The IRS has delayed the new $600 Form 1099-K reporting threshold for third-party settlement organizations for calendar year 2023. Reporting will not be required for 2023 unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023. The IRS is planning a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold.
The new provision enacted under the American Rescue Plan requires third-party settlement organizations, such as Venmo, PayPal, Facebook, eBay, Etsy, or Cash App to report payments for selling goods or services of $600 or more to taxpayers on Form 1099-K.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.
The casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K, even if the seller has no tax liability from those sales.
The complexity in distinguishing the types of transactions factored into the IRS decision is to delay the reporting requirements an additional year and to plan a phase in implementation.
Dawn Darnell, CPA, is an Assurance Partner at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our audit or tax professionals, please contact our office at 781-453-8700.