How Upcoming 1099-K Changes Will Affect Payment Reporting and Your Bottom Line

Organizing for tax season can be overwhelming, especially with constantly changing rules. Navigating the IRS can feel like a maze, particularly with the variety of platforms to receive payments. So, what exactly is a 1099-K, and why should it matter to you? Starting in 2024, the Venmo 1099-K reporting threshold is set at $5,000. However, in 2025, this threshold will drop significantly to $600. This change means more transactions will be reported to the IRS, impacting many small business owners, freelancers, and gig workers. Here’s how to prepare:

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• December 31, 2024 – RMD  - Required minimum distributions have to be taken for individuals age 73 or older by the end of 2024.

• December 31, 2024 – S-Corp Compliance -  All, more-than-2%-S-Corp owners should be reviewing their payroll compared to their net profitability.

• January 15, 2025 - Fourth quarter 2024 estimated tax payment due.

• January 31, 2025 -  Deadline for any employees or independent contractors to receive W-2, 1099-NEC, or 1099-MISC tax forms.

Inherited IRAs: Inherited IRAs come with Required Minimum Distributions (RMDs) that beneficiaries must be aware of. Previously, you had the flexibility to withdraw all funds within a ten-year period, allowing for strategic planning around tax implications. However, starting in 2024, new regulations require more frequent distributions. Instead of having the entire ten-year window to manage your withdrawals, you'll need to adhere to specific annual RMD schedules. This change means it's essential to review your distribution strategy to ensure compliance and optimize tax benefits.

Hobby Income & Losses: It's important to differentiate between hobby and business income for tax purposes. Hobby income is taxable, but related expenses can only be deducted up to the income earned—losses can't offset other income. The IRS considers intent to profit, activity conduct, and expertise to classify your activity. Proper documentation and understanding of these distinctions are key for accurate tax planning.

Jeanine Hemingway, CPA, PC is a tax planning, tax preparation, bookkeeping, accounting, and advisory firm located in Austin, Texas. We combine sound advice and an innovative approach to achieve our client’s financial, accounting, tax and business needs.

Contact us today for a discussion:
Phone: (512) 291-9955
info@jeaninecpa.com