IRS to Postpone the $600 Reporting Threshold for Third-Party Payment Platforms

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On December 23, the Internal Revenue Service (IRS) announced a delay in the $600 threshold tax reporting requirements.

The soon-to-be-enacted rule mandated that online marketplaces like eBay, Etsy, and others provide the IRS with information about customers who generate more than $600 in revenue.

Third-party payment platforms will not be obliged to record the transactions from the tax year 2022 on a Form 1099-K early in 2023 due to the postponement of the $600 reporting threshold.

According to the IRS, implementing the lowered threshold reporting for third-party settlement companies, such as Venmo, PayPal (NASDAQ: PYPL), and CashApp, will take place throughout the calendar year 2022.

Acting IRS Commissioner Doug O’Donnell stated, “The IRS and Treasury heard several concerns regarding the timeframe of the implementation of these adjustments under the American Rescue Plan.” The IRS will put off the implementation of the 1099-K adjustments to facilitate the transition and provide clarity for taxpayers, tax experts, and businesses.

He noted that the extra time will “reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand” the new requirements.

The American Rescue Plan Act, which Congress passed in March 2021, lowered the Form 1099-K threshold to $600 to increase tax compliance.

The threshold for commercial transactions has been reduced from more than 200 per year and more than $20,000 in total transactions to $600 per year.

A TPSO is obligated by law to report third-party network transactions paid in 2022 to any participating payee that exceeds a minimum threshold of $600 in aggregate payments, regardless of the number of transactions, starting January 1, 2023. Individual payees get IRS Form 1099-K, Payment Card, and Third-Party Network Transactions, which TPSOs use to report these transactions.

Whether or not the additional tax reporting requirement is ultimately implemented, taxpayers will continue to face a complicated and ever-changing regulatory environment in the coming years.

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