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Taxpayers Get a Break on New 1099-K Regulations

Someone in the IRS finally came to their senses and decided a little more thought needed to be placed on the implementation of the new 1099-K regulations. 

In IRS news release IR-2023-221, fact sheet FS-2023-27, and Notice 2023-74 the IRS announced a multi-year transition in implementing the $600 threshold for reporting payment organizations such as Venmo and PayPal to issue Form 1099-K, Payment Card and Third Party Network Transactions. The changes are as follows:

  • Calendar year 2023 (TS2024) – The over $20,000 in gross proceeds and over 200 transaction thresholds will continue to apply. That is, there is no change from the rule that applied for 2022 (TS2023).
  • Calendar year 2024 (TS2025) – Form 1099-K will be required if a taxpayer receives more than $5,000 in gross proceeds. There is no transaction threshold.
  • Calendar year 2025 (TS2026) – The reporting threshold change will be fully implemented. Form 1099-K will be required if a taxpayer receives over $600 in gross aggregate proceeds regardless of the number of transactions.

This phased transition will allow the IRS additional time to explore ways to minimize taxpayer burden. For instance, casual sales of personal items at a loss could still generate Form 1099-K and tax reporting implications even though the taxpayer has no tax liability for the sale. 

Maybe by then they can figure out how to keep that from happening, but I won't keep my fingers crossed.