The IRS will delay implementing a sweeping rule change that forces people to report income over $600 paid through popular apps such as Venmo and Paypal, the agency announced Tuesday.
The controversial tax-reporting rule, which received no Republican votes when it was approved by Democrats in Congress in 2021 as part of the American Rescue Plan, would have resulted in some 44 million additional 1099-K forms being sent out in January by the IRS.
The agency, which delayed implementation of the rule last year as well, said it will treat 2023 “as an additional transition year” in an effort to “reduce the potential confusion” about the new tax obligation and instead phase-in the $600 threshold over the next two years.
“We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” IRS Commissioner Danny Werfel said in a statement.
The IRS is delaying a rule change that would force people to report income over $600 paid through popular apps such as Venmo and PaypalAP
“Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes to the Form 1040. It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area,” Werfel added.
With the delay in place, users of third-party payment apps will not be required to fill out 1099-K’s in 2023 unless they received over $20,000 in income and engaged in more than 200 transactions.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts or splitting the cost of a meal or household bills, according to the agency.NurPhoto via Getty Images
With the delay in place, users of third-party payment apps will not be required to fill out 1099-K’s in 2023 unless they received over $20,000 in income and engaged in more than 200 transactions. AP
The IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in, and will presumably implement the $600 reporting threshold in tax year 2025.
The new rule only applies to payments received for goods and services transactions.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts or splitting the cost of a meal or household bills, according to the agency.
The agency, which delayed implementation of the rule last year as well, said it will treat 2023 “as an additional transition year” in an effort to “reduce the potential confusion” about the new tax obligation.REUTERS
Critics of the rule change, such as the Coalition for 10-99-K Fairness, argue that there are privacy concerns that come with forcing third-party payment app to reveal details of user transactions with the government, as well as an unfair tax burden that falls on “casual online sellers and microbusinesses.”
The Biden administration hopes to crack down on tax evasion by reducing the reporting threshold.
Source link: https://nypost.com/2023/11/22/news/irs-delays-implementing-600-reporting-rule-for-venmo-paypal-payments/