New 1099-K Threshold for Ticket Exchange Platforms: How Will the New Requirements Impact?

You may have heard that there are new updates to the Form 1099-K threshold for the 2023 tax year. Payments that were never required to be reported to the IRS before will be required from this tax year and beyond. 

This will have impacts on all kinds of payment transactions, including those related to online ticket exchange platforms. Businesses that deal in online ticket exchanges will be required to report many more transactions, and the taxpayers that do business with them will in turn, receive 1099-K forms that wouldn’t have in the past. 

Here is an overview of what changes are coming to the 1099-K and how this will affect online ticket exchanges and the taxpayers that they interact with. 

What is an Online Ticket Exchange? 

This is an online platform that enables the buying and selling of tickets. In this marketplace, individuals can re-sell tickets to events that they have already purchased to interested buyers. This can include concerts, sporting events, and more. 

This type of marketplace provides a secure opportunity for ticket exchanges, minimizing the risk of purchasing illegitimate tickets or falling victim to scams often associated with less-regulated platforms, such as social media. An example of a ticket exchange platform that you may be familiar with is StubHub.

What are the Tax Requirements for Ticket Exchanges?

For the 2023 tax year, ticket exchange entities will be required to issue a 1099-K for every transaction of $600 or more. They will not only be required to file this form with the IRS, but they will need to furnish the recipient with a copy of this form. 

What Is Form 1099-K

Form 1099-K is a form that is part of the IRS 1099 Series. The forms in this series are required to be filed with the IRS to report a variety of payment transactions that are made in the course of doing business with non-employees and business entities.

Last year, the IRS proposed new reporting regulations for Form 1099-K. However, they made a decision at the end of the year to delay the requirements until 2023. 

What are the New Requirements for 1099-K Reporting?

The 2023 tax year is here, meaning these new reporting requirements are going into effect for the year-end filing this January. So, let’s talk about what’s new. 

Original 1099-K Threshold:

Payment processing entities only needed to report transactions to the IRS if they exceeded $20,000 or 200 transactions.

1099-K Threshold for Tax Year 2023:

All transactions must be reported if the payment amount is $600 or more. 

As you can see, the difference between these thresholds is pretty significant and will certainly have a notable impact on these platforms and the taxpayers who use them to make transactions. 

What are the Impacts of the 1099-K Thresholds?

Ultimately, the new thresholds for 1099-K will have two major impacts:

First, companies like Ticketmaster, StubHub, and similar ticket exchange platforms will be required to file a 1099 Form 2023 for a much larger percentage of the transactions that happen between their clients.

Second, more of the taxpayers who use these online platforms will receive a Form 1099-K. This also means that the ticket exchange will require them to provide additional information when using the service. These platforms will require the seller’s name, address, and social security number/TIN to successfully file 1099 forms. 

What does it mean if you receive a Form 1099-K?

If you re-sold tickets on the exchange and the total gross amount of the transaction was $600 or more, you will receive a 1099-K from the platform. Whether or not you need to report this transaction as income on your personal tax return will depend on whether or not you profited from the sale, regardless of the fees the platform applied. 

Here’s an example of a scenario where you would receive a Form 1099-K:

Let’s say that you sold tickets using a popular platform like StubHub. The gross amount of the transaction was $700. The original price of the tickets was only $500, so there were net earnings of $100 after the platform’s fees were applied. 

So, would you receive a 1099-K reporting your net earnings? 

The answer is no, the ticket exchange platform is required to report the gross transaction regardless of the fees they applied or the net earnings. The amount that you are required to report to the IRS on your personal income tax return, will depend on how this is broken down. 

TaxBandits offers a Simplified Solution for meeting 1099 Requirements

With TaxBandits, businesses can easily meet their 1099 filing requirements with the IRS, State, and recipient copy distribution. In addition to affordable pricing, TaxBandits offers a complete solution powered by time-saving features. 

Importing 1099 form information to TaxBandits is simple, you add the information manually, upload it in bulk using our 1099 Excel Templates, or import it using our 1099 integrations with accounting software (QuickBooks, Xero, FreshBooks, ZohoBooks, or Sage Intacct). TaxBandits generates and audits forms using the IRS Business Rules for accuracy. 

TaxBandits also provides a W-9 Manager that businesses can use to collect Form W-9 from their recipients electronically. Once the recipient follows the secure link to our W-9 portal, they can easily complete and e-sign the Form W-9 that has been requested. TaxBandits then performs TIN Matching using the SSA database to ensure they are accurate. 

Is your business looking for an option that will allow you to automate the W-9 and 1099 process? Look no further than the TaxBandits API. This secure API option allows you to do just this with extensive documentation for developers and an expert team available to address your questions during the process. Click here to learn more about TaxBandits API. 

 1,751 total views,  4 views today