NOTE: The IRS delayed its tax reporting rule Friday, so we are offering this updated column from February from Michelle Singletary’s archive.
IRS delays reporting rule for Venmo, PayPal and other payment apps
A new income tax reporting rule that has been causing confusion for users of various payment apps will now be delayed by a year, the IRS said Friday.
As a result, third-party payment processors such as PayPal, Venmo and Cash App will not be required to report transactions of $600 or more on Form 1099-K for the 2022 tax year.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” acting IRS commissioner Doug O’Donnell said in a statement. “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.”
For now, the existing 1099-K reporting threshold of $20,000 in payments from more than 200 transactions will apply for 2022, the agency said.
Before this announcement, the companies were supposed to report payments received for goods and services of more than $600 a year. The change was made to capture income from gig workers and entrepreneurs with a side hustle. In the past, companies were required to send an IRS Form 1099-K only for gross payments exceeding $20,000 and more than 200 transactions within a calendar year.
Eric Bronnenkant, head of tax for online financial adviser Betterment, answered some questions readers had earlier this year about the new rule, which now will apply to transactions made next year. Although the reporting has been delayed, it’s important to understand how it will impact you for the 2024 tax season.
Source: WP
