2024 Form 1040 Schedule 1 draft released

[PATAX]

It is not final. At the top is a new line which states: For 2024, enter the amount reported to you on Form(s) 1099-K that was included in error or for personal items sold at a loss. Below this it then states: Note: The remaining amounts reported to you on Form(s) 1099-K should be reported elsewhere on your return depending on the nature of the transaction. See www.irs.gov/1099k. You can look this up for yourself just in case I made a typo.

[rbynaker · Accepted solution]

For reference, here's the draft form (subject to change at any minute but at the moment this is the 2024 1040 Sch 1 draft):  https://www.irs.gov/pub/irs-dft/f1040s1--dft.pdf

This was discussed briefly at one of the IRS Nationwide Tax Forum sessions.  This is the "new and improved" system for 2024 vs. the 2023 instructions which told you to report it as income and then back it out as an adjustment to income.  I never liked those instructions.

We've had the $600 threshold for 1099-Ks in VA for a few years now.  My approach has been to include a preparer note (efiled with the return) for anything weird.  So far so good.  Obviously if it's all just on Sch C, it doesn't really matter.  In my experience the IRS computers default to assuming anything on a 1099-K belongs on Sch C.  So if you took your extended family to the beach for a week and your siblings, nephews, aunts, etc. all decided to pay you with Venmo for their share of the beach rental, now you can plop that in the box at the top of Sch 1 and (presumably) the IRS will ignore you.

If the intent of the 1099-K rules is to catch tax cheats, I'm not quite sure what's stopping the tax cheats from just putting the entire 1099-K amount(s) in the new and improved "leave me alone" box and having the IRS computers ignore them.  But that's somebody else's problem.  My problem is getting the IRS to not harass my clients who sell $5,000 worth of their kid's hockey equipment on ebay for $650 and now have a 1099-K to show for it.

Rick

[Just-Lisa-Now-]

I thought the 1099k limit went up to $5000 for 2024?

[PATAX]

@Just-Lisa-Now- Lisa, I think Rick is talking about Virginia 1099-k forms? I didn't know the different states had their own 1099-k forms and/or rules?

[sjrcpa]

Also notice new Line 8v re: digital assets.

[PATAX]

@sjrcpa Thanks Sue. I got my information from Basics+Beyond income tax seminars slides for virtual live seminar tomorrow. They have other dates for virtual seminars. They are great. Do a google search and take a look at their website. If you or anyone else here on our forum sign up for a virtual seminar, tell them that PATAX referred you, and you will receive a 0.00% discount.😉

[rbynaker]

---

@PATAX wrote:

@Just-Lisa-Now- Lisa, I think Rick is talking about Virginia 1099-k forms? I didn't know the different states had their own 1099-k forms and/or rules?

---

Correct!  I think how the VA law reads is that if the issuer is issuing a 1099-K to an address in VA the threshold is $600.  Does everybody know that?  I doubt it.  But ebay, paypal, and airbnb seem to know it.  One of my clients sold some of the hockey tickets from his season pass on one of the online "Stubhub" type sites and got a 1099-K in the $600-$1,000 range.

I have to give the folks in Richmond some credit for this.  VATax doesn't have a huge budget for state tax audits (for the most part VA individual tax returns start at federal AGI).  But there is a checkbox on the VA return for you to indicate that your federal return has been audited or amended and if you check that box it wakes up somebody in Richmond so they can go looking for an amended VA return.  They still audit state credits and such, but they rely heavily on the IRS to audit income and deductions.  I think there's also some sort of communication system that notifies VA when the IRS makes changes to a return as a result of an audit.

Anyway, all this to say, with VA lowering the threshold that means the ebay, venmo, etc. folks are filing more 1099-K forms WITH THE IRS who then does document matching on them and notifies VA of anyone they catch (usually meaning more revenues for VATax while shifting the audit costs to the IRS, pretty clever).

Rick

[PATAX]

@rbynaker that is good information. Thank you.