If you’re eager to file your 2022 tax return in January or early February, the IRS has a warning: you’ll have to wait for “key documents” before you file in 2023.
In a statement released last week, the IRS urged “early filers” to monitor Form 1099-K, which reports income from third-party payment networks such as Venmo or PayPal.
“A little extra caution” could save time and effort, the agency said, because if you don’t report 1099-K income, you may owe money and have to file an amended return.
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“I would recommend waiting until at least late February or early March,” said Albert Campo, chartered accountant and president of AJC Accounting Services in Manalapan, New Jersey. His reasoning: The deadline for companies to send 1099-Ks is January 31.
This means that filers should allow some time to allow for slow or misdirected mail.
If you recently moved, for example, third-party payment networks may still have your previous address on file and send 1099-Ks to the wrong place, he said.
Why many more filers will receive 1099-Ks
Experts say many Americans will receive 1099-Ks for the first time next tax season.
Here’s why: Prior to 2022, the federal Form 1099-K reporting threshold was more than 200 transactions with a total value greater than $20,000. But the American Rescue Plan Act of 2021 lowered the threshold to just $600, and even a single transaction can trigger the form.
Although the change targets business transactions, such as part-time work, side jobs or the sale of property, some filers may receive 1099-Ks for personal transfers. The IRS is urging filers to contact issuers “immediately” to correct errors or make adjustments to filings.
“The timeliness and accuracy of 1099-K reporting under the new lower threshold remains to be seen,” said Phyllis Jo Kubey, New York-based enrolled agent and past president of the New York State Society of Enrolled Agents.
“I worry about self-prepared taxpayers who may not understand what is listed on their 1099-K and why,” Kubey said, noting that reconciliation has been difficult for years. “Now this problem will affect more people.”
Why it is essential to have all the tax forms before filing them
When filing your return, it is important to accurately report details of all tax forms, such as your work’s W-2, Form 1099-NEC for employment contracts, and Form 1099-G for income. unemployment.
Known as “information returns,” these forms are sent to taxpayers each year by employers and financial institutions to report taxable activities, with copies going to the IRS. Your tax return should match these forms, assuming the details are correct.
When the IRS receives your income directly from the reporting companies, the system automatically flags mismatched returns. That’s why it’s better to wait and include the correct details, experts say. Otherwise, you risk possible error notices and penalties later.
Kubey said it’s easy to miss forms for investment income because many opt for paperless records.
One way to check the forms the IRS has received is to log into your online account to view your IRS transcripts, she suggested.
“Unfortunately, the IRS doesn’t release taxpayer salary and income transcripts until later in the year,” Kubey said. However, “these transcripts are a fantastic resource for checking missed tax forms,” including third-party payment reporting discrepancies, she said.