Late December, the IRS postponed the $600 reporting requirement that was scheduled to take effect in 2023, flooding taxpayers with 1099-K forms…and potential confusion.
What is it?
As part of the American Rescue Plan Act, the reporting threshold was lowered from 200 aggregate transactions in a year that exceeded $20,000 to any number of transactions that exceeded $600. This was scheduled to have taken effect 1/1/22, with Form 1099-K filing starting January 2023. However, the IRS postponed this requirement.
What you need to know
While the law doesn’t require reporting of transactions that are personal- such as splitting the cost of meal, gifts, or reimbursing someone for your share of a bill, it does impact gig workers and others who use 3rd party networks (like Venmo, CashApp, Zelle, Etsy, and PayPal) for transactions.
Prior to the IRS postponing the enforcement of this law, third party settlement companies were going to be required to report and file Form 1099-K for all taxpayers with aggregate payments in excess of $600.
However, due to the concern around the implementation of this new law, the flood of 1099-K forms anticipated, and general confusion, the IRS delayed the $600 threshold.
How will it impact me this year?
For this upcoming tax season 2023, the existing threshold of $20,000 and an aggregate of 200 transactions will stay in effect.
However, it’s important to be aware that this delay- at this point- is only a delay. Calendar year 2022 is being considered a “transition period” to put the right processes in place to implement the law.
For business transactions this year- in 2023- where you receive payment (in aggregate) of $600 for any third party payment network, you will likely receive a Form 1099-K for that income in January of 2024.
How will it impact me next year?
At this point, the IRS has said that for years after 2022, it will enforce the $600 aggregate payment threshold.
However, there are requests by various organizations and members of congress to consider some sort of a happy medium, lowering the $20,000 threshold to a number closer to $5,000 instead of $600.
We will make sure you are informed of changes when they occur. For this tax season, anyone who would have been impacted can breathe a little easier with time to prepare accordingly for next year.