“If a household employer was using a payroll provider, we’re good,” Vig said. “If they possibly used the Venmos of world, their employee or domestic help may be issued a 1099-K. This is where it’s confusing, since the domestic help possibly may get two forms: a W-2 and a 1099-K. The average household employee is not a sophisticated taxpayer, and this may create confusion and stress.”
Another potential issue, Eyler said, is the IRS watching for people who get a large pop of 1099-K income and delving into prior years for previously unreported taxable income.
Reporting requirements for payment card transactions—credit, debit and store-value cards—haven’t changed, Pace said.
“New rules on the 1099-K is a tax-reporting game changer,” Vig said. “The solution would be to find a way to allow Venmos of the world to exempt these certain payments, but that adds a step to the process and also may be subject to abuse.”
Awareness seems the most important tool for now, advisors said “The advice to our clients was to put on their tax hat for just a minute and share this new reporting requirement with the individual who may not be aware that this form could come their way next year,” Pace said.