On Nov. 21, 2023, the Internal Revenue Service (IRS) announced a second delay in the implementation of the new $600 Form 1099-K reporting threshold for third-party settlement organizations (TPSOs) for calendar year 2023. This means that TPSOs threshold will remain the same at more than 200 transactions totaling over $20,000. TPSOs will not be required to report third-party network transactions as low as $600, regardless of the number of transactions, as initially enacted under the American Rescue Plan (ARP).
The IRS is making this change in response to feedback from taxpayers, tax professionals and payment processors. The agency is concerned that the new reporting requirement could cause confusion and hardship for some taxpayers, particularly those who receive income from multiple TPSOs.
To minimize unnecessary burden for some taxpayers and ease into lower thresholds, the IRS is planning to phase in the new reporting requirement by increasing the threshold to $5,000 for calendar year 2024. This means that TPSOs will only be required to report third-party network transactions paid in 2024 with any participating payee that exceed a minimum threshold of $5,000 in aggregate payments, regardless of the number of transactions.
The IRS has stated that it is committed to working with taxpayers, tax professionals and payment processors to ensure a smooth implementation of the new reporting requirement. The agency also plans to continue providing guidance and resources to help taxpayers understand their obligations under the new law.
What This Means for Taxpayers
For taxpayers, this delay means that you will not receive Form 1099-K from a TPSO unless you receive more than $20,000 and have more than 200 transactions in 2023. This is the same reporting threshold that was in place for tax year 2022. Taxpayers should be reminded that all taxable income should be properly reported on your income tax return as required, whether Form 1099-K is received or not.
What This Means for TPSOs
For TPSOs, this delay means that you will not be required to report third-party network transactions paid in 2023 with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. However, you will still be required to report third-party network transactions paid in 2023 with any participating payee that exceed a minimum threshold of $20,000 and have more than 200 transactions.
The IRS is encouraging TPSOs to continue to work with their participating payees to provide them with information about their income from third-party platform payments. This will help taxpayers to accurately report their income on their tax returns.
For more information about the Form 1099-K reporting requirement, review the relevant IRS Fact Sheet and schedule a meeting with your Windham Brannon advisor, or contact Tomika Bullet.
