The IRS is once again delaying the implementation of reducing the threshold for 1099-K tax forms to $600, now pushed out in expectation of a phased transition for tax year 2024.
IR-2023-221, Nov. 21, 2023
WASHINGTON — Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74PDF announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023.
As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn't expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
Given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).
Following feedback from the tax community, the IRS is also looking to make updates to the Form 1040 and related schedules for 2024 that would make the reporting process easier for taxpayers. Changes to the Form 1040 series – the core tax form for more than 150 million taxpayers – are complex and take time; delaying changes to tax year 2024 allows for additional feedback.
The $600 threshold was originally supposed to take effect for tax year 2022 but was delayed as efforts to increase it failed to make it into the final version of the FY23 Omnibus bill.
eBay CEO Jamie Iannone has already released a statement about the further delay and we expect other ecommerce marketplace leaders to follow.
eBay Inc. (Nasdaq: EBAY), a global commerce leader that connects millions of sellers and buyers around the world, issued the following statement today in response to the IRS announcement that they are again delaying the implementation of the new 1099-K reporting threshold.
“Today’s announcement by the IRS is welcome news for millions of Americans who turn to online marketplaces to earn some extra money," said Jamie Iannone, Chief Executive Officer at eBay." These sellers and small businesses power the economy and help keep preloved goods out of landfills. We are grateful that the IRS has acted for the second year in a row to protect these taxpayers from unnecessary and confusing paperwork – and now we need Congress to continue working towards a permanent solution.”
What do you think of this decision to delay implementation for another year? What would be a more fair and appropriate threshold for 1099-K reporting? Let us know in the comments below!