The American Rescue Plan Act of 2021 lowered the reporting threshold to $600 for third parties that process credit card and other payments relating to business activities. In an early Christmas present to those who seek repeal of the provision, the IRS announced today that it will delay implementing new reporting threshold for another year.
IRS Notice 2023-10 sets out the details: calendar year 2022 will be treated as a transition period, and no penalties will be imposed for third party payment processors who follow the pre-ARPA rules:
The IRS will not assert penalties … for TPSOs failing to file or failing to furnish Forms 1099-K unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of transactions exceeds 200. For returns for calendar years beginning after December 31, 2022, a TPSO is required to report payments in settlement of third party network transactions with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of such transactions.
Income from transactions not reported to the IRS is a major part of the U.S. tax gap, as the IRS FAQ on the provision explains. However, the IRS press release states that
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “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.”
For now, third-party settlement organizations can relax, and we will all wait to see what Congress does with IRC 6050W in the coming year.