Lower 1099-K Reporting Thresholds Rake in Money for States, Surprise Businesses and Put Companies on Notice

Gerry Nelligan
February 8, 2018

This blog was last updated on March 11, 2019

The 1099-K reporting threshold changes enacted in Massachusetts and Vermont have started to have repercussions for states, online businesses and companies doing tax reporting.

In conflict with IRS requirements, Massachusetts and Vermont changed the threshold for reporting 1099-K transactions from $20,000 and 200 transactions to just $600 with no minimum number of transactions. These transactions include payments from third-party settlement organizations (TPSOs), such as online auction sites, to non-employee service providers, such as people who sell via online auction sites.

Surprise to Businesses but Windfall for States

The change has surprised many online sellers, whose payments received were well below the federal threshold and who have never before received 1099-K forms. Massachusetts and Vermont are expecting a tax windfall from the threshold adjustment, with Massachusetts projecting additional revenue of $20 million and Vermont expecting an additional $1.5 million.

The two New England states might be on the forefront of a new trend, as other states, potentially including large population centers New York and California, are exploring similar options. For TPSOs, widespread threshold changes are likely to lead to a massive increase in the number of 1099-K forms filed every year.

A Sign of Things to Come?

New state laws could also be a precursor to a change in IRS policy as the federal agency explores ways to derive revenue from the burgeoning online “sharing” economy. The 1099-K has become a flashpoint for lawmakers as they seek to match the growth in the sharing economy with corresponding rise in tax revenues.

The arrival of 1099-K forms in online businesses’ mailboxes in New England is, in any case, very likely to be just the first of many surprises that could lead tax reporting in the sharing economy to become considerably more chaotic and difficult to manage.

The Sovos Solution

Sovos enables organizations to centralize and automate their tax-reporting processes. As the largest 10-series filer in the United States, Sovos serves nearly half of the Fortune 500 across 52 different industries for 1099 reporting.

As sharing-economy companies deal with rapid and sweeping changes to compliance rules, Sovos provides cloud-based, hybrid and on-premises solutions that enable them to maximize efficiency and avert risk at a time when the booming sharing economy and government desire to claim a piece of it are about to collide.

 

Take Action

Discover how Sovos’ 1099 reporting solutions enable sharing-economy companies to stay ahead of change.

Contact Sovos to learn more about automating tax reporting.

Sign up for Email Updates

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

Author

Gerry Nelligan

Gerry Nelligan is a Regulatory Analysis Supervisor at Sovos, leading a team of counsels covering information reporting, including 10-Series IRS reporting, Affordable Care Act (ACA) reporting and Automatic Exchange of Information (AEOI). Gerry received his J.D. from Suffolk University Law School and his B.A. from Providence College. He is a licensed attorney in the state of Massachusetts.
Share this post

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
VAT in the Digital Age Approved in ECOFIN

This blog was last updated on November 7, 2024 The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major […]