Call it a holiday miracle. The IRS has decided, in the absence of Congressional action, to delay for one year the implemtation of a law that requires payment and e-commerce platforms like PayPal
The delay is a welcome reprieve to tax professionals who were expecting enormous confusion during the upcoming tax-filing season among taxpayers who have been doing a small amount of online selling but have never received this form in the past. It also may mitigate the possibility of millions of additional IRS CP2000 “matching notices” being sent to taxpayers who weren’t aware of the new lower threshold and failed to retrieve the notices from their online accounts and/or who moved and didn’t get mailed notices and, consequently, failed to report the “income” on their annual Form 1040.
The reporting delay does not change the obligation of those doing business through the sites to report any taxable income. But it does give taxpayers additional time to make themselves aware of this requirement and to educate themselves as to how to determine if the proceeds reported on the form are taxable income. (For example, cash wedding gifts received through an app would not be taxable income.) Taxpayers will also get more time to learn about the options for correcting erroneous forms—or to make the decision to hire a tax professional to help them.
“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,’’ Acting IRS Commissioner Doug O’Donnell said in a statement.
Finally, the delay gives Congress yet another chance to change the law, which was part of the 2021 American Rescue Plan Act and was intended to help close the tax gap. That law instituted the new lower 1099-K reporting requirement for revenue received during the 2022 year—a very short time frame for a change that could affect so many taxpayers. A proposed amendment to the $1.7 trillion omnibus spending bill that would have raised the threshold from $600 per year to $10,000 per year wasn’t included in the list of amendments voted on when the Senate passed the spending bill yesterday and sent it to the House. A prior bill, the SNOOP Act, which would have returned the threshold to its original $20,000, was introduced in February of this year and stands no chance of passing this Congress.