Date: November 28, 2023Attorney: Martin D. Hauptman

The IRS has decided to delay the Form 1099-K reporting threshold changes, originally set for 2023. This decision comes after concerns were raised by various stakeholders, including tax professionals and third-party payment facilitators. A phased-in approach will now begin in 2024, providing more time to address taxpayer confusion. Let’s explore this development.

The Form 1099-K reporting threshold change was introduced in the American Rescue Plan Act of 2021 (ARPA). It aimed to lower the de minimis threshold from $20,000 to $600. However, this change raised concerns and led to pushback.

To ease the transition, the IRS delayed the new Form 1099-K rules, treating 2022 as a transition year.

On November 21, the IRS announced another postponement. This delay won’t impact the upcoming tax filing season. Instead, a phased-in approach will start in 2024, with the threshold set at $5,000.

IRS Commissioner Danny Werfel emphasized the importance of gathering feedback and the need for additional time to implement the new reporting requirements effectively.

The IRS clarified that reportable transactions include those on online and social media marketplaces, craft or maker marketplaces, auction sites, resale sites, crowdfunding platforms, and freelance marketplaces. “Friends and family transactions” are not taxable events.

The IRS stressed that the transition period doesn’t exempt taxpayers from their income reporting responsibilities. Taxpayers should stay informed and follow reporting procedures for their specific transactions. The IRS plans to release additional materials before the upcoming tax season to assist taxpayers.

The IRS’s decision to delay the Form 1099-K reporting threshold change and implement a phased-in approach aims to reduce confusion and ensure effective tax administration. This provides taxpayers, tax professionals, and stakeholders with more time to adapt, with changes taking effect in 2024. Stay tuned for IRS guidance as they clarify these changes in preparation for the upcoming tax season.