Learn about the new tax law changes that freelancers and small business owners should be aware of in 2022. Discover how the new regulation will impact payment services, reporting requirements, and tax forms.
When it comes to taxes, change is inevitable. As a small business owner or freelancer, it’s crucial to stay up to date with the latest tax laws to avoid any legal issues. In this article, we’ll discuss the new tax law changes for small business owners and freelancers in 2022.
What Has Changed for Tax Season?
For those who use payment platforms like PayPal, there’s a new tax rule in place for 2022. If your annual income exceeds $600, you must disclose it to the IRS, even if you reach that sum through a limited number of transactions. This means even side hustlers who purchase and sell online must be honest about their additional income in their tax return.
Effects of the New Tax Rule for Small Business Owners and Freelancers
The new tax law for freelancers and enterprises will impact reporting requirements and payment services. Here are the changes you need to be aware of:
Payment Services Will Need Information About Your Taxes
Payment service providers like PayPal will ask for your tax information if you haven’t already provided it. This could be your tax identification number, social security number, or employer identity number. Payments will be suspended until consumers validate their tax information. Venmo and other payment platforms will also follow this practice.
Users Will Be Shown An Additional Form To Provide The Details Of Each Transaction
The new tax law for businesses won’t noticeably alter how their customers check out. Customers will merely be required to confirm the type of each payment. Tell them to select the option that denotes payment for goods or services if you want compliance.
Payment Services Will Provide A 1099-K Form To Freelancers And Small Company Owners
Payment service providers will give sellers a Form 1099-K if they received payments totaling $600 or more for goods or services. If you receive payments from a business through a payment processor, you don’t need to file the 1099-K form. You only need to file the 1099-MISC form that the employer provides until you make more than $600 from additional transactions.
Final Reflections on the 2022 New Tax Rule
It’s essential to stay informed about the most recent tax laws, whether you’re a freelancer or a small business owner. While the new rule may not sit well with everyone, you don’t have to handle it alone. You can find over a thousand independent tax consultants on Fiverr to take care of your tax-related responsibilities, allowing you to focus on expanding your company.
In summary, the new tax law changes for small business owners and freelancers in 2022 will impact payment services, reporting requirements, and tax forms. Make sure to provide your tax information to payment service providers, confirm the type of each payment with your customers, and file the correct tax forms based on your income. By doing this, you can ensure compliance and stay out of trouble with the IRS.