5 Tips for Communicating Form 1099-K Changes

Sovos
November 15, 2022

As the 2022 tax season approaches, ensure your first-time Form 1099-K recipients are prepared for reporting. In 2021, as part of the American Rescue Plan Act (ARPA), the Form 1099-K threshold was changed from $20,000 and 200 transactions to just $600 with no transaction minimum. This means for tax year 2022 and beyond, all third-party settlement organizations (TPSOs) must report Form 1099-K when payments total greater than $600 in the calendar year.

This threshold change will impact a variety of TPSOs, including gig economy payers (e.g., Uber, Lyft), platform marketplaces (e.g., Etsy, Facebook), and other companies that facilitate goods and services payments through electronic platforms (e.g., PayPal). A majority of those who receive Form 1099-K for tax year 2022 will be first time recipients. These workers may not be accustomed to or have knowledge of how to accurately report this type of income on their individual income tax return.  or have knowledge of how to accurately report this type of income on their individual income tax return.
Here are five tips to ensure your Form 1099-K recipients are ready for the 2022 filing season.

Offer pre-season communication

Communicate with potential 1099-K recipients ahead of the tax season. Proactively reaching out to Form 1099-K recipients can help your team as tax season begins. A sizable percentage of those receiving Form 1099-K in tax year 2022 will be first-time recipients. Ensure early communication with these individuals so their questions are answered before reporting begins. This will help limit the burden on your customer service team and help limit calls, inquiries and resources as tax season begins.

Disclose tax identification inaccuracies

Bulk TIN match recipient tax information with IRS and communicate inaccuracies with potential recipients prior to the season. With the lowered 1099-K threshold, form volumes will likely increase for most companies, which means penalties could also increase if companies are filing more forms with inaccurate information. Companies that file inaccurate name and TIN combinations on 1099 forms are subject to backup withholding notices (“B” notices) and penalty notices (“P” notices) by the IRS. If you expect an increase in form volume, it’s recommended to proactively check TIN combinations with the IRS system (or through Sovos’ Bulk TIN matching process) to identify recipients with inaccurate name and TIN combinations. Once identified, reaching out to the recipient for corrected information will prevent IRS notices and proposed penalties for your organization and prevent putting your recipients into backup withholding on future payments.

Provide mailing inserts

Make sure that Form 1099-K recipients receive insert communications. Try to limit the stretch of your customer service department during reporting season. Work ahead of the clock by providing insert communications into your 1099-K forms mailed to recipients. This will help lessen the burden on your customer service team and provide your recipients with essential information regarding Form 1099-K and the upcoming filing season.

Provide quality portal communication

Include additional information in a banner, simplifying portal access, especially if using e-statements. There will be many first-time 1099-K recipients in tax Year 2022, so be prepared for questions. It can be difficult for recipients to understand their tax forms, especially if they have not received them previously. Include easy-to-find communications in your portal (especially if utilizing e-statements). Your recipients will have a go-to place for their questions, and it can lessen the amount of calls your team receives during tax season.

Include talk tracks for customer service teams

Investing in customer service training, with solidified talk tracks, is one of the most important best practices of companies seeing a significant increase in 1099-K form volume. Be sure your team is ahead of the game for questions, concerns and corrections.

Take Action

Still have questions about Form 1099-K? Reach out to our experts to learn more.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Sovos

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe, and is owned by Hg and TA Associates.
Share This Post

North America Tax Compliance
December 2, 2022
Four Pillars of a Strong Technology Match

There are many technology vendors out there promising you the world.  With a technology vendor partnership, those miracle solutions to all your business needs are available at your fingertips.  However, as with most things in life, it’s important to ensure you check off all the important boxes before making a purchasing decision. When you’re shopping […]

North America Tax Information Reporting
November 28, 2022
The Great Resignation to the ‘Great Confusion’ — What It Means for 1099s

The Great Resignation may technically be behind us, but the ripple effects are far from being complete. More than ever people are pursuing a side gig in addition to a job (full- or part-time). In some cases it’s out of economic necessity, while in others it can be for a lifestyle choice or based on […]

EMEA IPT
November 23, 2022
Fire Brigade Tax in Slovenia

Problems encountered with Fire Brigade Tax rate increase in Slovenia Slovenia’s Fire Brigade Tax (FBT) has changed. The rate increased from 5% to 9%. This came into effect on 1 October 2022. The first submission deadline followed on 15 November 2022. Unfortunately, the transition has been plagued by problems. We discuss some issues and how […]

E-Invoicing Compliance North America VAT & Fiscal Reporting
November 22, 2022
E-invoicing and Fiscal Digitization in Africa

African countries are following e-invoicing and continuous transaction control trends implemented rapidly by many countries around the globe. Each country in the continent is developing their variation of a tax digitization system. This means there is currently no standardisation with compliance requirements differing in each jurisdiction. A common transaction reporting feature among African countries is […]

North America ShipCompliant
November 17, 2022
How Can Direct-to-Consumer and Three-Tier Complement One Another?

Historically, the three-tier and direct-to-consumer (DtC) channels for beverage alcohol have operated independently, sometimes even viewing the other as competition. But in reality, there are many opportunities for a symbiotic relationship between these business units. For beverage alcohol producers that depend on both, a collaborative approach is imperative. DtC and three-tier—what’s the difference? First, some […]