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IRS delays implementing $600 reporting rule for Venmo, PayPal payments

The IRS is postponing implementation of sweeping rule changes that would require people to report income over $600 paid through popular apps like Venmo and Paypal, the agency announced Tuesday.

The controversial tax reporting rule, which received no Republican votes when approved by Democrats in Congress as part of the American Rescue Plan in 2021, resulted in approximately $4,400 more tax reporting from the IRS in January. Millions of 1099-K forms will be shipped.

The agency, which also delayed implementation of the rule last year, is treating 2023 as an “additional transition year” to “reduce potential confusion” regarding the new tax liability and will instead phase out the threshold above $600. announced that it would be introduced. for the next two years.

IRS Commissioner Danny Wuerffel said, “We have spent months gathering feedback from third-party organizations and other entities, and it will take additional time to effectively implement the new reporting requirements.” It has become increasingly clear that there is a need for statement.

IRS is delaying rule changes that would require people to report income over $600 paid through popular apps like Venmo and Paypal
AP

“Taking this phased approach is the right thing to do for tax administration purposes and will prevent unnecessary confusion as we continue to consider changes to Form 1040. Additional deferrals to the 2023 tax year avoid problems. “It is clear that we will do this for taxpayers, tax professionals and others in this field,” Werfel added.

With this delay, users of third-party payment apps will not have to fill out a 1099-K in 2023 unless they earn more than $20,000 and make more than 200 transactions.

According to the agency, reporting requirements do not apply to personal transactions such as birthday and holiday gifts, or splitting the cost of meals or household expenses.
NurPhoto (from Getty Images)
With this delay, users of third-party payment apps will not have to fill out a 1099-K in 2023 unless they earn more than $20,000 and make more than 200 transactions.
AP

The IRS plans to implement a $5,000 reporting threshold for the 2024 tax year as part of a phase-in, and perhaps a $600 reporting threshold for the 2025 tax year.

The new rules apply only to payments received for transactions of goods and services.

According to the agency, reporting requirements do not apply to personal transactions such as birthday and holiday gifts, or splitting the cost of meals or household expenses.

The agency, which also delayed implementation of the rule last year, said it would treat 2023 “as an additional transition year” to “reduce potential confusion” regarding the new tax obligations.
Reuters

Critics of the rule change, including the Coalition for 10-99-K Fairness, have criticized the privacy concerns associated with forcing third-party payment apps to reveal details of user transactions with the government. There are concerns about this and the fact that there is an unfair tax burden. That applies to “casual online sellers and small businesses.”

The Biden administration hopes to crack down on tax evasion by lowering reporting standards.

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