Tax season officially closes on April 15th. While that doesn’t leave much time to finish filing, it leaves even less time for small businesses and freelance workers. Beginning this year, how freelancers enter their tax information has been changed.
Any entrepreneur or small business that generates income through third-party apps must use entirely different forms than before. Tutoring, copywriting, dog walking, etc., can be categorized as gig and freelance work. Usually, these jobs are part-time, temporary, or contractual. Often, though not always, payment comes in via apps like CashApp, PayPal, Zelle, and Venmo.
Until now, small businesses and freelancers have used the 1099-K form to claim payments of $200 or higher or a total of $20,00 via third-party apps. This form will stand for the 2023 filing year, ending in under two weeks. However, effective January 1st, 2024, a new method of filing replaces it.
The IRS has caught up with the trending gig economy and will lower the third-party app requirements to $5,000. These changes are expected to help keep income more trackable and organized. The IRS has an entire center dedicated to helping small businesses and gig workers acclimate to the change during the transition.
While this filing season is following previous years regarding what forms to use, the changes that small businesses and freelance workers need to be aware of have already gone into effect. Knowing where to access guidance and what will be required going forward will make future filing seasons much more manageable.