1099-K , Tax Alerts
New Payment Servicing Entities 1099-K Reporting Delayed for One Year
The 2021 American Rescue Plan Act (ARPA) included a law that requires payment servicing entities (PSEs) like Venmo, PayPal, eBay, and Etsy to file Form 1099-K to taxpayers and the IRS for anyone receiving over $600 in proceeds through the PSEs beginning with 2022 tax reporting. The law was enacted to help pay for ARPA by helping to close the tax gap. Prior to this law, the threshold was $20,000 in revenue and more than 200 transactions in a single calendar year.
Why Did the IRS Delay This Change for 1099-K Reporting?
To avoid expected confusion regarding the new law in the current tax-filing season among taxpayers who do small amounts of online selling, the Internal Revenue Service (IRS) has decided to delay the reporting requirement for one year. This delay will allow time for taxpayers to get educated about the new law and hopefully avoid millions of IRS “matching notices” being sent to taxpayers who are not aware of the new law and its reporting requirements.
Additionally, Congress will have time to consider changing the reporting level to a higher threshold than $600, which will ease reporting paperwork without having a large impact on the law’s goal of closing the tax gap.
For questions regarding this change or your business, please contact The Whitlock Co.
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