You probably fall into one of two categories:
- You don’t know or care about Form 1099-K reporting (even though it might apply to you); or
- You’ve been stressing about how you’re going to comply with the Form 1099-K reporting requirements because you’ve made electronic payments exceeding $600 in 2023.
If you’re in category #2, you probably also know that last year, the IRS delayed implementation of the $600 reporting threshold and left it at $20,000 (and 200 transactions) for 2022. The good news is that – due to taxpayer concerns and comments – the 2022 threshold will continue to apply for 2023. The IRS calls 2023 “an additional transitional year”.
The bad news is that a reduced threshold will apply in 2024 . . . but will be $5,000.The IRS is still aiming at an eventual $600 reporting threshold because it’s required by the American Rescue Plan, but they’re also looking at ways in which to make the reporting process easier.
The Form 1099-K reporting was initially targeted at third party settlement organizations such as PayPal, Venmo, Zelle, and other online marketplaces to report electronic payments. In those situations, the $20,000/200 transaction threshold only applied to larger entities with a lot of payments. However, lowering the threshold to $600 could inadvertently pick up personal sales of goods and services and reimbursing friends and family for the cost of a meal, paying for gifts, or sharing a car ride. The complexity of distinguishing these types of casual payments from more formal transactions caused the IRS to delay the implementation once again.
IRS Commissioner Danny Werfel commented, “The IRS will use this additional time to continue carefully crafting a way forward to minimize burden. We want to make this as easy as possible for taxpayers. We will work to make the new reporting requirements easier for them, and we’ll work closely with third party groups, tax professionals and others to find the smoothest path to ensure compliance with the law.”
More information on Form 1099-K can be found at https://IRS.gov/1099k.