IRS Delays $600 Threshold Tax Reporting Requirement for Non-bank Transactions
The Internal Revenue Service (IRS) announced a delay in reporting the $600 threshold for third-party settlement organizations previously set to take effect for the 2022 calendar year. This one-year delay does not apply to any of the other Form 1099-K rules which set reporting requirements for transactions in excess of 200 per year, exceeding an aggregate amount of $20,000.
The IRS invoked the delay to establish a transition period for implementing the lowered threshold for reporting earnings due to anticipated confusion over the new requirement. Although the law is not intended to track personal transactions such as sharing the cost of a meal, car ride, holiday gifts etc., it was feared that the payment platforms would erroneously issue tax forms in these cases.
As a result of this delay, third-party settlement organizations such as Venmo, PayPal, Amazon, Square, and Cash App will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower $600 threshold amount.
The IRS released the following statement: “The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
The lower-level reporting requirement was adopted through the American Rescue Plan of 2021. The American Rescue Plan was an economic stimulus package signed into law by President Biden to provide relief from the hardships caused by the pandemic. Previously, only business transactions exceeding $20,000 were reported by third party pay platforms.
More information can be found at Notice 2023-10.
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