IRS Delays Implementation Of $600 Reporting Forms For Third Party Sellers
The change was implemented due to corporate push back about the low threshold.
A new IRS change has relieved millions of online sellers with a delay to their recently announced reporting rule. The 1099-K $600 IRS tax reporting rule set to go into effect this year has been pushed back for a second time due to consumer outcry.
The 1099-K rule requires online marketplaces that use payment apps like PayPal, Venmo, Etsy, and eBay to file a tax form if they received over $600 in payments for services or goods. The new rule would’ve had an estimated 40 million taxpayers filing the new form, even some who hadn’t had any tax obligation in the past.
The rule has been amended for the 2023 tax year to have a $20,000/200 transaction threshold instead. According to Kiplinger, third-party payment apps will issue 1099-K forms to people who received over $20,000 in service payments and have had more than 200 separate transactions.
IRS Commissioner Danny Werfel released a statement explaining the change. He explained it was a response to overwhelming corporate concerns over the low threshold and sudden implementation.
He said, “We spent many months gathering feedback from third-party groups and others, and it became increasingly clear we need additional time to implement the new reporting requirements effectively. A [changed approach] is the right thing to do to prevent unnecessary confusion.”
Although the previous standing reporting amount remains the same for this tax year, the IRS announced plans to introduce a $5,000 threshold for the 2024 tax year. The requirement only includes payments for goods and services, not any money sent through personal transactions.
The distinction caused the IRS to warn that “the casual sale of goods and services, including selling used personal items like clothing and furniture at a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.”
The IRS believes the eventual move to a lower reporting threshold for the 1099-K form will hopefully increase tax compliance as long as sellers fully understand how to use the forms.