Sun. Dec 10th, 2023
    IRS Delays Implementation of Tax Reporting Requirements for Payment Platforms

    The Internal Revenue Service (IRS) has announced the second consecutive delay in implementing a 2021 law that would require payment platforms like Venmo, Paypal, and Cash App to send tax forms called 1099-Ks to users who received more than $600 in the current tax year. The regulation, initially scheduled to take effect this year, has been postponed until 2023 due to concerns about taxpayer confusion.

    The decision to delay the implementation of the law was made after feedback from taxpayers, tax professionals, and payment processors. The IRS aims to reduce confusion surrounding the reporting requirements. Without the delay, approximately 44 million 1099-K forms would have been sent to taxpayers, even if they didn’t owe taxes on the payments.

    Starting in tax year 2024, the IRS plans to raise the reporting threshold from $600 to $5,000 as it gradually introduces the new rule. This change will allow for a phased-in approach and align with the evolving landscape of digital payments.

    The law, which was part of the 2021 American Rescue Plan, requires users to report transactions through payment apps for goods and services amounting to $600 or more in a calendar year. Previously, the reporting requirement only applied to taxpayers who received over $20,000 and had more than 200 transactions.

    The IRS decision to delay the implementation of the regulation has faced opposition from online selling platforms like eBay and Etsy. These platforms argue that the reporting requirement would create confusion and difficulties for sellers who rely on them for their livelihoods. Additionally, some Republican lawmakers view the law as government overreach and believe it may negatively impact individuals who use payment apps to reimburse friends and family.

    IRS officials stated that the delay was necessary due to taxpayer confusion regarding which transactions are reportable under the new law. While transactions between friends and family, selling used items at a loss, or repaying a friend for pizza may not be reportable, sales conducted by small businesses for a profit may be taxable and require reporting.

    The IRS Commissioner, Danny Werfel, expressed support for the delay, emphasizing the importance of avoiding unnecessary confusion and problems for taxpayers and professionals in this area.