IRS Delays $600 1099-K Reporting Rule for Payment Apps

Here’s what you need to know about payment apps and taxes after the latest IRS announcement.

Payment apps like Venmo, PayPal, and Cash App have been mandated as part of the 2021 American Rescue Plan to submit 1099-K tax forms to the Internal Revenue Service (IRS) and to people who make at least $600 through the platforms to have.

People should get the forms in January 2023 in time for the 2022 tax filing season. But one viral tweet Claims released on December 23 that the IRS delayed reporting.

“Cash App, Venmo, and Paypal no longer need to send you 1099-K for $600 worth of transactions,” the tweet reads. “Instead it will be $20,000.”

Recently on-line seeks also show that some people are wondering if the tax reporting rule has been delayed.

THE QUESTION

Did the IRS delay the $600 payment app tax return rule?

THE SOURCES

THE ANSWER

This is true.

Yes, the IRS delayed the $600 tax return rule for payment apps.

WHAT WE FOUND

Third-party processing organizations, including payment apps like PayPal, Cash App, and Venmo, don’t need to send 1099-K forms to anyone who made at least $600 through those apps in 2022. the IRS announced on December 23.

A 1099-K form is “used to report tax information to you and the IRS about your transactions through a payment app or other online service, tax preparation service.” H&R block explained. The payment app or online platform will send you a copy of the 1099-K form to prepare your taxes and another to the IRS.

The lowered reporting threshold of US$600 has been included in the American rescue plan of 2021, a measure designed to prevent people from understating income. The Joint Tax Committee estimated that this change in reporting requirements would increase tax revenues by $8.4 billion from 2021 to 2031.

Before the passage of the American Rescue Plan, payment platforms only had to send out 1099-K forms to anyone who made over $20,000 from 200+ transactions.

As the IRS delays implementation of the $600 reporting threshold, the previous threshold will remain in place until December 31, 2023, National Taxpayer Advocate Erin Collins wrote in a blog post.

Similar to previous years, PayPal and Venmo will continue to report $20,000 from over 200 transactions, PayPal told VERIFY. Cash App did not respond to a request for comment.

This new reporting requirement does not mean that people can avoid paying taxes. The IRS requires People are required to report all taxable income they receive, whether they receive a 1099-K form from a payment app or another online platform — this isn’t new.

The IRS announcement comes as some Taxpayer Advocateincluding Collins, have raised concerns about taxpayer confusion and the ability of third-party companies to settle settlements to meet the new $600 reporting threshold.

Collins said some taxpayers could receive a 1099-K under the new rule if their payments are incorrectly classified as income, although the law isn’t designed to track personal transactions like paying for meals or household bills to friends or family.

More from VERIFY: No, not all $600 payment app transactions are required to be reported to the IRS

“Lowering the threshold from $20,000 to $600 will significantly increase the number of 1099-Ks issued,” Collins said. “The postponement should give taxpayers additional time to familiarize themselves with the rules and, more importantly, to properly identify personal and business payments to prevent misidentified payments from being reported on a 1099-K form at year-end .”

The 1099-K reporting threshold of $20,000 is a federal requirement imposed by the IRS. Some states have their own lower reporting thresholds, e.g PayPal and Meta Notice on their websites.

In Vermont, Massachusetts, Virginia and Maryland, the 1099-K reporting threshold is $600 per year, regardless of the number of transactions. The Illinois threshold is $1,000 in a year with at least four payment transactions processed.

Anyone who meets the reporting thresholds in these states will receive a 1099-K form.

When using payment apps, Collins recommends ensuring that personal payments, such as gifts or refunds, are classified as something other than goods and services. You can also create separate personal and business accounts to keep these transactions separate.

Click here to learn more about what to do if you receive a 1099-K but the money received is not income.

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https://www.kvue.com/article/news/verify/taxes-verify/irs-delays-600-dollar-1099-k-tax-reporting-rule-for-venmo-paypal-other-payment-apps/536-c6281c76-1380-4a09-962b-b21376c9c58a IRS Delays $600 1099-K Reporting Rule for Payment Apps

Laura Coffey

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