(SmartAsset) - Here in the thick of tax season, those who earn money from freelance work and side-hustles may be wondering what obligations they have to report their income formally to the IRS. Well, in late December 2022, the IRS actually delayed its plans for millions of the country’s gig workers to report their income that reached $600 or more to be subject to tax until 2024. We’ll discuss what when this means for workers and how it needs to be reported.
For help figuring out how a side job will impact your taxes, consider working with a financial advisor.
IRS Delays Reporting $600 on 1099-k Forms Until 2024
2023 was initially the first tax year that IRS Form 1099-K would have had to be submitted on the part of anyone who takes in more than $600 from eBay, Etsy, Uber, Lyft, Airbnb and other platforms and services. Before 2022, the requirement for reporting was $20,000 or 200 transactions.
But the IRS has delayed the new rule until 2024 to give businesses more time to prepare. The new rule for 2024 is projected to raise $8.4 billion in 10 years. And it was part of the COVID-19-inspired American Rescue Plan passed in 2021.
Online Sellers Don’t Agree With IRS’ New Requirement
A collection of seller platforms, including PayPal, OfferUp, Reverb, Poshmark and the parent company of Square, has organized the Coalition for 1099-K Fairness to opposing the new requirement. The coalition charges that the requirement will hurt struggling people using the apps to get by in hard times. But it makes no mention of the compliance costs those platforms will face.
“The new reporting threshold of only $600 means that Americans who sell only used goods and owe no taxes will now get confusing IRS forms,” the coalition says in a statement at 1099Fairness.org. “And many will be forced to consult costly tax experts when they normally handle their own returns or risk overpaying on their taxes.”
IRS’ New Requirement Isn’t Foreign Territory for Some Workers
1099 reporting might be new to gig workers and those running side hustles. But independent contractors, freelancers and other self-employed workers have been receiving their own 1099-MISC forms for years. And it’s often for less than $600. The IRS also considers gambling winnings and money from prizes, contests and awards to be reportable income, along with the value of bartered goods.
The IRS also requires various 1099 forms for bank interest paid. That includes (1099-INT), stock dividends (1099-DIV), canceled debt (1099-C), retirement plans (1099-R) and even state and local tax refunds as well as unemployment benefits (1099-G).
Just because someone received a 1099-K doesn’t mean the person is required to file a federal tax return. The average U.S. taxpayer doesn’t need to deal with the tax man until he or she has earned $12,550 for a single filer, or $25,100 for a couple. That rises to $14,250 for those older than 65, or $27,000 for a couple.
If you are working as a freelancer, gig worker or side hustler, don’t panic in 2023. The IRS extended more time for workers and online businesses to report income on 1099-k form to 2024. The Coalition for 1099-k fairness is looking fighting the IRS’ plans to report income of $600 or more. There’s a belief from major online businesses that IRS’ plans bring an unnecessary tax burden on them as well as workers.
Tax Tips for Side Jobs
Working multiple jobs can make tracking expenses and filing at the right time challenging. A financial advisor can help you organize your finances and file taxes correctly. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Figuring out your taxes can be overwhelming. SmartAsset’s income tax calculators will help you calculate federal, state and local taxes.
By Brian J. O'Connor