Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the IRS released Notice 2023-74 announcing a delay of the new $600 Form 1099-K reporting threshold for third-party settlement organizations for calendar year 2023.
Congress changed the reporting rules for payment card and third party network transactions as part of the American Rescue Plan Act of 2021. Previously, transactions exceeding $20,000 with 200 sales-related transactions were required to be reported via form 1099-K. The new threshold is $600, regardless of the total number of transactions. The IRS temporarily delayed the new requirement last year.
Given complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan.
Following feedback from the tax community, the IRS is also looking to make updates to the Form 1040 and related schedules for 2024 that would make the reporting process easier for taxpayers.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.
However, the casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.
Questions regarding the reporting and taxability of income reported on Form 1099-K should be directed to your tax preparer or your personal financial advisor.
The Willi Law Office, LLC has been providing personalized legal services to individuals and businesses in Westerville and Central Ohio for over 20 years.
