Sen. Mike Braun, R-Ind., explains the details regarding the IRS starting to send out 1099-K forms for some payments on ‘Fox Business Tonight.’
The IRS announced on Tuesday that it is delaying a controversial tax reporting requirement targeting Americans who made more than $600 online through third-party payment apps like Venmo or PayPal.
The rule change – approved by Democrats in March 2021 with the passage of the American Rescue Plan – would have required payments platforms including Venmo, PayPal, Etsy and Airbnb to send Form 1099-K to the IRS and users if their transactions totaled more than $600 over the course of the year.
Instead, the IRS will treat 2023 as "an additional transition year," meaning that payment apps will not be required to send users Form 1099-K unless their gross income exceeded $20,000 or they had 200 separate transactions within a calendar year. Beginning in 2024, that basic reporting threshold will be increased from $600 to $5,000.
The Internal Revenue Service (IRS) headquarters in Washington, D.C., U.S., on Friday, Feb. 25, 2022. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
"Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion," IRS Commissioner Danny Werfel said in a statement. "It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area."
The change was intended to crack down on Americans evading taxes by not reporting the full extent of their gross income. However, critics say that it amounts to government overreach at its worst and that it could ultimately hurt small businesses.
To be clear, business owners are already required to report that income to the IRS. The new rule simply means that the IRS will figure out what business owners earned on the cash apps, regardless of what that individual actually reports on their 1099-K, because it broadens the scope of the threshold.
In this photo illustration, PayPal logo is seen displayed on a mobile device. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images / Getty Images)
Form 1099-K is used to report goods and services payments received by a business or individual in the calendar year, but there are certain exclusions from gross income that are not subject to income tax, including amounts from selling personal items at a loss, amounts sent as reimbursements and amounts sent as gifts.
Once implemented, the lower reporting threshold threatens to sweep up millions of Americans who make money online. Roughly one in four Americans rakes in extra income on the side by selling something online, renting their home or using a digital platform to do work, according to the Pew Research Center.
This is a developing story. Please check back for updates.
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IRS delays tax-reporting rule on Venmo, PayPal payments over $600 - Fox Business
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