GREENSBORO, N.C. — Back in July, WFMY News 2 told you about the IRS's plan to send 1099-K forms to anyone who used a payment app last year and got a total of $600. The idea is to make sure any income you get for a side gig or hustle is taxed.
The problem is, a lot of us use payment apps to consistently split bills with friends and family, and those totals could easily be at that $600 threshold. Can you imagine getting a tax form for every one of these and having to document that it was personal not income?
Thankfully, the $600 threshold has been delayed.
“The IRS is not prepared to handle it. Think of all the people sending personal funds through Zelle, Venmo, or PayPal and it's not taxed, but how do you clarify that? So, the IRS is giving a year reprieve,” said Kevin Robinson of Robinson Tax & Accounting Services.
The IRS confirms on its website that the delay will give taxpayers the opportunity to plan for next year.
Here is a close-up look at some of the highlights:
Under the law, beginning January 1, 2023, a TPSO is required to report third-party network transactions paid in 2022 with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. TPSOs report these transactions by providing individual payee's an IRS Form 1099-K, Payment Card and Third-Party Network Transactions.
The transition period described in Notice 2023-10PDF, delays the reporting of transactions in excess of $600 to transactions that occur after calendar year 2022. The transition period is intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting. A participating payee, in the case of a third-party network transaction, is any person who accepts payment from a third-party settlement organization for a business transaction.
The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting, like Form 1099-K. However, the IRS noted it must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them. In addition, it's important that taxpayers understand what to do as a result of this reporting, and tax preparers and software providers have the information they need to assist taxpayers.
Additional details on the delay will be available in the near future along with additional information to help taxpayers and the industry. For taxpayers who may have already received a 1099-K as a result of the statutory changes, the IRS is working rapidly to provide instructions and clarity so that taxpayers understand what to do.
If you do get a form in the mail, keep the tax form, don't freak out, and let's see what instructions come from the IRS. Hopefully, those instructions come soon.
While technically you could file your taxes as of right now, the IRS won't accept or process them until usually the last week of January.