IRS Delays $600 Payment Threshold for Third-Party 1099-K Issuance

The $600 Payment Threshold for Third-Party Payments Has Been Delayed — See How This Affects You

Just before the holidays, the Internal Revenue Services announced they would delay their new $600 reporting threshold for third-party settlement organizations (TPSOs). The new reporting threshold, which was announced as part of the American Rescue Plan of 2021, had been scheduled to take effect during the 2023 tax filing season. 

As part of the announcement, the IRS said that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations that would have generated Form 1099-Ks for taxpayers. As such, the reporting threshold for filing your 2022 taxes will remain $20,000 for the time being.

Form 1099-K: What kinds of payments does the new IRS threshold affect?

The new IRS reporting threshold is for businesses or side hustles who are receiving payment for goods or services through a third-party settlement organization, such as Amazon, Etsy, PayPal, Venmo, CashApp, etc. 

The threshold does not apply to personal payments made through these apps, such as gifts, paying a friend for pizza, or sending a roommate rent money. If you receive a 1099-K and your payments through these third-party organizations were not business-related, your records should reflect that, and you can reach out to the company itself to re-issue a corrected 1099-K and amend the wrong information. 

That said, it is unlikely that you will erroneously receive a 1099-K, as these platforms typically have separate interfaces for business transactions rather than personal.

IRS Delay: When will the $600 reporting threshold take effect?

The IRS released guidance outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) that would have generated Form 1099-Ks for taxpayers. 

Essentially, all the delay means is that you will not receive a 1099-K form to file unless your income from these platforms exceeds $20,000 in payments from over 200 transactions. Regardless of whether or not you receive this form, you are still required to report all taxable income when you file your taxes.

Why is the $600 reporting threshold being delayed?

With digital payments becoming more commonplace, lowering the reporting threshold to $600 would lead to a massive increase in the number of people receiving 1099-K, a lot of whom may not know what to do with this new form. Furthermore, the IRS would have a huge onslaught of new reporting to sift through. Delaying the threshold reduction gives both the IRS and taxpayers an opportunity to get to know the new process. 

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About the Author

A young professional standing by Colorado's Front Range

Mason Turner

Director of Accounting

Mason is Boxelder's Director of Accounting, and the head of our office in Wichita, Kansas. He graduated from McPherson College with dual majors in Sociology and Psychology, and a minor in Business. Mason’s been the Director of Accounting at Boxelder for over two years now, managing the workload for the accounting department and handling client relationships. Mason loves the culture at Boxelder, and loves helping people in need of tax advice. He married his wife in August of 2019, and they have two cats and two dogs. Mason enjoys sports, spending time with friends and family, and learning new things.

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