A Form 1099-K reports the payments that you received during the tax year through a payment settlement entity (Credit Cards, PayPal, Venmo freelancing platforms, etc.). For tax year 2023, third-party payment networks are required to file Form 1099-K with the IRS when the the gross payment amount is more than $600. (This was delayed by one tax year near the end of 2022.)
To answer your question it is neither a pro or a con. The 1099-K simply reports gross payment amounts of more than $600. The 1099-K is a starting point along with your other tax records to report your correct income on your tax return.
With a 1099-K a taxpayer must first determine if they sold a personal item or if they sold goods, rented property or provided services.
A personal item is something you owned for personal use such as a car, refrigerator, furniture, stereo, jewelry or silverware, etc.
You can sell personal items at a loss and it would be reported as follows:
On Schedule 1 (Form 1040):
- Enter the Form 1099-K gross payment amount (Box 1a) on Part I – Line 8z – Other Income: "Form 1099-K Personal Item Sold at a Loss, $700"
- Offset the Form 1099-K gross payment amount (Box 1a) on Part II – Line 24z – Other Adjustments: "Form 1099-K Personal Item Sold at a Loss $700"
These 2 entries result in a $0 net effect on your adjusted gross income (AGI).
It can also be reported on Form 8949.
For Personal Items Sold at a Gain you would report it on both Form 8949 and Schedule D.
If you sell goods, rent property or provide services, which appear to be the case in your question, you must report the income on your tax return, most likely, on Schedule C. It can also be reported on Schedule E if it is a Partnership or a Corporation, when there is a 1065 K-1 and/or an 1120 K-1.
An area of particular is the reporting of payments that were gifts or reimbursements from family or friends. Work with the filer to attempt to get a corrected 1099-K in this circumstance. If you cannot get a corrected Form 1099-K, report the amount on Schedule 1 as follows:
- Enter the error on Part I – Line 8z – Other income: "Form 1099-K received in error, $650"
- Adjust it on Part II – Line 24z – Other adjustments: "Form 1099-K received in error, $650"
These 2 entries note the error and result in a $0 net effect on your adjusted gross income (AGI).
So see this links for more details:
https://turbotax.intuit.com/tax-tips/irs-tax-forms/form-1099-k-decoded-for-the-self-employed/L6xHSTX...
https://www.irs.gov/businesses/understanding-your-form-1099-K-1.
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