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1099-K could reflect transactions besides those of goods sold or deductible business expenses.
involving the provision of goods and services, such “The IRS expects amounts reported on the
as for reimbursements, charitable contributions, and Form 1099-K to include things like credits, refunds,
personal payments (for more, see “New, Lower Form fees, and other adjustments,” said Wendy Walker,
1099-K Threshold Prompts Cautions, Criticisms,” principal of tax information reporting for Sovos, a
JofA, March 10, 2022). provider of tax and regulatory compliance solutions,
CPAs with tax clients in the gig economy and chair of the Information Reporting Subgroup
therefore will be more likely to have to reckon of the IRS Advisory Council (IRSAC). “However,
with the form and with the fact that it may report getting to what is actually taxable is far from easy,
transactions that do not involve the provision of especially when you receive a 1099-K form.”
goods and services and are therefore nontaxable. CPAs should inform their gig economy clients
Electronic payment facilitators, which process that they will, in many cases, need to file Schedule
payments, do not necessarily have a relation- C, Profit or Loss From Business (Sole Proprietorship).
ship with a participating payee and must obtain Not reporting net income from activities such as
the payee’s tax identification number from the Uber driving, dog-walking, and similar activities
third-party settlement organization that connects could spawn assessments and penalties, Walker
buyers and sellers of goods or services (see “Tax pointed out.
Clinic: Form 1099-K Information Returns: New “The IRS is constantly on the lookout for gaps
Rules Beginning 2022,” The Tax Adviser, Jan. in income tax reporting,” she said. Increasingly,
2022; also IRS, Form 1099-K Frequently Asked that scrutiny may turn to independent contractors,
Questions (FAQs)). including those receiving Form 1099-K.
Moreover, participating payees (generally, persons MBO Partners, an online workforce manage-
who accept a payment card as payment or a payment ment platform, released a report that found that
made by a third-party settlement organization) the number of U.S. independent contractors rose by
may not be able to distinguish payments that are 34% to 51 million in 2021, in an ever-wider range
for goods or services from those that are not, unless of occupations and work settings — even including
the third-party settlement organization allowed the accounting firms.
payer to designate payments that were not for goods “Many CPA professionals are independent
or services, such as for reimbursements or personal contractors,” Walker said. “And if they’re using a
payments. Such errors on Form 1099-K generally freelancer platform, they should expect to receive a
require payee taxpayers to contact the filer or pay- Form 1099-K from the platform company.”
ment settlement entity and request a corrected form
(see IRS FAQs: General). MIDYEAR STANDARD MILEAGE RATE CHANGE
What can such taxpayers expect from the new Speaking of common small business deductions,
increased Form 1099-K reporting? For one thing, CPAs need to keep in mind that clients using
the gross amount reported does not reflect the cost the standard mileage rate for business use of a

IN BRIEF Card and Third Party Network transactions on Form 1040, U.S.
Transactions — much lower than Individual Income Tax Return, and some
■ Tax year 2022 returns for CPA tax previously. However, the IRS postponed other returns in the Form 1040 series
preparers’ clients may be simpler in its implementation until 2023. has been changed again for 2022, which
some ways than for the year before, ■ Taxpayers using the standard mileage may cause confusion for taxpayers.
with most of the pandemic relief rate for business, medical, or moving ■ Businesses that previously deducted
provisions that were applicable to deductions will have to calculate research or experimental (R&E)
2021, such as the advance child tax their deductions twice, since the IRS expenditures under Sec. 174 will now
credit, no longer a factor. adjusted the rates midyear. One rate have to amortize them over five years
■ Some taxpayers faced complications applies before July 1, 2022, and the for domestic R&E activities, or for 15
from a new-for-2022 $600 reporting other on that date or after. years if the research is conducted in a
threshold for Form 1099-K, Payment ■ The question about cryptoasset foreign country.
To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.

8 | Journal of Accountancy January 2023