November 30, 2023

IRS announces delay in Form 1099-K reporting threshold for third party platform payments for tax year 2023

For 2023 and prior years, payment apps and online marketplaces are only required to send out Form 1099-K to taxpayers who receive over $20,000 and have over 200 transactions.

The IRS had previously considered a reporting threshold requirement of $600 for third party payment organizations for tax year 2023.

For tax year 2024, the Internal Revenue Service plans for a threshold of $5,000 to phase in the new reporting requirements.

The agency is making 2023 another transition year to implement the new requirements under the American Rescue Plan. The American Rescue Plan changed the Form 1099-K reporting threshold for payments over $600 that taxpayers receive selling goods or providing a service. This could include “people with side hustles, small businesses, crafters and other sole proprietors,” according to the IRS notice. It could also include casual sellers who sold personal items including clothing and household items for less than they paid originally.

Selling items at a loss could generate a Form 1099-K even though there is no taxable income.

The previous reporting thresholds will remain in place for 2023.

This phased-in approach will allow the agency to review its operational processes to better address taxpayer and stakeholder concerns.

Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount.

It’s important to note that the higher threshold does not affect the actual tax law to report income on your tax return. All income, no matter the amount, is taxable unless it’s excluded by law whether a Form 1099-K is sent or not.

The IRS Understanding your Form 1099-K webpage provides resources for taxpayers who receive a 1099-K, including what to do with a Form 1099-K, what to do if you get a Form 1099-K in error, what to do if you are selling personal items at a loss or selling personal items at a gain.

Reporting is not required for personal transactions such as birthday or holiday gifts, sharing the cost of a meal or a ride, or paying a family member or another for a household bill.

Should you have any questions about 1099-K thresholds or other tax related items, we encourage you to reach out to your Weiss tax professional.

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