Don't Expect Form 1099-K From Venmo!

Hi, I'm Bette Hochberger, CPA, CGMA, and I will discuss the news we've all been raving about today! So, it looks like the IRS announced that there would be a delay in implementing the $600 reporting threshold for third-party payment platforms' Form 1099-K. I'm sure you're wondering, "What is a 1099-k form, and what are third-party payment platforms?" Third-party payment platforms include: Venmo eBay Paypal Cash App Zelle And more What is Form 1099-K? This form is an IRS information reporting form. It contains information, for your taxes, about the gross number of payment transactions that you had on a third-party payment network when that amount exceeds $20,000 in the previous year. So, for example, you would receive this form in 2023 if you received more than $20,000 in payments for goods or services through third-party payment networks in 2022. What does this mean, and what changed? The American Rescue Plan Act reduced the 1099-K reporting threshold from $20,000 to $600. Under the act, a third-party organization must report third-party network transactions paid in 2022 with any participating payee exceeding a minimum threshold of $600 in collected payments, regardless of the number of transactions. This differs from the previous point of 200 transactions per year exceeding $20,000. This was initially supposed to take effect in 2022, but it is now being delayed. Who does this affect? This new threshold mainly affects third-party settlement organizations and e-commerce platforms (i.e., eBay, Offer Up, etc.). However, this also includes individuals and small businesses that use those platforms. Many companies who use third-party payment networks are celebrating, as they will not be required to report the 2022 tax year transactions on a Form 1099-K to the IRS or the payee for the lower $600 threshold amount enacted by Congress as part of the American Rescue Plan Act. In addition, contrary to popular opinion, this law does not track personal transactions, such as sharing the cost of a car ride or meal, birthday gifts, etc. When did the IRS announce this? On December 23rd, 2022, the IRS announced the reporting thresholds for third-party settlement organizations and e-commerce platforms set to take effect for the upcoming tax filing season. Then, on January 3rd, 2023, the IRS updated the timing in response to the public's concerns. To help smooth this transition rather than just jumping right into it, they will now be delaying the implementation of the 1099-K changes, hopefully giving some clarity to taxpayers and tax professionals in the industry. However, the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect until they've come up with a solution. As always, I hope you learned something new. Stay safe, and I will see you next time!