Last week, the IRS made some much-needed additions to its frequently asked questions page. These new additions were made regarding form 1099-K, which is the form used to report information about taxpayers’ use of third-party payment networks.
Overview
Initially, it was supposed to be a requirement that all transactions made on third-party payment networks totaling $600 or more must be reported on the 1099-K. However, the Internal Revenue has temporarily delayed this requirement.
The same action of delaying this requirement was also seen by the IRS in the Winter of 2021, when they delayed the lowered reporting threshold for many third-party payment companies such as Venmo, Airbnb, PayPal, Etsy, and many more similar companies.
More Time Provided
The new threshold was set to take effect on Jan 1, 2023. Several organizations in the accounting and tax industries warned the IRS that this could cause a frenzy for practitioners and their clients. For example, The National Association of Tax Professionals cited that the agency is already understaffed and overworked. Adding millions of additional forms has the potential to cause some serious delays this tax season.
These voiced concerns were heard by the Internal Revenue Service. The agency also expressed its concerns regarding the short timeframe in which the threshold could be implemented. This is why they have decided to give taxpayers and practitioners additional time for the transition over to the new threshold to go as smoothly as possible.
IRS Statement
Doug O’Donnell was still the acting commissioner when he made this statement regarding the additional time provided. “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.”
Wrap Up
While this additional time to ensure a smooth transition can be seen as a relief, taxpayers and practitioners still must be weary. This new threshold is part of the American Rescue Plan Act of 2021 and it will eventually be implemented. Additionally, updates have been made on the IRS FAQ’s page regarding form 1099-K. If you have any questions about form 1099-K or reporting third-party payment transactions. Give us a call at 516-541-6549 for additional guidance.