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Look for Form 1099-K
This year you may receive an unfamiliar 1099-K tax form. Here's what you need to know:
1099-K Basics
- It shows gross payment amounts. A Form 1099-K reports the gross amount of payments received by you from payment received by you from payment transactions like credit cards or digital payment services like PayPal and Venmo.
- Reporting changes mean more forms. Starting in 2023, all third-party payment services are required to send a 1099-K for any activity over $600. The dollar amount threshold under the old rules was $20,000. This is being done by the IRS to capture unreported business transactions from ticket resellers and payment processing platforms like Amazon, Etsy, and eBay.
- You are now in business. So now individuals reselling concert tickets or using Venmo to receive payments may be in business in the eyes of the IRS.
- Personal payments may be included on a 1099-K. It's possible that a personal payment you received, for example from a friend sending you their share of a restaurant bill, ends up being included on a 1099-K.
What you should do
- Save the form. If you receive a 1099-K, save the form! You will need to account for this information on your tax return or face the possibility of the activity triggering a correspondence audit from the IRS.
- It's a business transaction. If you received the form due to activity on sites like Amazon, Etsy, or you are reselling tickets or taking rent payments, you are in business. In the eyes of the IRS, this is true even if you lost money on the transactions. This revenue needs to be reported, but you can also include any related business expenses to reduce reportable income, so you many need to include a Schedule C with your 2023 Form 1040.
- Stay organized. If you receive any Form 1099-Ks, your tax return will now be a bit more complex. But you can help if you stay organized and well documented to explain exactly how you used the third-party payment platform that sent you the form.
What's new and what to consider when you file in 2023
Tax brackets and rates
The income brackets subject to tax are increasing by approximately 7 percent due to inflation.
| Tax Rate | Single Filers |
Married Filing Joint/Widow Returns |
Heads of Households |
|---|---|---|---|
| 10% | $0 to $11,000 | $0 to $22,000 | $0 to $15,700 |
| 12% | $11,000 to $44,725 | $22,000 to $89,450 | $15,700 to $59,850 |
| 22% | $44,725 to $95,375 | $89,450 to $190,750 | $59,850 to $95,350 |
| 24% | $95,375 to $182,100 | $190,750 to $364,200 | $95,350 to $182,100 |
| 32% | $182,100 to $231,250 | $364,200 to $462,500 | $182,100 to $231,250 |
| 35% | $231,250 to $578,125 | $462,500 to $693,750 | $231,250 to $578,100 |
| 37% | $578,125 or more | $693,750 or more | $578,100 or more |
| Source: Internal Revenue Service | |||
New tax credits
Tax credit for new clean vehicles. A credit up $7,500 is available if you (or your business) buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle. Your modified adjusted gross income must not exceed:
- $300,000 for married couples filing jointly (MFJ)
- $225,000 for head of households
- $150,000 for all other filers
- $150,000 for married couples (MFJ)
- $112,500 for heads of household
- $75,000 for all other filers
Consider adjusting your withholding if you owed taxes or received a large refund when you filed. Changing your withholding can help you avoid a tax bill or let you keep more money each payday. Credit amounts may change each year, so visit IRS.gov and use the Interactive Tax Assistant to identify whether you qualify for any tax credits that may call for a withholding adjustment. Life changes – getting married or divorced, welcoming a child, or taking on a second job - may also mean changing withholding.
Use the Tax Withholding Estimator to help you determine the right amount of tax to have withheld from your paycheck. This tool on IRS.gov will help determine if you need to adjust your withholding and submit a new Form W-4 to your employer.
Log in to your online account to make a payment online or go to IRS.gov/payments.