IRS delays $600 cost reporting rule for PayPal, Venmo and extra — once more

IRS delays $600 cost reporting rule for PayPal, Venmo and extra — once more

The IRS stated Tuesday it’s once more delaying implementation of a 2021 legislation that requires cost platforms like Venmo, Paypal or Money App to ship tax kinds referred to as 1099-Ks to anybody who earned greater than $600 within the present tax 12 months.

It is the second 12 months in a row that the IRS has delayed enactment of the brand new regulation, following the tax company final 12 months And pushed the brand new legislation Till 2023. On Tuesday, the IRS stated it might delay the regulation for an additional 12 months to “cut back taxpayer confusion” after listening to from taxpayers, tax professionals and cost processors.

With out this delay, an estimated 44 million 1099-Ok kinds would have been despatched to tens of millions of taxpayers for the present tax 12 months, although they could not have owed taxes on the funds and weren’t anticipating such a kind, the IRS stated.

Moreover, the IRS stated that beginning in tax 12 months 2024, it’ll increase the essential reporting restrict from $600 to $5,000 as the brand new rule phases in.

A provision within the 2021 American Rescue Plan requires customers to report transactions by cost apps together with Venmo, Money App and different items and companies that meet or exceed $600 in a calendar 12 months. Earlier than the ARP provision — and now for this 12 months — the reporting requirement solely utilized to the sale of products and companies to taxpayers who obtain greater than $20,000 and have greater than 200 transactions.

Response from on-line sellers

The rule has drawn important opposition from on-line promoting platforms akin to eBay and Etsy, with some firms claiming that reporting necessities would create confusion and hardship for sellers who depend on these platforms to make a dwelling.

On the identical time, Republican lawmakers criticized the plan as authorities overreach and stated it may harm individuals who depend on cost apps to reimburse family and friends members.

The IRS proclaims new tax brackets for 2024

IRS officers stated one motive for the delay is taxpayer confusion about what kinds of transactions should be reported below the brand new legislation. For instance, transactions between pals and households, akin to promoting a settee or automotive or paying for a good friend’s pizza, is not going to be reported. Likewise, promoting used objects akin to clothes or furnishings for a loss by a service like eBay may also generate a 1099-Ok, though these gross sales is not going to create any tax legal responsibility.

Nevertheless, different gross sales might be topic to the tax, akin to small companies that promote items or companies for a revenue.

“Taking this gradual strategy is the best factor to do for tax administration functions and prevents pointless confusion,” IRS Commissioner Danny Werfel stated in an announcement. “It’s clear that the extra delay to the 2023 tax 12 months will keep away from issues for taxpayers, tax professionals and others within the subject.”

-With Related Press reporting.

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