IRS Delays Till 2023 Onerous $600 Type 1099-Okay Reporting Threshold

The Inside Income Service introduced a delay in reporting thresholds for third-party settlement organizations set to take impact for the upcoming tax submitting season. On account of this delay, third-party settlement organizations won’t be required to report tax 12 months 2022 transactions on a Type 1099-Okay to the IRS or the payee for the decrease, $600 threshold quantity enacted as a part of the American Rescue Plan of 2021.

As a part of this, the IRS launched steering outlining that calendar 12 months 2022 might be a transition interval for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) together with Venmo, PayPal
PYPL
and CashApp that might have generated Type 1099-Ks for taxpayers.

“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” stated Performing 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 American Rescue Plan of 2021 modified the reporting threshold for TPSOs. The brand new threshold for enterprise transactions is $600 per 12 months; modified from the earlier threshold of greater than 200 transactions per 12 months, exceeding an combination quantity of $20,000. The regulation shouldn’t be meant to trace private transactions resembling sharing the price of a automobile trip or meal, birthday or vacation items, or paying a member of the family or one other for a family invoice.

Below the regulation, starting Jan. 1, 2023, a TPSO is required to report third-party community transactions paid in 2022 with any collaborating payee that exceed a minimal threshold of $600 in combination funds, whatever the variety of transactions. TPSOs report these transactions by offering particular person payee’s an IRS Type 1099K, Fee Card and Third-Celebration Community Transactions.

The transition interval described in Discover 2022-10, delays the reporting of transactions in extra of $600 to transactions that happen after calendar 12 months 2022. The transition interval is meant to facilitate an orderly transition for TPSO tax compliance, in addition to particular person payee compliance with revenue tax reporting. A collaborating payee, within the case of a third-party community transaction, is any one that accepts cost from a third-party settlement group for a enterprise transaction.

The change beneath the regulation is massively necessary as a result of tax compliance is greater when quantities are topic to info reporting, just like the Type 1099-Okay. Nevertheless, the IRS famous it have to be managed fastidiously to assist make sure that 1099-Ks are solely issued to taxpayers who ought to obtain them. As well as, it’s necessary that taxpayers perceive what to do on account of this reporting, and tax preparers and software program suppliers have the knowledge they should help taxpayers.

Extra particulars on the delay might be out there within the close to future together with extra info to assist taxpayers and the business. For taxpayers who might have already acquired a 1099-Okay on account of the statutory modifications, the IRS is working quickly to offer directions and readability in order that taxpayers perceive what to do. The IRS additionally famous that the prevailing 1099-Okay reporting threshold of $20,000 in funds from over 200 transactions will stay in impact.