If you’ve taken in more than $600 from Paypal, Venmo or other third parties this year while selling cards or memorabilia, you won’t be getting a 1099-K form from the Internal Revenue Service after all.
The IRS has announced that it’s delaying the implementation of the new law until 2023. As a result of the delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower threshold.
Some lawmakers, taxpayer advocacy groups and eBay had been fighting the measure, saying millions of taxpayers would unexpectedly be getting 1099-K forms and that the new idea could be a major headache for some businesses and the IRS itself.
“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.”
In previous years, it took more than 200 transactions or an aggregate amount of $20,000 to trigger a tax form from the IRS through those third parties. The announcement of the delay means that will still be the case for 2022.
The IRS calls it a “transition period” which is “intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting.”
Earlier this month, the American Institute of CPAs indicated it had “deep concerns” about the lowering of the tax reporting threshold in a letter to the Senate Finance Committee and the House Ways and Means Committee. They suggested a threshold of $5,000 might be less drastic for tax preparers who had feared a major headache because of the number of clients who’d likely be receiving a form because of the lower amount.
“While a one- year delay is welcome news for millions of online sellers, Congress will need to permanently change the reporting requirements to prevent mass confusion and overreporting of income in the future,” eBay stated after the IRS announcement. “eBay will continue its work toward a permanent solution on behalf of the online selling community.”
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