EXCLUSIVE: Happy Holidays, tax pros. The IRS in an email to Western CPE today confirmed that it is delaying for one year the new and controversial $600 reporting threshold for Form 1099-K.
DETAILS: 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 new, lower $600 threshold enacted under the American Rescue Plan Act of 2021 (P.L. 117-2).
The 2022 calendar year will be a transition period for implementing the reduced threshold reporting for third-party settlement organizations (TPSOs), including Venmo, PayPal, and CashApp that would have produced Form 1099-Ks for taxpayers.
Under the law, starting Jan. 1, 2023, a TPSO must track and report third-party network transactions paid in 2022, with any participating payee surpassing a minimum threshold of $600 in combined payments.
Additionally, the IRS noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.
DRIVING THE DELAY: “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.”
COMING SOON: Notably, for taxpayers who may have already received a Form 1099-K due to the new law and before today’s announcement, the IRS says it is working quickly to provide instructions and clarity, so taxpayers understand what to do.
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