Etsy creators, Poshmark sellers, and side hustlers in general are receiving a Thanksgiving pardon from the IRS and its latest guidelines pertaining to digital sales and payment platforms. The new, drastically lowered $600 threshold to receive a tax reporting form from third-party settlement organizations such as Venmo and PayPal is delayed yet again.
First announced as part of the Biden administration’s 2021 American Rescue Plan, the regulation previously scheduled for the 2023 tax season substantially reduced the Form 1099-K benchmark for third party commerce service providers. Previously, those forms were only issued to people with more than 200 transactions or $20,000 in total profits. The new rules would drop the requirement down to just $600 in profit. The majority of such commerce is facilitated by services like the aforementioned Venmo and PayPal, as well as Square and Zelle. Ensuing backlash from lawmakers, tax filing companies, and the public eventually caused the IRS to issue its first delay in December 2022.
On Tuesday, the IRS conceded the estimated 44 million pending Form 1099-K’s could result in unnecessary “potential confusion” this year for “many taxpayers who wouldn’t expect one and may not have a tax obligation.”
“We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” IRS Commissioner Danny Werfel said in Tuesday’s announcement. “It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”
[Related: How to avoid tax season stress.]
The government’s newest pause comes alongside a more detailed, transitional plan before the $600 limit goes into effect in 2025. The 200 transaction, $20,000 profit margin will lower to $5,000 for tax year 2024, although the IRS did not specify the number of…
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