Tax

Do you sell goods or services and receive payment through a third-party settlement organization (TPSO)? If so, you must know the IRS’s new Form 1099-K reporting rules.

TPSOs include

• payment apps such as PayPal, CashApp, and Venmo;
• online auction or marketplace services such as eBay and Amazon;
• gig economy platforms such as Uber and Airbnb;
• some cryptocurrency processors such as BitPay;
• craft or maker marketplaces like Etsy ;
• ticket exchange or resale sites like Ticketmaster; and
• some crowdfunding platforms.

For over a decade, TPSOs filed IRS Form 1099-K, Payment Card and Third Party Network Transactions, reporting certain payments the TPSOs process for goods and services.

But a TPSO had to file Form 1099-K only if the recipient had

• gross annual earnings over $20,000, and
• more than 200 transactions in the calendar year. 

With these thresholds, only frequent users of TPSOs exceeded both thresholds and had their payment information reported to the IRS. If you’ve never received a 1099-K from a TPSO that processed payments on your behalf, this is why.

That is changing. Congress drastically reduced the 1099-K filing thresholds when it enacted the American Rescue Plan Act of 2021 to require TPSOs to file Form 1099-K for any recipient who is paid more than $600 during the year with no minimum transaction requirement.

The new 1099-K filing rules were supposed to go into effect for the 2022 tax year.

But the IRS delayed them until 2023. Now, the IRS has delayed them yet again, announcing that the old rules ($20,000/200 transactions) remain in place for 2023.

For the 2024 tax year, the IRS is replacing the $20,000/200 transaction threshold with a $5,000 threshold and no minimum transaction requirement.

For the 2025 tax year and later, the IRS applies the $600 threshold, again with no minimum transaction requirement.

Why all the delays? Because the IRS fears that TPSOs will mistakenly file many of the expected 44 million 1099-Ks. For example, TPSOs might mistakenly file 1099-Ks for personal payments from family and friends.

If you want to discuss TPSO reporting, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• January 30, 2024

As we continuously seek the best health care solutions for our clients, I want to introduce you to an alternative that may align with your financial goals and personal values: health care sharing ministries (HCSMs).

HCSMs are not your typical health insurance. They are non-profit organizations that enable members with shared religious or ethical beliefs to collectively share medical expenses. This approach is rooted in principles of community and charity, and it operates outside the conventional health insurance framework.

Financial benefits. Often, HCSMs offer lower monthly costs compared to traditional health insurance premiums. While contributions to HCSMs aren’t tax-deductible, for many, the significant savings in monthly expenses outweigh the tax benefits.

Membership requirements. HCSMs may base membership on adherence to lifestyle choices and ethical beliefs, including restrictions on tobacco and illegal drug use and, in some cases, regular church attendance.

Contribution structure. Unlike standard health insurance, HCSMs have contributions instead of premiums. Contributions are generally more affordable and pooled to share members’ medical expenses.

Coverage limitations. It’s important to note that HCSMs are not required to cover certain services mandated under the Affordable Care Act, such as preventive care or birth control.

Regulatory status. Federal regulations under the Affordable Care Act, ERISA, or HIPAA do not apply to HCSMs. Similarly, state insurance regulations do not apply to HCSMs. The lack of regulations means there’s no federal or state guarantee of coverage.

Despite the differences from traditional insurance, many find HCSMs a worthwhile option, especially considering the lower monthly expenses and the flexibility in service selection and doctor choice.

If you want to discuss HCSMs, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• January 23, 2024

If you’re trying to decide between leasing and buying your next business vehicle, one question is probably foremost in your mind:

Which option costs less?

Unfortunately, comparing the costs of leasing and buying isn’t as simple as it looks. To do it right, you must consider not just out-of-pocket costs but also

• cash available,
• the tax benefits of each option, and
• the time value of money.

The Difference between Lease and Buy . . .

When you buy, you own the vehicle free and clear after you repay the loan. So you get the trade-in or sale value of the vehicle when you decide to get rid of it.

When you lease, the dealer or leasing company owns the vehicle, and you pay for its use over the lease term. When the lease ends, you can either buy the vehicle for a “residual value” stated in the lease or walk away and get a new vehicle.

The Gnat’s Whisker

How can you absolutely know whether it’s better to buy or lease? Easy. Just ask us.

If you buy, we’ll find the present value (PV) as follows:

If you lease, we’ll find the present value as follows:

Key point. We enter the numbers such as the cost of the vehicle, down payment, lease payments, etc., in our calculator, and the calculator generates all the information above—the details. And from those details, the calculator gives you the results, which look like this:

Three key points here:

1. You give us the numbers—we enter them in our calculator.
2. The calculator crunches the numbers.
3. You see the result in after-tax cash.

If you want me to make the calculations for you, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• January 16, 2024