The new 1099 reporting requirements don’t apply to banks. However, the new rules do apply to some payment services that use bank transfers.
Will banks start sending 1099s for $600 transfers?
Your bank will not send you or the IRS a 1099 saying you had more than $600 in bank transfers.
There was some talk in Congress about adding a bank transfer reporting rule a few years ago. That never happened.
A big reason why the rule didn’t happen is because transfers between your own checking and savings accounts would have been covered. Congress actually realized that wouldn’t make sense.
The only 1099 you’ll receive from your bank is 1099s that you could have gotten in the past. This includes for things like bank interest, investment gains, and new account bonuses.
What do the new 1099 rules apply to?
The new 1099 reporting rules apply to electronic payment networks. Those are money transfer and payment processing services like PayPal, Venmo, and Square.
Previously, those types of services would have sent you a Form 1099-K if you received more than $20,000 during the year and had more than 200 transactions. The new rule is that you’ll get a 1099-K if you received $600 or more in any number of transactions.
The rules cover payments you receive by credit card, debit card, ACH transfer, or other bank transfers.
The key is that you’re receiving payments via a third-party app. Payments directly from a payer to your bank account usually won’t result in a 1099-K.
The payer may still issue a Form 1099-NEC if applicable.
Will the IRS audit bank transfers?
The IRS normally doesn’t review your bank transfers or account activity. They do have the right to request that information during an audit or tax fraud investigation.
Will I have to pay more in taxes?
There are no new taxes, tax increases, or changes to what’s taxable. Your taxes shouldn’t change except as a normal result of changes in your income, deductions, or credits.
If you haven’t been reporting all of your income because it wasn’t reported on a 1099, it’s now easier for the IRS to make sure you’re reporting your income and paying taxes. That’s the point of the new rules.
If you didn’t report income in the past, you may want to contact a tax professional. In cases of tax fraud or tax evasion, the IRS often has no limit on how far they can go back if they audit you. Penalties and interest may apply back to when you should have paid the taxes.
The new reporting rules aren’t guaranteed to trigger an audit on past tax returns, but it is a possibility. If you’re showing way more income this year, the IRS may ask why.
Does getting a 1099-K mean you owe taxes?
Getting a 1099-K does not mean that you owe taxes. It just means that you received bank transfers or other payments totaling more than $600.
Report your income and deductions as normal.
If you got a 1099-K for income that you don’t have to report, the IRS may send you a letter asking why you didn’t report the income. You’re not in trouble, and you probably don’t owe anything. The IRS just needs more information to determine if you had taxable income.