NATIONWIDE – The Internal Revenue Service (IRS) announced Friday, plans to delay the requirement to report business transactions over $600 from third-party settlement organizations like CashApp and Paypal.
A 2014-2016 IRS analysis estimated that unreported individual and small business activities cost $144 billion in taxes a year.
To combat underreporting, the new requirement was scheduled to take effect this coming tax season, however, IRS officials say they heard a number of concerns regarding the timeline for implementing these changes.
“To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes,” said Acting IRS Commissioner Doug O’Donnell. “The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
The current threshold will remain – 200 transactions per year that exceeds an aggregate amount of $20,000.
The American Rescue Plan of 2021 required third-party payment processors, including Venmo, CashApp, PayPal, Square, and Stripe to issue 1099-K forms to those who receive more than $600 in payments for goods and services.
Uber, Lyft and AirBnB are also considered third-party payment processors.
The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.
The IRS notes that reporting must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them.
The law will be implemented sometime in the future.