 Internal Revenue Service IRS Tax News Reminder Service Providers Others May Receive 1099 Kays For Sales Over $600 In Early 2023 Oh Great! The Government Has Co-Opted Even More Financial Institutions To Look Over My Small Business Shoulder! I mean, honestly, in a democratic republic, it's the government finances and spending habits that are supposed to be transparent to the people. Not the other way round? Dang, Banks. I mean, may as well be given these guys the government that is. My banking online login, account numbers, and routing numbers for crying out loud. Where's my privacy, dang it? President's Screw! I told you never to call me on this wall! This is an unlisted wall! Sorry, sir, but it's very important. You know, this is related to why the administration is so worried about Elon Musk firing 75% of Twitter. They ask, but if you can all of our twits, who will cover up the Hunter Biden scandal and stuff in the next election cycle. I mean, democracy is at stake, they cried. Because if the people get to hear actual news, we, the administration, will be forced through no fault of our own to become tyrannical. Clinging to power. For the people's own good, of course. I mean, like, we stand for democracy, but only if we can foster ignorance. And therefore, anybody who fights against ignorance, fights against democracy. Hold on a sec, that don't make no sense. Let me rant on this Twitter thing a little bit more. Elon Musk is going to fire 75% of Twitter? That's surely a good business move. Bender? You stole the atom? Yeah, but I can explain, it's very valuable. But he may have to change the name from Twitter. After firing all the twits. Oh, wait, you're serious? Let me laugh even harder. The Biden administration is like, my goodness, how will Twitter censor social media without all those twits? This is the worst kind of discrimination, the kind against me. Something must be done. That joke's on you, red light, red light. When's a doggy spelled with one letter? When it's you. Censorship laws must be passed. Don't mess with the bull, young man. You'll get the horns. Apparently, the term censorship was derived from the European practice of navigating to the West Indies and large ships using dogs with, like, a key sense of smell, smelling for the spices in the West Indies, helping to navigate the ships on its way. Against the term, censorship. No, try not, do, or do not, there is no try. But now, apparently, all censors are interpreted as negative feelings. Your eyes can deceive you, don't trust them. So any sensation leads to government banning at whatever caused the sensation. You're not going to tell me I have too much experience, are you? Certainly not. You're perfect for the job. Great. Accept? No. Resulting in our modern notion of censorship. No exceptions. I want this job. I need it. I can do it. Everywhere I've been today, there's always been something wrong. Too young, too old, too short, too tall, whatever the exception is. I can fix it. I can be older. I can be taller. I can be anything. Can you be a minority woman? Okay. Okay. Fact checkers. They didn't really use dogs to navigate their way to the West Indies. But like, I totally think they should have tried it. Come on. Pepper. It's rotten temple. IR 2022-189, October 24, 2022, Washington. The Internal Revenue Service reminds taxpayers earning income from selling goods and or providing services that they may receive from 1099K payment card and third-party network transaction for payment card transactions and third-party payment network transactions of more than $600 for the year. Let's first take a step back and see this whole 1099 thing in general. And then we can see how this change might have an impact on it. So of course, we have an income tax system. That means income is good because we're in business to generate income. But for taxes, everything is backwards. Income is bad. If we report the income, then we're most likely going to be paying taxes on it. It also means that the IRS has an incentive to verify, double check, confirm that people are reporting the income. Now, how could they do that? Well, in a business to business transaction, if we have two businesses doing a business with each other, one business is going to be receiving income and the other is going to have an expense. Normal business terms would be an expense. One business is paying the other business for goods and services. And the one that's receiving the goods and services has income, which the IRS wants to verify and make sure that they report in order to get the taxes. And the one that is paying has an expense, which for taxes might be called a deduction. That's where the government has to leverage on the person that is paying. And we see that most clearly with like employees, for example, where the IRS not only says, hey, we want you to tell us how much you're paying to the employee. We also want you to withhold that money and actually pay us directly. But if it's a business to another business type of transaction, then the IRS might say, hey, look, we would like to get some more information. We won't force you to actually give us taxes on their behalf as we do with the employees. But we would like you to inform us of the money that you paid this other business. Now normally, that wouldn't happen for corporations. If one business paid a large corporation like a utility company, because the IRS already has enough leverage, I think this would be the rationale on the utility company to make sure that they're reporting their income. They don't need any more leverage from a small business reporting that you paid the utility company. But with small businesses, they would like more. So if you're dealing with a contractor that's not incorporated, the IRS is saying, hey, we don't have any other leverage to make sure that they're reporting their income. They want you to give us a 1099. That's the general idea. So if you want the deduction, you're paying another business. You need to give us a 1099. Now where does this kind of system fall apart and not work so well? It doesn't work so well for like cash type businesses. So small businesses that are getting paid from with cash, especially from customers. This would be like hair salons, massage parlors and that kind of bars and whatnot. Because now the person that's paying isn't another business. It's the end user. It's the customer. And the IRS doesn't have the same kind of leverage because the customer is not going to get a deduction for a haircut. So the IRS has no leverage to require the customer to report a 1099 to the small business. So that's where the system kind of falls apart. And that's where I would think you see sometimes the IRS is not as kind to these kind of cash based businesses oftentimes. And then the other place that it kind of falls apart is with some of these online kind of situations where you have gig work, if you've got a gig work situation, the platform is basically acting as the intermediary and is not really the one that's hiring someone to do the business. So if a platform is hiring a driver, then really they're just the connection between the driver that has its own business and the person that needs a ride somewhere or the food delivery service or something like that. So once again, really what's happening is the person that's doing the service is providing it to the end customer. But then you've got this platform as the middle ground connecting the two. So you can see where the IRS is going to try to get leverage there. They may try in some way to get the payment system, however the payments are being processed to issue the 1099. Or they might try to get the actual intermediary, the website, the platform, even though they're not the one actually hiring to act more as though they're hiring like a contractor or hiring an employee. You can see that this wouldn't possibly be good for these kind of platforms and this kind of economy because it's going to add a lot more kind of regulatory environment meant to it. So it might be harmful to some of those businesses, I believe it would be depending on how they do it. But that's the idea. So now they're trying to get, how can the IRS get 1099s, typically on small businesses that might fly under the radar and typically small businesses that are providing services to the end user, the customer, because they don't have the same leverage on the customer to issue the 1099. Maybe they can have the leverage on the payment platforms that are facilitating the payments. Maybe they can have leverage on the gig work platforms that are connecting the people together. That would be the general idea, at least my interpretation of it. So there is no change to the taxability of income. The only change is the reporting rules for Form 1099K. As before, income, including the part-time work, side jobs, or the sale of goods is still taxable. Taxpayers must report all income on their tax return unless it is excluded by law whether they receive a Form 1099NEC, non-employee compensation, Form 1099K, or any other information return. So the general idea is you're supposed to do your own bookkeeping and report your taxes no matter what, either way, whether you get a 1099 or not. But they're concerned that small businesses will not do that. And that's why they're trying to get more leverage in any way they can to verify the small businesses. So the IRS emphasizes that money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. The American Rescue Plan Act of 2021, ARPA, lowered the reporting threshold for third-party networks that process payments for those doing business. Prior to 2022, Form 1099K was issued for third-party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099K. That's quite interesting because that's going to have a big difference between the 200 transactions exceeding $20,000 and now they've got a single transaction of $600. So they're cracking down, again, basically small businesses to make sure they're reporting the gig work and the small people who are doing the side jobs and whatnot. That's where they're going. Okay, so the lower information reporting threshold and the summary of income on Form 1099K enables taxpayers to more easily track the amounts received. Generally, greater income reporting accuracy by taxpayer also lowers the need and likelihood of later examination. So obviously if you don't report your taxes, then you could be subject to an audit, but clearly the fact if they have a 1099 on it, that's going to make their double checking a lot easier. Like if you didn't report your income and they didn't have a 1099 and you made some money in gig work, they wouldn't have really the verification process that you could still get audited and whatnot, but it wouldn't be like a snap easy decision, right? But if you don't report your income and they received a 1099 for $600 or more, then it's an easy audit in that case, right? Because they don't even have to do anything. That would be like you not reporting your W-2 income. They're going to say it. They're going to audit. The computer will audit it. They don't even need anybody to do any special kind of, it's not like they're going to have any complexity to try to catch anything on that. They're just going to go after it, send the letter out automatically. Okay. They're making estimated tax payments. Income taxes must generally be paid as taxpayers earn or receive income throughout the year either through withholding or estimated tax payments. If the amount of income tax withheld from one salary or pension is not enough, or if they receive other types of income such as interest, dividends, alimony, self-employment income, capital gains, prizes, and awards, they may have to make estimated tax payments. Now this is kind of where the IRS, I think, is getting concerned because a lot more people are moving from traditional jobs where the IRS has traditionally had a great deal of leverage over the larger companies to not only report the taxes, but also have the withholdings to people doing kind of independent work and working smaller jobs or having multiple gig works and this kind of stuff, and the IRS has far less leverage over those areas. In the past they haven't been, that area hasn't been a huge part of the economy, so they might not have been as concerned. It's becoming more and more of a bigger part of the economy, so the IRS might be coming in to strangle, hold it, most likely choking the economy out of it being as profitable or just because it'll be more regulation, regulating it to death. So if they are in business for themselves, individuals generally need to make estimated tax payments, estimated tax payments are used to pay not only income tax, but other taxes as well such as self-employment tax and alternative minimum tax. Publication 17, your federal income tax for individuals, there's a link to that here, provides general rules to help taxpayers pay the income tax, they owe. Additional helpful information is available in Chapter 5, Business Income of Publication 335, Tax Guide for Small Business, there's a link to that here as well as to Publication 525, Taxable and Non-Taxable Income and on IRS.gov at understanding your Form 1099K, so you can look into understanding it better at that link. Form 1099K, it's instructions and a set of answers to frequently asked questions are available on IRS.gov. I've got a question, why don't you back off? That's my frequent, they're not going to answer that one. In any case, there's a link to that here, there'll be a link to all this stuff that I said there was a link to. There'll be a link to this in the description.