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IRS Delays Changing 1099-K Reporting Threshold Once Again

S.J. Steinhardt
Published Date:
Nov 22, 2023

Once again, the IRS has deferred changing the reporting threshold for third-party settlement organizations for a year. The agency announced a one-year delay at the end of 2022, and it is now delaying implementation for a further year.

So, yet again, the IRS has put off implementation of the new $600 Form 1099-K reporting threshold for third-party settlement organizations. These include service apps such as Venmo, CashApp, Etsy, StubHub and Airbnb. Previously, reporting was only required for taxpayers that received more than $20,000 in payments from more than 200 transactions. The change was supposed to take effect for the 2023 tax year, which the IRS said it will now treat as an additional transition year.

As a result of the decision, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023. To give individual taxpayers affected and stakeholders enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold.

The agency made the decision after receiving feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion. Last week, the Government Accountability Office (GAO) reported that the IRS expected to receive roughly 44 million Form 1099-Ks in 2024—about 30 million more than in 2023—but did not have a plan to analyze the data "to inform enforcement and outreach priorities.”

"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," said IRS Commissioner Danny Werfel. "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."

Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill, the IRS pointed out. These payments are not taxable and should not be reported on Form 1099-K, but the casual sale of goods and services could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.

This complexity in distinguishing between these types of transactions caused the tax agency to delay the reporting requirements an additional year and to plan for a threshold of $5,000 for 2024 in order to phase in implementation.

The IRS will continue to provide information on and provides more details about this announcement on Fact Sheet 2023-27.

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