatine Baker Newman Noyes successful Woburn, Massachusetts.

"In effect, the IRS compares the accusation it receives from 3rd parties to the accusation included connected a taxation return," helium said. "To the grade the amounts bash not match, it could perchance trigger a taxation notice."

If you mistakenly received Form 1099-K oregon the magnitude was incorrect, the IRS updated guidance connected however to grip it this week.

Some taxpayers whitethorn person incorrectly received Form 1099-K, the bureau said. "In different cases, the signifier whitethorn person been issued successful mistake — specified arsenic for transactions betwixt friends and family, oregon disbursal sharing," the IRS wrote.

The bureau suggests contacting the issuer nonstop to close 1099-K mistakes. But if you can't get a timely update, the bureau suggests addressing the mistake connected your instrumentality by zeroing retired the income connected 2 lines of Schedule 1 with the statement "Form 1099-K Received successful Error" for both.

• Part I - Line 8z - Other Income - (add income)
• Part II - Line 24z - Other Adjustments - (offset income)

Alternatively, for taxation twelvemonth 2022, you tin see some the gross proceeds and the offsetting antagonistic magnitude connected Line 8z, the IRS said successful the FAQs page updated this week.

"Of course, providing an due and wide mentation for the offsetting accommodation is besides an important origin to reporting this accusation correctly," said Guarino.

You tin travel the aforesaid steps if you received Form 1099-K aft selling idiosyncratic items astatine a loss, the IRS said. You tin usage the statement "Form 1099-K Personal Item Sold astatine a Loss" for both.

However, you request to study profits arsenic a superior summation connected Form 8949 and Schedule D.