Don’t Forget This New Tax Rule for Small Business in 2022

A new tax rule takes effect in 2022, and it will affect millions of small businesses.

The new tax rule for small businesses for 2022

Reports indicate that the new tax base is due to a minor change in the US bailout law of 2021. The law is a $1.9 trillion economic stimulus bill designed to facilitate the US recovery from the economic and health effects of the pandemic.

According to reports, starting in the beginning of 2022, small business owners or self-employed people who get paid from the digital payment service of a third-party settlement provider that accepts credit cards on their behalf will be required to report the amount to the IRS. This saves the amount received over $600 in total during the year.

Of course, small businesses have to report such income anyway, but it’s not uncommon to forget to report small payments.

Due to the tax change, the IRS will be able to see what the business earned regardless of whether it was reported.

Etsy, eBay, and Amazon sellers can expect to receive a 1099K form

Reports state that businesses that sell on the likes of Etsy, Amazon, or eBay, can expect to receive a Form 1099-K — after January 31, 2023 — from the payment services they use from revenue reported to the Business IRS on behalf of purchases made. It took place in 2022.

Additional questions asked

In a press release about the new changes to tax reporting, PayPal cautioned that businesses can also expect to ask additional questions from the payment service provider.

“You may notice that in the coming months we will ask you for your tax information, such as your Social Security number or tax ID, if you have not already provided it to us, in order to continue to use your account to accept payments for the sale of goods and services transactions and to ensure that there are no issues with entering these changes Coming into effect in 2022,” PayPal notes.

Personal gifts will be excluded

As Bloomberg Tax reports, it’s important for small businesses to realize that transactions for personal gifts, charitable contributions, and refunds are specifically excluded from Form 1099-K.

Filling out Form 1099-K must report the total amount of transactions that can be reported for each month and for an entire year in the sperate boxes on the form.

It is critical that small business owners, freelancers, temporary job workers, and other individuals dealing with their own tax affairs are aware of changes to tax reporting rules.

For any company that earns more than $600 through various places online, you can expect to start receiving a 1099-K form.

Photo: Depositphotos

Leave a Comment