I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
Code-d Messages
Last week I shared how I'm Slowing My Roll this year as a way to ease into the new year and avoid a lot of stress and anxiety.
If you were one of the many folks who let me know you're all aboard the Slow It Down Movement, thank you so much for joining me. And, please keep me posted on how it's going for you.
So, while I'm limiting my intake of emails and social posts and general news, something happened last week that I absolutely want to share with you in case you missed it.
On January 3rd the IRS said it was delaying implemention of a change to the tax rules regarding income received through PayPal, Venmo and other third-party payment settlement options (TPSOs).
The existing rule is that if you make at least $20,000 from 200 or more transactions within any given year via a TPSO, then that platform is required to report your earnings via Form 1099-K to the IRS and send you a copy as well for your tax preparation.
As part of the 2021 American Rescue Plan, changes to this rule were set to go into effect this year to be applied to 2022 tax reporting.
The change requires TPSOs to issue Form 1099-Ks to anyone who earns $600 or more in any calendar year.
Basically, the intention of the change is to treat payments from TPSOs in a similar way to payments received directly from clients, which are reported via Form 1099-NEC.
So, what happened is that the IRS received lots of feedback over concerns that TPSOs, tax preparers, and tax payors all needed more time to adequately prepare for this transition. As a result, they agreed to delay implementation.
What this means for you if you use TPSOs, or plan to, is:
- Unless you meet the existing minimum 200 transactions and $20K revenue from a TPSO for 2022, nothing changes for you this year.
- You've got some extra time to prepare yourself for implementation of this change, which will likely impact your tax preparation in 2024 for this year.
— One way to prepare is to make sure you're tracking income for each payment option you accept. This will enable you to check the accuracy and appropriateness of each 1099 you receive.
Whether or not you use TPSOs, this is a great reminder that the tax code changes fairly often, especially when the political party leadership changes hands in Congress. So, it's imperative to stay up-to-date on the tax requirements that impact you.
In recent years, there have been quite a few changes to small business taxes and reporting.
So, here are the questions I recommend asking your accountant/CPA/tax preparer each year:
- Does the way I'm recording my income and expenses still work for my tax preparation?
- Is there anything else I should be doing to make it easier for tax prep?
- Are there any changes to the tax code on the horizon I should know about?
- How do you see any changes impacting my tax liability or burden?
- In light of upcoming changes, do you recommend I reconsider my business structure, my payment options, my accounting software, my banking and/or credit relationships, etc.
If you don't work with a tax professional, find a reputable source of information and dedicate some time a few times a year to catching up on what is and will be happening with small business taxes and reporting.
To support you in all of this, here are some helpful tax-related resources for small business owners:
- Small Business Tax Meetings, Seminars, and Workshops (organized by state)
- Free Tax Preparation Programs provided by the US Gov't. (Also check your state for any programs.)
- 14 Tax Preparation Resources for Small Businesses (from SCORE)
Until next week, remember it's better to be prepared, than to remain unaware.
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I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
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