Current Items:                                                             

  • Garage Sale 1099-K… Wha?
  • IRS Interest Rates
  • Digital Signatures                                                                    

1) Everybody likes going to a garage sale now and then. You’ve see that Antique Road Show where some lady bought a picture for four dollars and it turns out to be worth $50,000. Most times it’s just junk. But there are those who make a living at buying and selling what could otherwise be called “old crap.” Now IRS, always looking for an additional buck, knows damn well that those sellers are not properly reporting their transactions. So to make life even more complicated a recent addition to the tax law (The American Rescue Plan) requires that taxpayers send form 1099-K to alert the IRS of those sale transactions. According to the IRS: The ARP required third party settlement organizations (TPSOs), which include popular payment apps and online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form 1099-K starting in 2022. These forms would go to the IRS and to taxpayers and would help taxpayers fill out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and services involving more than 200 transactions per year totaling over $20,000.

Unable to deal with the tsunami of forms, the IRS temporarily delayed the new requirement last year.

Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.

However, the given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).The casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales. That’s where your garage sale comes in. Granted most times people are paying a dollar or two for most items but when the sale transaction gets larger there is now this filing requirement which has been enacted. Whenever IRS resorts to having somebody send a form 1099 it is actually making taxpayers private IRS agents. Once the IRS gets its hands on this information it is a hop skip and a jump for it to compare the seller’s tax return with the 1099s that have been generated. The scary part about all this is there could be millions of transactions that would qualify under the new law and require taxpayers to file forms 1099-K! Needless to say with penalties for failing to do so as well. Think about that the next time you are browsing your neighbors junk pile they call a garage sale.

2)  The Internal Revenue Service has announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2024.

For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here is a complete list of the new rates:

  • 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
  • 5.5% for the portion of a corporate overpayment exceeding $10,000.
  • 8% for underpayments (taxes owed but not fully paid).
  • 10% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

3) Many forms filed with IRS have in the past required handwritten signatures by taxpayers. In slowly joining the 21st century, IRS has begun accepting digital signatures.  The Internal Revenue Service has announced that it has extended certain temporary flexibilities. The acceptance of digital signatures is extended indefinitely until more robust technical solutions are deployed, and encrypted email when working directly with IRS personnel has been extended until October 31, 2025. Nice to see the IRS using the same sophisticated methods as the server did at your last restaurant meal.

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