WASHINGTON — Tax reporting is going to be a little less complicated for individuals and companies that receive business payments via PayPal, Venmo, or e-commerce companies such as eBay, Etsy, or Poshmark in 2023, CNBC reported.
The IRS announced Tuesday that 2023 will be an “additional transition year” and new tax reporting rules for Form 1099-K, which is for reporting third-party business payments to the IRS, will be delayed until 2024 affecting such electronic payments. The 2022 threshold remains more than 200 transactions worth an aggregate of more than $20,000.
That will change for the next tax season when the IRS will begin phasing in the new reporting rules and the 2024 threshold goes down to $5,000 for tax returns filed in 2025, but it specified no transaction limit. In 2025, the threshold plummets to $600 for even one transaction at the beginning of 2026, the news outlet reported.
The extreme drop in the threshold to $600 has been enacted under the American Rescue Plan.
The IRS reminds that business payments have always been taxable and taxpayers should still report 2023 income even if they don’t receive a 1099-K.
The IRS said the complexity of the new rules, and the millions of taxpayers affected, will require delay for the “stakeholders” more lead time.
The IRS will also make updates to Form 1040 and related schedules for 2024 that would make the reporting process easier for taxpayers, IRS Commissioner Danny Werfel said. Changes to the 1040, which the Agency said is the core tax form for more than 150 million taxpayers, are complex and will take time to implement delaying the changes until 2024 will allow for additional feedback, the IRS announced.
“Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes to the Form 1040,” Werfel said. “It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals, and others in this area.”
The threshold will not apply to personal transfers on apps such as Venmo and PayPal -- such as sending money to a friend or family member, CNBC reported.
