IRS Delays Rollout Of Online Payment Reporting

(NewsGlobal.com)- Taxpayers can rejoice, as the IRS has decided to hold off on a new reporting requirement for at least one year.

Before the move was made, third-party online payment platforms such as PayPal, Cash App and Venmo would’ve been required to produce a tax document for any user who conducted at least $600 in transactions on their platforms this year. In addition to sending the report the taxpayer, the companies would be forced to send them directly to the IRS as well.

There was a lot of backlash to this rule change. Before it went into effect, these payment processing companies only had to file the tax documents if users conducted more than 200 transactions in one tax year that totaled more than $20,000.

That threshold was dropped significantly – all the way down to $600. It was included as a provision in the 2021 COVID-19 stimulus package that Congress passed – and President Joe Biden signed – using budget reconciliation in the Senate. In essence, the package had no support from Republicans and was completely led by the Democrats.

This new provision was set to go into effect on January 1 of 2023. But, the IRS released an update this week that said calendar year 2022 would be a “transition period” for that change, and that it wouldn’t be implemented for another year.

Doug O’Donnell, who serve as an acting IRS commissioner, said in the release:

“The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”

Only transactions that happen after 2022 is over will start to count toward the new reporting threshold. The news release from the IRS said that they are delaying the changes to facilitate an “orderly transition” so that both individual taxpayers and the payment processing companies can get in compliance.

The rule only applies to payments that are received over the platform for income purposes. It doesn’t cover money that is sent to or from family, friends and colleagues. It doesn’t apply if someone sends you money to pay for their share of a meal, a bill for the household or a ride, the agency said. It also doesn’t apply to any monetary gifts that are sent via these third-party payment platforms.

One of the concerns the IRS says it has with the new rule is making sure that only taxpayers who should truly receive the 1099-K tax forms actually receive them. This form is used to report on business transactions only, which is why it wouldn’t apply to all of those other types of transactions listed above.

In this week’s release, the IRS said it would provide more information about the delay in the near future so that taxpayers have a better understanding of everything that’s involved headed into 2023 – when the provision will supposedly be in full effect.