Sovos Provides Relief to Small- and Medium-Sized Businesses in Advance of 1099-K Threshold Changes

December 14, 2022

Sovos addresses reduced reporting thresholds, increased IRS enforcement and shifts in worker classifications

ATLANTA – December 14, 2022 – Global tax software provider Sovos today announced that it will be continuously monitoring changes to provide ongoing updates and advice to help small- and medium-sized businesses navigate the complexities brought on by the combination of IRS rule changes, an increase in budget allocations for tax enforcement and a major shift in worker classifications. What Sovos has dubbed “The Great Confusion” includes, amongst other things, are recent threshold changes to form 1099-K, varying requirements for state filing of the 1099-NEC form and never-ending updates to state portals and reporting processes.

Under the American Rescue Plan Act (ARPA) that was passed in 2021, the Form 1099-K threshold was changed from $20,000 and 200 transactions to just $600 with no transaction minimum. As a result, all third-party settlement organizations (TPSOs) must report Form 1099-K when payments total greater than $600 in the calendar year for Tax Year 2022 and beyond. The 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).

“As the new threshold for the Form 1099-K reporting goes into effect, we’ve seen a drastic increase in questions from customers related to the challenges impacting third-party payment processing and gig economy platforms,” said Wendy Walker, solution principal, tax and regulatory reporting, Sovos. “The increase in form volumes, as well as the number of first-time recipients, will be a big lift for small- and medium-sized businesses, because non-compliance will result in hefty fines and penalties.”

The complexity of 1099 state reporting

Sovos saw a 33% increase in 1099-K forms filed from the tax year 2020 to 2021 and a 17% increase in 1099-NEC tax forms, both signaling a significant increase in gig and contract work that is expected to grow substantially for the 2022 tax season. Further complicating things are the continued challenges in how to classify workers as the rules evolve – an issue that continues to get more government scrutiny because of how it contributes to the rising tax gap. Given this shift in focus and the expansion of 1099 employment, many states are requiring reporting information to be sent directly to the states creating yet another layer of complexity and exponential effort to complete annual 1099 reporting obligations.

For the 2021 tax reporting season, the IRS Publication 1220 Specifications for Electronic Filings of Forms indicated the Form 1099-NEC data would be included in the Combined Federal/State Filing (CF/SF) program. However, in 2020 so many states had invested in new processes and technology to receive the Form 1099-NEC data directly from businesses that 26 states and the District of Columbia decided to stick with their own direct reporting requirements. The states reluctance to rely on the CF/SF has created a very complex patchwork of state tax reporting requirements and methods for Form 1099-NEC that can be very easy to misunderstand.

Clarifying The Great Confusion

As a leader in SMB tax compliance solutions, Sovos is hosting a free 1099 reporting season prep webinar on December 20. Additionally, the company’s team of industry thought leaders has created tips for communicating 1099-K changes. Sovos and eFileMyForms have a full range of software and service options to support businesses of every size to prepare for these significant and rapidly changing 1099 reporting obligations.

To learn more about how Sovos can help your organization, visit

About 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. For more information visit and follow us on LinkedIn and Twitter.

Sign up for Email Updates

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

Additional Press Releases

September 6, 2023
Sovos Bolsters Executive Team to Drive Innovation and Growth, Delivering True Confidence to Customers Navigating Complex Digital and Cross-Border Regulatory Environments

As President of Revenue and Chief Transformation Officer, two industry veterans bring additional depth of global cloud-based enterprise platform IT experience to fuel delivery of compliance solutions  ATLANTA, September 6, 2023 – Global compliance technology solutions and services provider Sovos today announced the addition of two technology industry veterans to its executive leadership team. In […]

Read more
North America
August 17, 2023
Sovos Announces Collaboration with KPMG Canada to Provide Best-in-Class Global Tax Determination Solutions and Services

Agreement to provide clients full suite of tax compliance solutions from both companies  ATLANTA – August 17, 2023 – Global compliance technology solutions and services provider Sovos today announced a Collaboration Agreement with professional services firm KPMG in Canada, an extension of Sovos’ Strategic Alliance with KPMG in the US, which was established in 2022. “This […]

Read more
North America ShipCompliant
July 31, 2023
Mid-Year Direct-to-Consumer Wine Shipping Report Shows Decline in Overall Volume and Value

Sovos ShipCompliant’s mid-year DtC wine shipping report shows a channel adapting   to a new normal  (ATLANTA) July 31, 2023 – Today’s release of the mid-year direct-to-consumer (DtC) wine shipping report from Sovos ShipCompliant and WineBusiness Analytics documents a continued return toward pre-pandemic trends for the market. Following the January release of the 2023 Direct-to-Consumer […]

Read more
North America Tax Information Reporting
July 5, 2023
Sovos Shortlisted at The SaaS Awards 2023

International SaaS Awards Program Announces Initial Shortlist BOSTON – 5 July 2023 – Global compliance technology solutions and services provider Sovos has been shortlisted in the 2023 SaaS Awards program in the category Best SaaS Product for Small Business / SMEs. With its 1099 Tax Information Reporting solution, Sovos gives small- and medium-sized businesses the ability to navigate an increasingly regulated […]

Read more
North America Sales & Use Tax
June 20, 2023
Sovos Experts Examine the State of Economic Nexus Five Years Removed from Wayfair Decision

Is the path to sales tax simplification achievable and what role will technology play as laws continue to evolve?   ATLANTA – June 20, 2023 – Global tax provider Sovos today unveiled its analysis of the state of sales and use tax five years removed from the South Dakota v. Wayfair decision. With more than 1,000 […]

Read more