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The IRS is a year late when payment services like it. Paypal And Venmo and e-commerce companies like Ebay, Etsy And Poshmark Tax forms must be provided to individuals who perform their duties Transactions on those platforms exceed $600.
The agency announced on Friday that such third-party platforms will not have to use that limit when reporting tax-year 2022 transactions on Form 1099-K, which is up to the IRS and taxpayers. Instead, more than 200 transactions valued at more than $20,000 could rely on the pre-2022 limit.
The 2021 US bailout bill has dropped to just $600. And even a single transaction can trigger a form.
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“To ease the transition and ensure transparency for taxpayers, tax professionals and the industry, the IRS will delay implementing the 1099-K changes,” said IRS Acting Commissioner Doug O’Donnell.
“The additional time will help reduce confusion during the upcoming 2023 tax filing season and give taxpayers more time to prepare and understand the new reporting requirements.”
The agency said it will provide more details on the delay, as well as guidance for taxpayers who received a 1099-K due to the change in the US bailout plan.
Despite the new reporting requirement, income from transactions on such platforms is still taxable – meaning sellers must report it. The delay only means that the business will not generate a 2022 tax form at that lower threshold.
Tax experts had ‘deep concerns’ about the $600 limit
Tax professionals and consumers may welcome the delay.
Tax experts have pointed to the lower tax reporting threshold as a potential pain point for filers, along with the risk of receiving 1099-Ks as gifts or reimbursements on platforms like Venmo and PayPal.
“As tax preparers, we’re expecting the worst,” Albert Campo, a certified public accountant in Manalapan, New Jersey, and president of AJC Accounting Services, told CNBC earlier this month.
“We expect most of our customers to get these things,” he said. “So we are trying to be proactive in solving the problem.”
Last week, the American Institute of CPAs shared “deep concerns” about the $600 tax reporting limit in letters to the Senate Finance Committee and the House Ways and Means Committee.
The professional group said it supports the National Taxpayers Union Foundation’s recommendations to raise the standard to “a level sufficient to exempt casual or low-level online activity.”
The AICPA says even a $5,000 limit would be a “huge improvement.”
CNBC’s Kate Dore and Kelly Grant contributed reporting.
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