IRS Delays $600 Tax Threshold For Third-party Payment Platforms
The Internal Revenue Service (IRS) says that further clarification is required before launching the implementation of its new $600 reporting threshold for third-party settlements.
The new threshold, which was implemented as a part of the American Rescue Plan of 2021, will also be phased in starting in 2022, according to the IRS.
The transition period described in Notice 2023-10, 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.
Besides, the IRS has stated that it will provide the proper 1099 forms to taxpayers who request them when the time comes.
The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting, like the 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.
The extra time, according to IRS Commissioner Doug O’Donnell, will assist people in smoothly adapting to the new system.
In particular, the IRS will delay the implementation of the 1099-K changes to help smooth the transition and ensure clarity for taxpayers, tax professionals and industry. As IRS stated, 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.
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