The New 1099-Ks Are Coming: Are You Ready?
2021 was a huge year for multiple reasons. However, it was incredibly important for entrepreneurs and small businesses, primarily because of the passing of the American Rescue Plan Act. This act aimed to help small businesses survive the competitive commercial environment by providing them with funds, resources, and investment to hire more workers and keep them.
One of the significant aspects of this act was Form 1099-K. If you’re about to file your taxes as a business owner or individual in 2022, there’s a high chance that you’ll receive the 1099-K form. While your outsourced bookkeeper can always help you learn more about this, here’s everything you need to know about the 1099-KS.
What are the 1099-Ks?
Businesses with third-party processors like Venmo and PayPal have been filing the 1099-K form for several years. However, before 2022, businesses that had successfully conducted at least 200 transactions of more than $20,0000 were required to file the 1099-K form.
However, according to the new guidelines, businesses with third-party processors must file this form regardless of how many transactions they’ve been involved in. If they manage to make up to $600 in sales, they must use Form 1099-K in 2022.
Who Does the 1099-Ks Affect?
If you have a business or organization that conducts financial transactions via cash payments, credit and debit cards, or checks, you won’t be receiving a 1099-K form this year. Therefore, these new guidelines don’t impact you or your business in any way.
However, if you employ third-party tools and organizations to run your business, you’re most likely required to file the 1099-K form with the rest of your tax documents this year. A good example of such businesses is Amazon or eBay.
Funds donated or received from acquaintances are exempted from the new 1099-K guidelines.
Bookkeeping Concerns For Tax Filers to Keep in Mind
When you’re trying to comply with the new 1099-K guidelines, it’s important to employ a safer and more reliable mechanism to record financial transactions involving third-party payment processes. In other words, it’s high time to find a more innovative way to manage your books to simplify your business’s tax-filing processes. This will ensure that you’re always logging accurate numbers and are always protected from hefty tax bills in the coming year.
The entire idea behind the 1099-K form is to properly communicate the number of transactions you’ve conducted in a tax year. While you won’t need to make debit, credit, discount, and return calculations on this form, using an outsourced bookkeeping company’s help will help you make the necessary calculations and deductions when you’re about to file your taxes.
To learn more, make sure you check out Remote Quality Bookkeeping’s professional bookkeeping services. We’re a professional bookkeeping firm with a highly qualified team of experts, specializing in cost-effective bookkeeping services to save you time and money. Check out all of our offerings here or contact us for more information today!