By Naomi Jagoda | Bloomberg
The Internal Revenue Service is delaying a requirement for e-commerce platforms, including Venmo, PayPal, Cash App and Etsy, to send tax forms to customers who have transactions of more than $600.
The one-year delay is a reprieve for individuals who use those digital payment platforms to conduct business. Congress reduced the tax reporting threshold to $600 from $20,000 in 2021, and it was slated to affect people filing tax returns in the spring of next year.
The IRS said it will use the coming year to transition to the new requirement and that more information would be available soon.
“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,” Acting IRS Commissioner Douglas O’Donnell said in a statement Friday.
The requirement for third-party payment processors to send 1099-K forms to taxpayers with more than $600 in business transactions, with no minimum number of transactions required, was included in the 2021 pandemic aid legislation known as the American Rescue Plan Act. Previously the law had the higher dollar threshold as well as a minimum of more than 200 transactions.
The IRS said the law isn’t intended to track personal transactions, such as reimbursing a friend or family member for a meal or gift, or for paying a household member for a bill. However, the difficulty of delineating personal and business transactions has caused critics of the proposal to say that it could result in people receiving IRS forms for payments on which they don’t owe taxes.
Online marketplaces such as eBay Inc. also have pushed for the $600 threshold to be increased, arguing that the lower threshold will cause confusion for taxpayers who sold used goods online for less than the original purchase price.
The delay comes after pleas from Congress. Lawmakers on both sides of the aisle have expressed interest in raising or delaying the $600 threshold, but they were unable to include such a change in the year’s spending bill. Senator Joe Manchin, a West Virginia Democrat, called on Thursday for the IRS to postpone implementation of the threshold in order to “allow Congress to continue working to find a lasting solution that prevents this harmful regulation from impacting small businesses.”
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