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IRS Delays Implementation of $600 Reporting Threshold for Third-Party Payment Platforms

By David Donnelly, CPA-Houston

On Dec. 23, 2022, the IRS provided relief for filing Forms 1099K by third-party settlement organizations (TPSOs such as Venmo, PayPal or CashApp) for 2022. Prior to this relief, the TPSOs were required to file 1099Ks for any recipient with aggregate payments exceeding $600; the relief extends this filing requirement to payments in years beginning Jan. 1, 2023.

The original legislation governing 1099Ks – the Housing Assistance Tax Act of 2008 – set the threshold for filing 1099Ks at $20,000 and 200 transactions. The American Rescue Plan of 2021 (ARP) lowered the threshold to $600 regardless of the number of transactions. 

As TXCPA expressed concern in a previous blog to our members, TPSOs are frequently used for personal transactions outside of the context of a trade or business. The IRS seems to understand the unintended consequence of the ARP that would have required filing possibly millions of 1099Ks for non-taxable personal transactions. 

IR 2022-226 and Notice 2023-10 state that 2022 will be a ‘transition period’ for purposes of IRS administration. Presumably, for calendar 2023 and going forward, the IRS will provide guidance on which transactions the digital platforms will be required to report on Form 1099K.

As we await guidance, TPSOs will still be required to provide 1099Ks to payees that receive more than $20,000 and more than 200 transactions. TPSOs will also be required to provide 1099Ks to any recipient where the TPSO performed backup withholding if the payments to and the withholding from the payee exceeded $600 for calendar 2022.

Lawmakers from both parties scrambled to scale back or reverse the tax measure in the recent Congressional spending package, but none of the changes were included in the final legislation.

NTA Blog: Heard Loud and Clear: IRS Postpones Implementation of $600 Form 1099-K Reporting by a Year - TAS

IRS Form 1099-K FAQ

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