Joining small-business industry leaders, NSBA applauds the IRS for its common sense decision to delay new, cumbersome 1099-K reporting requirements.
On Nov. 21, 2023, the Internal Revenue Service (IRS) issued Notice 2023-74, a policy change that significantly impacts taxpayers who engage in e-commerce.
As a part of President Biden’s American Rescue Plan Act of 2021, the IRS was directed to amend the reporting threshold for third-party settlement organizations, like PayPal, Venmo, CashApp. As an exclusion, Zelle was not included; however, this change means that taxpayers who recorded $600 or more in transactions in the course of a calendar year would have their aggregate transaction amounts reported to the IRS by their third-party settlement organization, as well as be issued an IRS form 1099-K.
Previously, payees would only have their information reported by the settlement organization if they exceeded 200 transactions with a combined $20,000 in payments.
Given the complexity of the reporting requirements, the enormous volume of taxpayers affected by the change, and the potential for confusion, the IRS has now issued Notice 2023-74, electing to postpone the effective date of the new requirement. With this delay, the IRS is calling 2023 “an additional transition year” between the previous threshold and the new one, which was intended to take effect in 2022.
As a result of the delay, for 2023, taxpayers will only receive a form 1099-K should they exceed the 200 transaction/$20,000 mark. That said, as part of the IRS plan to phase-in the new standard, for tax year 2024, taxpayers will receive a form 1099-K if they exceed $5,000 in taxable income through these payment services.
NSBA applauds the IRS decision to delay implementation of the new reporting standard and will continue to provide updates as we monitor the regulatory process.