The Internal Revenue Service (IRS) is delaying rolling out its new $600 reporting threshold for third-party settlements, saying that more clarity is needed before it can kick off.
In a new press release, the IRS says that due to the moratorium, third-party settlement businesses will no longer be required to report transactions in 2022 that cross the $600 threshold.
Furthermore, the IRS has designated 2022 as a “transition period” for the implementation of the new threshold, which was enacted as a part of the American Rescue Plan of 2021.
“The transition period…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 [third party settlements organization] 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 IRS says that it will provide the proper 1099 forms required to report the new threshold to taxpayers who need them when the time is right.
“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.”
According to Acting IRS Commissioner Doug O’Donnell, the additional time will help taxpayers cleanly transition to the new system.
“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.”Don't Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
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