Small Business Owners: Be on the Lookout for a New Tax Form This Year  

On January 1, 2022, a brand-new tax change went into effect due to the American Rescue Plan Act of 2021. The $1.9 trillion stimulus bill, designed to speed up the country’s economic recovery from the COVID-19 pandemic and the recession it caused, makes changes to tax law that may affect you.  

Until this year, the third-party settlement organizations (payment processing apps like PayPal, Venmo, and CashApp) weren’t required to report sales of less than $20,000. The new law reduces that amount to $600. Those payment processors will be required to report all earnings to the government on behalf of the businesses they work with. That means the government will know exactly how much gig workers, independent contractors, and even casual eBay or Etsy sellers made. It’s expected to generate $8.4 billion over the next ten years.  

The new 1099-K or 1099 MISC

Contractors can expect to receive the new 1099-K form for their sales, and sellers will get the new 1099-MISC form sometime after January 31, 2023, to account for sales made using these platforms. In a perfect world, your small business is already reporting these sales to the federal government, but occasionally transactions can fall through the cracks. Now, it’s more important than ever to maintain good records to help keep things in order.  

If you received funds from an Economic Injury Disaster Loan, you could use those funds to pay your taxes. That way, you can use cash on hand for your business needs or pay off debt. Personal gifts and charitable donations are not counted as income and will be exempt from taxation.  

Be sure to familiarize yourself with the new tax changes and how they may impact your bottom line. The good news is that there are plenty of resources available to help, so there’s no need to panic. And remember, if you have any questions or concerns, it’s a good idea to talk to your accountant or tax advisor for more information.