AFSA NEWS Any net LTCG that results from this process is taxed at the capital gains rates in the table below: There are exceptions to these rates for certain types of capital gains, such as Section 1202 qualified small business stock, net capital gains from selling collectibles, and Section 1250 unrecaptured gains (explained in “Investments in Real Estate,” on page 62). Finally, and closely related, an additional 3.8 percent net investment income tax may apply to some forms of investment income, including some capital gains for taxpayers with modified adjusted gross income (AGI) above: • $250,000 for those MFJ or qualifying surviving spouse with a dependent child, • $200,000 for HOH or single, and $125,000 for those MFS. 1099-K: Payment Card and Third-Party Network Transactions The reporting requirements for business transactions processed through third-party payment settlement organizations (TPSOs) such as Venmo and PayPal were changed for 2024 transactions. Although the IRS initially planned to implement a $600 reporting threshold starting in 2023, this threshold has been delayed. For 2024, the IRS is planning to implement a $5,000 reporting threshold for Form 1099-K, meaning TPSOs must issue a 1099-K if a taxpayer receives more than $5,000 in payments for goods or services. The $5,000 threshold replaces the previous $20,000 and 200 transactions threshold used in prior years. The 1099-K will need to be accounted for on the taxpayer’s 2024 tax return. If the 1099-K was issued due to the sale of personal items, the taxpayer must calculate the gain or loss from the sale of personal items on a per transaction basis. Each sale of a personal item that resulted in a gain must be reported on both Form 8949 and Schedule D, even if the taxpayer did not receive a 1099-K reporting the transaction. The sale of personal items that results in a loss must only be reported if the taxpayer received a 1099-K reporting the transaction. In this case, the taxpayer must report the proceeds from the sale and the cost basis as equal amounts so no loss is reported, because personal losses are not tax deductible. If the sale of personal items that results in a loss is not reported on a 1099-K, then the sale does not need to be reported to the IRS. Readers should keep adequate records to substantiate the original purchase price of sold items. Readers should also ensure they code transactions through TPSOs correctly so only business-related transactions are reported on Form 1099-K. Finally, readers should confirm if the payment service they are using is a TPSO. Certain money transfer services, such as Zelle, are not TPSOs and are not required to issue a Form 1099-K. Readers can follow IRS updates to 1099-K reporting on their FAQ page: https://www.irs.gov/ newsroom/form-1099-k-faqs. Virtual Currency/Digital Assets In recent years, the IRS has placed increased scrutiny on virtual currency transactions (now referred to as a digital asset, along with many other types of digital assets such as nonfungible tokens [NFTs]). The draft 2024 Form 1040 and Schedule 1 reflects this continued scrutiny. Taxpayers must confirm in a check box on page 1 of Form 1040 whether the taxpayer received a reward, award, or payment for property THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2025 61 Figure 2 Figure 3
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