A Christmas Miracle: IRS Delays $600 Reporting Rule For PayPal And Venmo

The Internal Revenue Service (IRS) delayed a rule that would require Americans to report transactions above $600 made through third-party payment settlement organizations.

A webpage updated by the IRS earlier this month had informed taxpayers who use platforms such as PayPal and Venmo that they could expect to receive a copy of Form 1099-K for “gross payments for goods or services” that exceed $600, no matter how many transactions occurred. On Friday, however, a statement posted by the agency announced that the current calendar year will instead mark a “transition period” for the platforms, which are still required to report transactions above $600 beginning in the 2023 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 remarked. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. 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.”

The reporting requirements prior to the 2022 tax year only applied to taxpayers with more than 200 payments above $20,000. “You may receive a Form 1099-K from each payment settlement entity from which you received payments in settlement of reportable payment transactions,” the agency had said before the policy was delayed. “A reportable payment transaction is defined as a payment card transaction or a third-party network transaction.”

Beyond the amended reporting requirement enacted under the American Rescue Plan, a stimulus measure passed last year in response to economic fallout from the lockdown-induced recession, the Inflation Reduction Act more recently greenlit $80 billion in new funding for the IRS, which the agency will use to hire 87,000 new employees over the next decade. Officials have said that more than doubling the agency’s headcount is intended to decrease wait times for phone calls and help centers, as well as upgrade information technology used by agents.

Treasury Secretary Janet Yellen has likewise vowed that the new resources will not be utilized to increase audit rates for American households earning less than $400,000 per year “relative to historical levels.” She neglected to clarify that “historical levels” of audits were far higher as recently as one decade ago: Overall audit rates fell 72% between 2010 and 2019, while those earning less than $25,000 saw audit rates fall by 61%, according to a report from the United States Government Accountability Office.

Former IRS Commissioner Charles Rettig, who the Biden administration plans to replace with consulting executive Daniel Werfel, said in a letter to lawmakers that the additional resources will be used for auditing “large corporate and global high-net-worth taxpayers” while serving as an aide to middle-class taxpayers and small businesses.

“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” he wrote. “Other resources will be invested in employees and IT systems that will allow us to better serve all taxpayers, including small businesses and middle-income taxpayers. Enhanced IT systems and taxpayer service will actually mean that honest taxpayers will be better able to comply with the tax laws, resulting in a lower likelihood of being audited and a reduced burden on them.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Generated by Feedzy