The IRS on Tuesday said it’s once more delaying the implementation of a 2021 regulation that requires cost platforms corresponding to Venmo, Paypal or Money App to ship tax types known as 1099-Ks to anybody who obtained greater than $600 within the present tax yr.
It is the second consecutive yr the IRS has delayed enacting the brand new regulation, after the tax company final yr pushed off the new law till 2023. On Tuesday, the IRS mentioned it would push the regulation again one other yr “to cut back taxpayer confusion” after listening to from taxpayers, tax professionals and cost processors.
With out that delay, an estimated 44 million 1099-Ok types would have been despatched to tens of millions of taxpayers for the present tax yr, though they might not have owed taxes on the funds and would not have been anticipating such a type, the IRS mentioned.
Moreover, the IRS mentioned that beginning in tax yr 2024, it would increase the essential reporting threshold from $600 to $5,000 because it phases within the new rule.
A provision in 2021 American Rescue Plan requires customers to report transactions via cost apps together with Venmo, Money App and others for items and providers assembly or exceeding $600 in a calendar yr. Earlier than the ARP provision — and now for this yr — the reporting requirement utilized solely to the sale of products and providers to taxpayers who obtain over $20,000 and have over 200 transactions.
Pushback from on-line sellers
The rule had sparked vital pushback from on-line promoting platforms corresponding to eBay and Etsy, with among the corporations arguing that the reporting requirement would create confusion and difficulties for sellers who depend on these platforms to make a residing.
On the similar time, Republican lawmakers had decried the plan as authorities overreach and argued that it might harm individuals who depend on cost apps to reimburse family and friends members.
IRS officers mentioned one cause for the delay is taxpayer confusion over what types of transaction are reportable beneath the brand new regulation. As an illustration, transactions between associates and households, like promoting a sofa or automotive or repaying a pal for pizza, wouldn’t be reportable. Likewise, promoting used gadgets corresponding to clothes or furnishings for a loss via a service like eBay might additionally generate a 1099-Ok, though these gross sales would create no tax legal responsibility.
But different gross sales might be taxable, corresponding to a small enterprise that’s promoting items or providers for a revenue.
“Taking this phased-in strategy is the proper factor to do for the needs of tax administration, and it prevents pointless confusion,” IRS Commissioner Danny Werfel mentioned in an announcement. “It is clear that an extra delay for tax yr 2023 will keep away from issues for taxpayers, tax professionals and others on this space.”
—With reporting by the Related Press.
