The IRS is delaying implementation of a new rule that requires companies like PayPal, Venmo, and CashApp to report user transactions that eclipse a $600 threshold.
That unpopular new rule is part of the 2021 American Rescue Plan. It will require companies known as third-party settlement organizations (TPSOs) to send users who transact $600 or more in a year a Form 1099-K.
The rule was supposed to go into effect this year. However, in an update announced on Dec. 23, the IRS says that rule will not go into effect for the 2022 tax year. It was only a month ago that the IRS reminded taxpayers and businesses of the new $600 threshold rule.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” says Acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
IRS Delays $600 Threshold Rule for Business Transactions on PayPal, Venmo, CashApp
This new rule definitely impacts small businesses, especially freelancers and contractors, who use these TPSO apps to collect money from clients and customers. Only business transactions are affected by the new rule.
The previous rule, prior to passage of the American Rescue Plan, required these apps to send Form 1099-K to users when they passed thresholds of either 200 transactions in a single year or an aggregate money amount of $20,000.
A TPSO, under the new rule, will have to send users a Form 1099-K when payments total $600 or more, no matter the number of transactions in a year.
The IRS says delaying the new rule is “intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting.”
More details on the delay and implementation of this new rule will be released in the future, the IRS says.
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