IRS Commissioner Daniel Werfel testifies before a Senate Finance Committee hearing on Feb. 15, 2023.
Kevin Lamarque | Reuters
If you received business payments via apps comparable to PayPal or Venmo or e-commerce corporations comparable to eBay, Etsy or Poshmark in 2023, your tax return may now be somewhat simpler.
The IRS announced Tuesday that 2023 can be a “transition 12 months” for a recent tax reporting requirement affecting such payments. Once in place, it is going to trigger Form 1099-K for just $600 in payments, even when that income stemmed from a single business transaction.
For 2023, the old limit of greater than 200 transactions value an aggregate above $20,000 will remain in place. The agency will phase within the lower threshold by adding a $5,000 limit for 2024, nevertheless it didn’t specify a transaction limit. The $5,000 limit will apply to tax returns filed in 2025.
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The $600 threshold will go into effect for tax 12 months 2025, and taxpayers over the limit can expect to receive a 1099-K at the start of 2026.
However, business payments have at all times been taxable and filers should still report 2023 income even in the event that they don’t receive a Form 1099-K.
“We spent many months gathering feedback from third-party groups and others, and it became increasingly clear we want additional time to effectively implement the brand new reporting requirements,” IRS Commissioner Danny Werfel said in an announcement.
The agency said it also plans on updates for Form 1040, which is utilized by taxpayers to file individual income tax returns, and related schedules, to “make the reporting process easier.”
“Taking this phased-in approach is the best thing to do for the needs of tax administration, and it prevents unnecessary confusion as we proceed to take a look at changes to the Form 1040,” Werfel said. “It’s clear that an extra delay for tax 12 months 2023 will avoid problems for taxpayers, tax professionals and others on this area.”
The announcement comes amid bipartisan scrutiny of the reporting requirement, with lawmakers and industry professionals citing concerns about taxpayer confusion. Prior to the delay, the IRS was expecting an estimated 44 million 1099-Ks for 2023.