The IRS has announced that it will delay implementing a rule change that requires people to report income over $600 paid through popular apps like Venmo and PayPal.
Driving the news: The rule change, which received no Republican votes when approved by Democrats in Congress in 2021, would have resulted in an additional 44 million 1099-K forms being sent out by the IRS in January.
- The IRS will treat 2023 as an additional transition year and phase in the $600 reporting threshold over the next two years to reduce confusion and give more time for implementation.
- With the delay in place, users of third-party payment apps will not be required to fill out 1099-K forms in 2023 unless they received over $20,000 in income and engaged in more than 200 transactions.
- The reporting requirements do not apply to personal transactions such as gifts or splitting the cost of a meal or household bills.
- The IRS is planning for a threshold of $5,000 for tax year 2024 and will likely implement the $600 reporting threshold in tax year 2025.
What they’re saying: “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.
- Werfel continued, ““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.”