by The MDTAXES Network | Jul 13, 2023 | 2023 July
What are 1099-Ks?
1099-Ks are issued annually by Payment Settlement Entities (PSE) and third-party settlement networks to report payment transactions taxpayers received during the year via credit cards and other contractual payments. eBay, Venmo, Stub Hub and PayPal are some of the most recognizable of these entities that issue 1099-Ks annually to taxpayers using their services.
How have the rules changed?
Prior to the 2023 reporting year, a 1099-K was not required to be issued unless total transactions exceeded 200 and the total dollar amount exceeded $20,000 in a calendar year for the payee. Under the new rules which begin for the 2023 reporting year, a 1099-K is required to be issued for total settlement payments from a third-party vendor that is at least $600 and no minimum number of transactions (Massachusetts had already required the $600 and no minimum number of transactions threshold prior to 2023 for payees with a Massachusetts address).
When should a 1099-K be issued?
1099-Ks should only be issued to report sales of goods or services. Transactions between friends and family for reimbursements, personal affairs, etc. should not be reported on a 1099-K.
What to do if you receive a 1099-K?
Taxpayers that are in a business would generally report the 1099-K income on their Schedule C and deduct related costs.
Individuals who receive a 1099-K (such as for the sale of old unused furniture via eBay or the re-sale of sporting tickets via StubHub) generally should report the income and deduct the cost of the resale items on Schedule D/Form 8949.
- For individuals, taxable income would be reported for the resale dollar amount reported on the 1099-K exceeding the cost of the underlying item.
- For individuals, a loss from the sale of personal items is not allowed as a “taxable loss” if the resale income received and reported on the 1099-K is less than the cost of the item previously purchased. (But the transaction reported on the 1099K would still need to be reported by individuals on their personal tax return, although a tax loss is not allowed to be claimed.)
- When 1099-K income items are sold at a loss by individuals, taxpayers can opt to report the income and cost on Schedule 1 of the tax return – reporting the 1099-K income on Schedule 1, Part I, Line 8z with the description “Form 1099-K Personal item sold at a loss, $XXX” and report the cost, limited to income reported on the 1099-K, on Schedule 1, Part II, Line 24z with the description “Form 1099-K Personal item sold at a loss, $XXX”.
by The MDTAXES Network | Jul 13, 2023 | 2023 July
For taxpayers who are the beneficiary of an IRA or other retirement account, The SECURE Act changed the Required Minimum Distribution (RMD) rules for inherited IRAs. While final regulations are expected in 2023 but have not yet been issued, the IRS did issue guidance in IRS Notice 2022-53.
Included as part of the SECURE Act are new rules for individuals who died after December 31, 2019 and passed on retirement accounts to beneficiaries. The new rules required the designated beneficiary’s inherited IRA to be fully distributed within 10 years of the death of the deceased retirement account owner. However, the distribution rules differ depending on whether or not the deceased individual had reached the age of 70.5 (72 if they passed away after 2019) and had already started taking their Required Minimum Distributions (RMD):
For taxpayers that inherit an IRA and the RMDs have already started for the original retirement account holder, then:
- The designated beneficiary must continue to take annual RMDs over the life expectancy of the designated beneficiary, and
- The inherited IRA must be fully distributed by December 31 of the 10th year following the year of the original retirement account owner’s death.
For taxpayers that inherit an IRA and the RMDs have not begun because the original account owner died before their RBD commenced, then:
- The designated beneficiary is not required to take any annual RMDs in years 1 – 9, but has the option of doing so if they choose, and
- The inherited IRA must be fully distributed by December 31 of the 10th year following the year of the original retirement account owner’s death.
The notice does include some good news for taxpayers that may have missed RMDs for the years 2021 and 2022 resulting from SECURE Act’s lack of clarity relating to RMDs. The IRS has provided an automatic waiver of penalty for those RMDs not taken for those two years only, which is great since the penalty for Failure to Take the RMD is equal to 50% of that year’s missed RMD.
If you are the beneficiary of an inherited IRA or other retirement account, please reach out to the financial institution holding the retirement account, your tax accountant, and/or the estate lawyer to make sure you are complying with these recently revised RMD rules.
by The MDTAXES Network | Jul 6, 2023 | 2023 July
Just a reminder that if your practice had a 401k/Profit Sharing Plan in place during 2022, you are required to file a Form 5500 by 7/31/23 (Form 5500 Corner | Internal Revenue Service (irs.gov). If you aren’t able to submit this paperwork prior to 7/31, please file for an extension using the Form 5558, https://www.irs.gov/pub/irs-pdf/f5558.pdf, giving yourself until 10/15 to file.
There are no taxes due with this form. Instead, the 5500 is an informational filing only. Practices with SEPs and SIMPLEs are exempt from this annual filing requirement. While no taxes are due, the PENALTIES FOR FILING THE FORM 5500 LATE ARE DISGUSTING – A WHOPPING $250 PER DAY!!!
As a practice owner with a retirement plan, it’s up to you to follow up with your TPA to be completely sure that all the filing deadlines are met. No one is certain how flexible the IRS will be to reduce or waive this onerous late filing penalty. Please do what you can to not need to find out.
Remember, no one cares more about your practice avoiding this $250 per day late-filing penalty than you do.
by The MDTAXES Network | Jul 6, 2023 | 2023 July
From IRS News – IR-2023-112, June 8, 2023
WASHINGTON ― The Internal Revenue Service today encouraged nearly 1.5 million people across the nation to submit a tax return to claim their refunds for tax year 2019 by the July 17, 2023, deadline.
The IRS estimates almost $1.5 billion in refunds remain unclaimed because people haven’t filed their 2019 tax returns yet. Available data includes a special state-by-state estimate of how many people are potentially eligible for these refunds in each state and each state’s median potential refund. The average median refund for tax year 2019 was $893.
“Time is running out for more than a million people to get their tax refunds for 2019,” said IRS Commissioner Danny Werfel. “Many people may have overlooked filing a 2019 tax return due to the pandemic. We don’t want people to miss their window to receive their refund. We encourage people to check their records and act quickly before the deadline. The IRS has several important ways that people can get help.”
Under the law, taxpayers usually have three years to file and claim their tax refunds. If they don’t file within three years, the money becomes the property of the U.S. Treasury.
For 2019 tax returns, however, people have more time than usual to file to claim their refunds. Usually, the normal filing deadline to claim old refunds falls around the April tax deadline, which was April 18 this year for 2022 tax returns. But the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency. IRS Notice 2023-21, issued on Feb. 27, 2023, provided legal guidance on claims made by the postponed deadline. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by July 17, 2023.
Learn more at: Time is running out: Taxpayers missing $1.5 billion in refunds for 2019 must file by July 17 | Internal Revenue Service (irs.gov)
by The MDTAXES Network | Jul 6, 2023 | 2023 July
Practice owners who received Provider Relief Fund (PRF) payments exceeding $10,000 in the aggregate between January 1, 2022 and June 30, 2022 are required to self-report during Reporting Period 5 (RP5) which runs through September 30th.
Providers who fail to comply with this requirement by September 30, 2023 will be deemed out of compliance with the program’s Terms and Conditions and could be subject to forfeiture of all PRF subsidies received during the first half of 2022. Check out the Provider Relief Fund Reporting Non-Compliance Fact Sheet at: https://www.hrsa.gov/sites/default/files/hrsa/provider-relief/reporting-non-compliance-fact-sheet.pdf.
For our clients who are required to report on PRF payments, you have likely received multiple emails from both HRSA as well as from our staff offering to help satisfy your self-reporting requirements. If you would like our assistance to self-report, please email us (prf@schwartzaccountants.com) soon so we can help make sure that you meet the September 30th deadline.
For any S&S clients who have already completed the reporting requirement on their own or plan to do so by September 30th, please reach out to us at (prf@schwartzaccountants.com) to let us know and we will update our records accordingly.
More info about the self-reporting requirement and the September 30th deadline is available at: https://www.hrsa.gov/provider-relief/reporting-auditing. We do charge a fee to assist our clients with the self-reporting application.
