The IRS announced that it will delay implementing the requirement that online payment platforms report payments to individuals of more than $600 to the agency.
The rule requires third-party payment platforms such as Cash App, Venmo and PayPal to report to the IRS payments to anyone who receives more than $600 in a year. The rule replaces the current one that had required the platforms to report income paid to anyone who had more than 200 transactions that exceeded $20,000 in revenue in a year.
“The IRS and Treasury heard a number of concerns” about the changes, acting IRS Commissioner Doug O’Donnell said in a statement released Friday, explaining the delay in implementation of the new guidelines.
“To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation” of the new rule, the statement said.
“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,” he added.
Taxpayers will get 1099-K forms in early 2023 if they meet the current guidelines of 200 transactions and more than $20,000 in income. The forms will show their income reported to the IRS during 2022.
The change in the reporting threshold came out of the $1.9 trillion American Rescue Plan, which was signed into law in 2021.
The lowered threshold had received strong pushback. Third-party payment platforms, such as eBay and Etsy, expressed concern that sellers on their sites would have trouble making a living if the level of reporting income was lowered to $600.
Treasury Department and IRS officials said Friday that they hope to work with industry groups over the next year to make sure the forms go to the right taxpayers, The Wall Street Journal reported.
The proposed change also had opponents in Congress as well. Lawmakers in both parties discussed raising the $600 threshold or not implementing it at all.
Sen. Joe Manchin, D-W.V., said in a statement Friday: “I am pleased the Treasury Department and the IRS listened to my request to delay the 1099-K reporting requirement that will harm small businesses and individuals who sell goods online across America. This will allow Congress more time to correct this regulation that puts undue burden on our small businesses.”
Republican Sen. Rick Scott of Florida tweeted last week that “@JoeBiden’s IRS has NO BUSINESS spying on YOU or tracking YOUR Venmo & PayPal transactions.
“Delaying this MASSIVE government overreach is a start, but IT’S NOT ENOUGH. I’ll keep fighting to end this absurd policy & keep big gov. out of your bank account.”
However, the IRS emphasized that personal transactions, such as repaying a friend for a shared meal, aren’t meant to be tracked by the new rule.
“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 emphasized Friday.
“We do not report friends and family transactions like splitting the bill on something,” Joseph Gallo, a spokesperson at PayPal, the parent company of Venmo, told USA Today.
“Payments have to be sent as ‘goods and services’ for us to consider these under this rule,” he said.
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