After Congress Fails To Act, IRS Delays Onerous New 1099-K Reporting For Payment Platforms

Name it a vacation miracle. The IRS has determined, within the absence of Congressional motion, to delay for one 12 months the implemtation of a regulation that requires cost and e-commerce platforms like PayPal
PYPL
, Venmo, CashApp, eBay
EBAY
and Etsy to file Type 1099-Ok (to taxpayers and the IRS) for anybody receiving over $600 in proceeds on their numerous platforms. The platforms, referred to as cost servicing entities (PSEs) within the regulation, beforehand solely needed to file the shape if a taxpayer had greater than 200 transactions and had acquired greater than $20,000 in income from the location.

The delay is a welcome reprieve to tax professionals who have been anticipating monumental confusion throughout the upcoming tax-filing season amongst taxpayers who’ve been doing a small quantity of on-line promoting however have by no means acquired this kind previously. It additionally might mitigate the potential for tens of millions of extra IRS CP2000 “matching notices” being despatched to taxpayers who weren’t conscious of the brand new decrease threshold and did not retrieve the notices from their on-line accounts and/or who moved and didn’t get mailed notices and, consequently, did not report the “earnings” on their annual Type 1040.

The reporting delay doesn’t change the duty of these doing enterprise by means of the websites to report any taxable earnings. But it surely does give taxpayers extra time to make themselves conscious of this requirement and to coach themselves as to methods to decide if the proceeds reported on the shape are taxable earnings. (For instance, money wedding ceremony items acquired by means of an app wouldn’t be taxable earnings.) Taxpayers may even get extra time to study in regards to the choices for correcting inaccurate kinds—or to make the choice to rent a tax skilled to assist them.

“The extra time will assist cut back confusion throughout the upcoming 2023 tax submitting season and supply extra time for taxpayers to arrange and perceive the brand new reporting necessities,’’ Appearing IRS Commissioner Doug O’Donnell stated in an announcement.

Lastly, the delay provides Congress one more probability to vary the regulation, which was a part of the 2021 American Rescue Plan Act and was meant to assist shut the tax hole. That regulation instituted the brand new decrease 1099-Ok reporting requirement for income acquired throughout the 2022 12 months—a really brief time-frame for a change that might have an effect on so many taxpayers. A proposed modification to the $1.7 trillion omnibus spending invoice that will have raised the brink from $600 per 12 months to $10,000 per 12 months wasn’t included within the checklist of amendments voted on when the Senate handed the spending invoice yesterday and despatched it to the Home. A previous invoice, the SNOOP Act, which might have returned the brink to its unique $20,000, was launched in February of this 12 months and stands no probability of passing this Congress.