IRS postpones 1099-K rule changes for Venmo, PayPal business payments

If you receive business payments via apps such as paypal or Venmo or e-commerce companies etc. eBay, Etsy Or Poshmark in 2023, your tax return could be a little less complicated.

The IRS announced Tuesday that 2023 will be a “transition year” for new tax filing requirements affecting these payments. Once the system is in place, payments of as little as $600 will trigger a Form 1099-K, even if the income comes from a single business transaction.

In 2023, the previous limit of 200 transactions with a total value of more than $20,000 will remain in place. The regulator plans to phase in the lower threshold by adding a $5,000 cap in 2024, but did not specify the trading cap. The $5,000 limit applies to tax returns filed in 2025.

Personal Finance Details:
Here’s how to avoid an expensive divorce
More part-time workers will take advantage of retirement benefits next year
Black Friday sales aren’t as good as you think. Click here to find out how to reduce the price further

The $600 threshold goes into effect starting in tax year 2025, and taxpayers who exceed the limit can expect to receive a 1099-K in early 2026.

However, business payments are always taxable, and filers must report their income in 2023 even if they haven’t received a Form 1099-K.

“While we have spent months gathering feedback from third-party organizations and others, we need additional time to effectively implement the new reporting requirements,” IRS Commissioner Danny Wuerffel said in a statement. It has become increasingly clear that this is the case.”

The agency also said it plans to update Form 1040 and related schedules, which taxpayers use to file individual income tax returns, to “facilitate the filing process.”

“Taking this phased approach is the right thing to do for tax administration purposes and will prevent unnecessary confusion as we continue to consider changes to Form 1040,” Werfel said. “It is clear that a further delay to the 2023 tax year will avoid problems for taxpayers, tax professionals and others in this area.”

The announcement comes amid bipartisan scrutiny of reporting requirements, with lawmakers and industry experts citing concerns about confusion for taxpayers. Before the delay, the IRS expected the number of 1099-Ks in 2023 to be an estimated 44 million.