1099-K Reporting Update: IRS delays enhanced reporting until 2024
In a pre-Thanksgiving offering to taxpayers, on November 21, 2023, the IRS released Notice 2023-74 which announced a delay of the new $600 Form 1099-K reporting threshold for third-party settlement organizations for calendar year 2023.
This is yet another delay in the planned reduction of the 1099-K reporting threshold. As reported in our December 2022 Expanded 1099-K Reporting Delayed post, the IRS issued a similar announcement last year.
In addition to Notice 2023-74, the IRS published Fact Sheet 2023-27 explaining the details of the announcement.
Below is a summary and overview of the 1099-K reporting rules.
Understanding the 1099-K
Form 1099-K is used to report payment card transactions and transactions with third-party settlement organizations (TPSOs). It's essential for businesses that receive income through these means to accurately report their earnings, allowing the Internal Revenue Service (IRS) to track and tax these transactions appropriately. Examples of those impacted by these changes are self-employed individuals using cash transfer services such as Venmo or PayPal, as well as other e-commerce companies like Etsy and eBay.
Legislative changes
To enhance tax compliance, Congress lowered the reporting thresholds for 1099-K forms. This effort came by way of the American Rescue Plan Act of 2021, which reduced the reporting threshold from $20,000 to $600, a substantial decrease. Please refer to our prior blog New Form 1099-K Reporting for an explanation of this legislative change.
Administrative delays
Originally scheduled to be effective for the tax year 2022, as reported in Expanded 1099-K Reporting Delayed, in December 2022 the IRS released Notice 2023-10 delaying implementation of the new rules until 2023.
Now, with Notice 2023-74, the implementation is delay again until 2024. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.
1099-K reporting threshold for 2023
Understanding Your Form 1099-K on the IRS website provides details of the following:
For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for personal or business accounts that receive over $20,000 in payments from over 200 transactions for goods or services.
Please contact your Herbein tax consultant if you have questions regarding this article or Form 1099-K reporting.
Article contributed by Alexander J. Sands
