IRS Delays Implementation of $600 Reporting Threshold for Third-Party Payment Platforms’ Forms 1099-K
The IRS announced a delay in reporting thresholds for third-party settlement organizations (TPSOs) set to take effect for the upcoming tax filing season. TPSOs will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021.
The calendar year 2022 will be a transition period for implementing the lowered threshold reporting for TPSOs, including Venmo, PayPal, and CashApp, that would have generated Form 1099-Ks for taxpayers.
The American Rescue Plan of 2021 changed the reporting threshold for TPSOs. The new threshold for business transactions is $600 per year, changed from the previous threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000. The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.
Under the law, beginning Jan. 1, 2023, a TPSO is required to report third-party network transactions paid in 2022 with any participating payee that exceeds a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. TPSOs report these transactions by providing individual payees an IRS Form 1099K, Payment Card, and Third-Party Network Transactions.
Source: Internal Revenue Service. in Notice 2023-10