The IRS Delayed Its Payment Reporting Rule Change Again. Is That Good for Taxpayers?
Beginning in 2023, the reporting threshold for businesses that use third-party apps, such as Venmo, Etsy, StubHub and Airbnb, was set to decrease significantly, from $20,000 to $600.
Now, the Internal Revenue Service has delayed the decreased reporting threshold for another year and announced that it will begin to phase in the lowered threshold starting in 2024, starting at $5,000 for the 2024 tax year. 2023, then, will simply be treated as another transition year.
The American Rescue Plan Act of 2021 also removed the de minimis threshold, which previously allowed an exception to filing Form 1099-K. In prior years, Form 1099-K was required to be issued for third-party networks transactions only if the number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the most recent delay in the effective date for the reduced Form 1099-K threshold.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
ByrnesTheir Reasons:
Bloink: This newly reduced threshold is going to create widespread confusion for ordinary taxpayers. Using online money transfer services has become extremely common. The law will require complex calculations to properly report gain or loss — and will apply to many taxpayers who’ve never been subject to these types of reporting requirements. We need the extra time to create a system that avoids confusion and widespread misinterpretation.