After Congress Fails to Act, IRS Delays Onerous New 1099-K Reports for Payments Platforms

Call it a holiday miracle. The IRS has decided, in the absence of congressional action, to delay for a year the implementation of a law that forces payment and e-commerce platforms like PayPal PYPL, Venmo, CashApp, eBay EBAY and Etsy to file Form 1099-K (for taxpayers and the IRS) for anyone receiving more than $600 in product on their various platforms. The platforms, known as Payment Service Entities (PSEs) in the law, previously only had to complete the form if a taxpayer made more than 200 transactions and received more than $20,000 from site revenue.

This delay is a welcome reprieve for tax professionals who were expecting huge confusion during the upcoming tax filing season among taxpayers who made a small amount of online selling, but who didn't. have never received this form in the past. It may also mitigate the possibility of millions of additional IRS CP2000 “notices of correspondence” being sent to taxpayers who were unaware of the new lower threshold and did not retrieve the notices from their online accounts and/or who moved and did not receive mailed notices and therefore did not report "income" on their annual Form 1040.

The reporting deadline does not alter the obligation of those doing business through the Sites to report any taxable income. But it gives taxpayers more time to realize this requirement and to educate themselves on how to determine whether the proceeds reported on the form are taxable income. (For example, cash wedding gifts received through an app would not be taxable income.) Taxpayers will also have more time to learn about options for correcting erroneous forms or making the decision to hire a tax professional. to help them.

"This additional time will help reduce confusion during the upcoming 2023 tax filing season and give taxpayers more time to prepare for and understand the new reporting requirements," the Commissioner said. Acting IRS Doug O'Donnell in a statement.

Finally, the delay gives Congress another chance to change the law, which was part of the American Rescue Plan Act of 2021 and aimed to narrow the tax gap. This law instituted the new 1099-K lower reporting requirement for income earned in the year 2022 – a very short deadline for a change that could affect so many taxpayers. A proposed amendment to the $1.7 trillion omnibus spending bill that would have raised the threshold from $600 per year to $10,000 per year was not included in the list of amendments voted on when the Senate passed the spending bill yesterday and sent it to t. .