IR-2023-221, Nov. 21, 2023

WASHINGTON — Following suggestions from taxpayers, tax professionals and cost processors and to cut back taxpayer confusion, the Inside Income Service as we speak launched Discover 2023-74 asserting a delay of the brand new $600 Kind 1099-Okay reporting threshold for third social gathering settlement organizations for calendar yr 2023.

Because the IRS continues to work to implement the brand new legislation, the company will deal with 2023 as a further transition yr. It will cut back the potential confusion attributable to the distribution of an estimated 44 million Types 1099-Okay despatched to many taxpayers who would not count on one and should not have a tax obligation. Consequently, reporting is not going to be required until the taxpayer receives over $20,000 and has greater than 200 transactions in 2023.

Given the complexity of the brand new provision, the massive variety of particular person taxpayers affected and the necessity for stakeholders to have certainty with sufficient lead time, the IRS is planning for a threshold of $5,000 for tax yr 2024 as a part of a phase-in to implement the $600 reporting threshold enacted underneath the American Rescue Plan (ARP).

Following suggestions from the tax neighborhood, the IRS can also be trying to make updates to the Kind 1040 and associated schedules for 2024 that may make the reporting course of simpler for taxpayers. Modifications to the Kind 1040 sequence – the core tax kind for greater than 150 million taxpayers – are advanced and take time; delaying modifications to tax yr 2024 permits for added suggestions.

“We spent many months gathering suggestions from third social gathering teams and others, and it turned more and more clear we want further time to successfully implement the brand new reporting necessities,” stated IRS Commissioner Danny Werfel. “Taking this phased-in method is the suitable factor to do for the needs of tax administration, and it prevents pointless confusion as we proceed to take a look at modifications to the Kind 1040. It is clear that a further delay for tax yr 2023 will keep away from issues for taxpayers, tax professionals and others on this space.”

The ARP required third social gathering settlement organizations (TPSOs), which embody in style cost apps and on-line marketplaces, to report funds of greater than $600 for the sale of products and companies on a Kind 1099-Okay beginning in 2022. These types would go to the IRS and to taxpayers and would assist taxpayers fill out their tax returns. Earlier than the ARP, the reporting requirement utilized solely to the sale of products and companies involving greater than 200 transactions per yr totaling over $20,000.

The IRS quickly delayed the brand new requirement final yr.

Reporting necessities don’t apply to non-public transactions reminiscent of birthday or vacation items, sharing the price of a automotive journey or meal, or paying a member of the family or one other for a family invoice. These funds should not taxable and shouldn’t be reported on Kind 1099-Okay.

Nonetheless, the informal sale of products and companies, together with promoting used private gadgets like clothes, furnishings and different home items for a loss, may generate a Kind 1099-Okay for many individuals, even when the vendor has no tax legal responsibility from these gross sales.

This complexity in distinguishing between some of these transactions factored into the IRS determination to delay the reporting necessities a further yr and to plan for a threshold of $5,000 for 2024 so as to section in implementation. The IRS invitations suggestions on the edge of $5,000 for tax yr 2024 and different components of the reporting requirement, together with how finest to focus reporting on taxable transactions.

“The IRS will use this extra time to proceed fastidiously crafting a approach ahead to reduce burden,” Werfel stated. “We need to make this as simple as doable for taxpayers. We are going to work to make the brand new reporting necessities simpler for them, and we’ll work carefully with third social gathering teams, tax professionals and others to seek out the smoothest path to make sure compliance with the legislation. That is in step with our Strategic Working Plan. The IRS is concentrated on assembly taxpayers the place they’re and serving to them get it proper the primary time.”

Expanded info reporting, which can happen as the results of the change in thresholds for Kind 1099-Okay, is vital as a result of it will increase tax compliance and may cut back burden on taxpayers in search of to observe the legislation. The IRS believes that growth have to be managed fastidiously to assist be certain that Types 1099-Okay are issued solely to taxpayers who ought to obtain them. As well as, it is vital that taxpayers perceive what to do because of this reporting, and that tax professionals and software program suppliers have the data they should help taxpayers.

The IRS will proceed to offer info on IRS.gov/1099k.

Reality Sheet 2023-27 incorporates extra particulars about this announcement.