The IRS has again delayed the $600 Threshold for Venmo, PayPal, and other popular third-party payment 1099-K reporting. Key reporting threshold should still be taken into consideration.
With the use of third-party payment solutions such as Venmo and PayPal growing in popularity, the IRS has been in the news cycle lately around the 1099-K reporting thresholds for transactions of at least $600 that are made through these services.
The IRS first announced this 1099-K reporting threshold back in November. However, on December 23rd, the agency announced that it has delayed the implementation of the $600 reporting threshold.
As such, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the $600 threshold amount, which was enacted as part of the American Rescue Plan of 2021.
While there is a delay in this reporting requirement, taxpayers should still plan accordingly because this threshold will eventually be enacted. It’s also important to fully understand the potentially upcoming requirement.
Essentially, business owners earning $600 or more per year will receive a tax form known as Form 1099-K. Failure to file a Form 1099-K report could trigger an audit since the IRS obtains a copy of the form directly from the third-party payment facilitator.
According to the American Bar Association, when conducting an audit, the IRS can request all aspects of these accounts and can summon the records should you not comply.
The rule will not apply to noncommercial payments, such as reimbursing someone for food or rent or other one-off transactions like selling old furniture.
The law will only apply to sellers who made money from goods or services. This includes those who have sold goods on sites like eBay and Etsy. For many people, this is going to be a significant change, and will likely create the need for more record-keeping capabilities.
The prior threshold was at least 200 transactions totaling an aggregate of at least $20,000.
Please contact GSG today to learn more about these new reporting requirements, as well as how to manage all of your 1099 forms.Categories: Tax