IRS delays reporting rule for $600 payments for PayPal, Venmo and more – again

The IRS said Tuesday it is again delaying the implementation of a 2021 law that requires payment platforms such as Venmo, Paypal or Cash App to send tax forms called 1099-Ks to anyone who received more than $600 during the current tax year.

This is the second year in a row that the IRS has delayed enacting the new regulations, following the tax agency last year. rejected the new law through 2023. On Tuesday, the IRS announced it would push back the regulations for another year “to reduce taxpayer confusion” after hearing from taxpayers, tax professionals and payment processors.

Without this delay, an estimated 44 million 1099-K forms would have been sent to millions of taxpayers for the current tax year, even though they may not have owed tax on the payments and would not expect such a form, the IRS said. said.

Additionally, the IRS said that starting in tax year 2024, it will increase the basic reporting threshold from $600 to $5,000 as the new rule is phased in.

A provision of the 2021 American Rescue Plan requires users to report transactions through payment apps, including Venmo, Cash App and others, for goods and services reaching or exceeding $600 in a calendar year. Prior to the ARP provision — and now for this year — the reporting requirement only applied to the sale of goods and services to taxpayers who receive more than $20,000 and make more than 200 transactions.

Refusal of online sellers

The rule has sparked significant backlash from online sales platforms such as eBay and Etsy, with some businesses arguing that the reporting requirement would create confusion and hardship for sellers who rely on these platforms to earn their revenue. life.

At the same time, Republican lawmakers denounced the plan as an overreach of government power and argued it could harm people who rely on payment apps to reimburse friends and family members .

IRS announces new tax brackets for 2024

IRS officials said one reason for the delay was taxpayers’ confusion about what types of transactions should be reported under the new law. For example, transactions between friends and family, such as selling a sofa or a car or reimbursing a friend for pizza, would not be reportable. Likewise, selling used items such as clothing or furniture at a loss through a service like eBay could also generate a 1099-K, even though those sales would not create any tax liability.

Still, other sales might be taxable, such as those of a small business that sells goods or services for profit.

“This phased approach is the right thing to do for tax administration purposes, and it avoids unnecessary confusion,” IRS Commissioner Danny Werfel said in a statement. “It is clear that an additional deferral for the 2023 tax year will avoid problems for taxpayers, tax professionals and others in this area.”

—With reporting from the Associated Press.

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