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Partly cloudy skies early. Thunderstorms developing late. Low 61F. Winds SSW at 10 to 20 mph. Chance of rain 90%..
Partly cloudy skies early. Thunderstorms developing late. Low 61F. Winds SSW at 10 to 20 mph. Chance of rain 90%.
Updated: March 24, 2023 @ 3:34 pm
An IRS press release in late December announced a delay in the $600 reporting rule for companies like PayPal and Venmo. The rule will no longer apply to the 2022 tax year.
The $600 rule would have created IRS issues for many people this year. The IRS had previously warned taxpayers about filing their tax returns early due to the new $600 threshold rule. One of the problems with the $600 reporting rule was that the IRS had no way of knowing if the money you received was taxable income.
The IRS said, “the law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday gifts, or paying a family member or another for a household bill.”
The $600 threshold amount was enacted as part of the American Rescue Plan of 2021. It was intended to begin with the 2022 tax year.
The IRS said that calendar year 2022 would be a transition period for implementing the new rule.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said 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.”
The IRS believes that the law is essential because tax compliance is greater when amounts are required to be reported to the IRS, like the Form 1099-K. However, the IRS said it needs to be carefully managed to help ensure that 1099-Ks are only given to people who should receive them. In addition, everyone must understand what to do due to this new reporting.
The IRS said that additional details on the delay would be available soon. For people who may have already received a 1099-K, the IRS is working rapidly to provide instructions and clarity so everyone will understand what to do.
The IRS also said that the previous 1099-K reporting threshold of $20,000 in payments from over 200 transactions would remain in effect.
The purpose of the law was to lower the tax gap between the amount people owed and the amount that they paid. A recent report by the Joint Committee on Taxation estimated that the law would bring in $8.4 billion in tax revenue from 2021-2031.
The delay in the $600 rule doesn’t mean you aren’t required to report all taxable income to the IRS.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS, and he has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or by email at david@yourtaxcare.com.
