According to a news release, the federal agency announced that it will delay the new $600 Form 1099-K reporting threshold requirement for third-party payment organizations for the 2023 tax year. The IRS is planning a threshold of $5,000 for the 2024 tax season.
When the IRS delayed 1099-Ks for the 2022 tax year, the agency said it was a transition year. In announcing its delay for a second consecutive year, the agency noted that it was making the 2023 tax year “another transition year to implement the requirements” under the American Rescue Plan.
As a result of the latest delay, third-party reporting for the 2023 tax year will only be required if the taxpayer receives more than $20,000 and has accumulated more than 200 transactions, Forbes reported.
“Today’s announcement by the IRS is welcome news for millions of Americans who turn to online marketplaces to earn some extra money,” stated Jamie Iannone, Chief Executive Officer at eBay. We are grateful that the IRS has acted for the second year in a row to protect these taxpayers from unnecessary and confusing paperwork – and now we need Congress to continue working towards a permanent solution.”
“We spent many months gathering feedback from third-party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” IRS Commissioner Danny Werfel said in a statement. “Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes to the Form 1040.
“It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”
According to CNBC, the IRS was expecting an estimated 44 million 1099-Ks for the 2023 tax year.
Before the 1099-K form was introduced in 2012, taxpayers who sold more than $600 in certain goods and services were responsible for issuing Form 1099-MISC, Forbes reported.
The 1099-K form included a requirement for reportable transactions, which were defined as payment card or third-party network transactions through apps like PayPal, Venmo and Cash App, according to the magazine.
The form required reporting when payments through a third-party network exceeded $20,000 and more than 200 transactions. There was no threshold applied to payment card transactions.
That was going to change with the legislation passed in 2021, but for the second straight year, it has been put on the shelf.
“Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount,” the IRS said in its news release.
Several lawmakers praised the delay.
“I’m glad to see the IRS heard my concerns and I’ll continue to fight back against burdensome bureaucratic policies,” Tester said.
On the Republican side, Rep. Jason Smith of Missouri told the AP that the delay exposed a flaw in the American Rescue Plan
“Given that even Democrats now admit that this law is unworkable and are trying to rewrite a key provision, it’s time to scrap it and start over,” Smith said.