If you have sold anything valued over $600. in 2023 using payment transactions such as credit cards, Pay Pal and/or Venmo, you will be getting a FORM 1099-K from the service at year end.
YOU ARE NOW IN BUSINESS
Save all the forms you receive – the IRS will get a copy also. Usually the income will need to be reported on a Schedule C and is taxable. To reduce your tax liability expenses pertaining to this income can also be recorded on the Schedule C.
You need to get organized and have documentation of both your income and expenses. I suggest using an Excel Spreadsheet to keep track of both the income and expenses.
It is also possible that this income could be reported TWICE. You may get a FORM 1099-NEC and a Form 1099-K for the same amounts paid, therefore, good documentation is vital.
Another issue is receiving cash that is reported on the Form 1099-K for personal reimbursements NOT a business expense. This can occur when you get a Venmo payment for personal expenses and these payments are lumped in with your business expense payments.
If you have received payments form organizations such as Amazon, Etsy or PayPal you will also get a Form 1099-K from them.
Another change that you should be aware of BEFORE year end is the increase in retirement contributions for 2023. The new limits are as follows:
Plan Limits Age 50 & Older Catch Up
401(k), 403(b) 457 $22,500 Add $7,500
IRA: Roth $ 6,500 Add $1,000
IRA: Simple $15,500 Add $3,500
IRA: Traditional $ 6,500 Add $1,000
Change your contribution rate NOW to take advantage of the increases for 2023.