Breaking news: IRS Delays $600 Tax Rule for Individuals and Online Sellers!
Breaking news! The IRS just announced they're delaying and revising the 1099K reporting changes that were supposed to go into effect starting this year 2023.
As you probably know, payment settlement entities were planning on issuing 1099K tax forms to individuals and online sellers who received $600 or more using payment platforms like PayPal, eBay, Venmo, and others.
But hold the phone. Here's the headline from the IRS Press Release.
ā¯¯IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementationā¯˛
In this blog, I'll break down what it means for you and some pitfalls to be aware of, so read on!
IRS Delays and Revises the 1099K Reporting Changes.
The IRS announced a surprise, let's call it a gift, to millions of Americans as tax filing season approaches. They've delayed the new $600 1099K reporting requirement that would have affected people who sell stuff on eBay, resell concert tickets, and use payment processors such as PayPal and Venmo.
This is the second straight year the IRS postponed enforcement of this law that requires those payment platforms to send the IRS information about users who made more than $600 in a year. Believe it or not, this change would have resulted in 44 million 1099K forms being sent in January to people like small business owners, freelancers, those with side hustles, and gig economy workers.
In a nutshell, they've postponed this for another year until 2024.
Additionally, in 2024, the filing threshold will increase from $600 to $5,000. I think that's pretty reasonable. I mean, $10,000 would have been better, but I'll take it.
Here's another important quote from the IRS Press Release.
ā¯¯As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn't expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
"We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements," said IRS Commissioner Danny Werfel.
"We want to make this as easy as possible for taxpayers. We will work to make the new reporting requirements easier for them, and we'll work closely with third-party groups, tax professionals and others to find the smoothest path to ensure compliance with the law," said Werfel.ā¯˛
This is a small win for the American taxpayer.
Keep in Mind: The Taxability of Things You Sell Online.
But keep in mind, this doesn't change the taxability of things you may have sold at a profit.
For example, if you bought Taylor Swift tickets for $500 and you were able to resell them for $2,000, you actually have a $1,500 taxable gain that you're supposed to report on your tax return.
So whether you receive a tax form or not, if you made a profit in the course of selling stuff online or for your business, then it's taxable and reportable.
Now, if you sold old stuff on eBay at a loss, then there's generally nothing to worry about. I'm relieved and I hope you are too.
1099K: Online Payment Platforms to Report Gross Business Income.
Do know that for 2023, third-party payment platforms will report your gross business income to you and also to the IRS in January, only if you conducted more than 200 transactions on that payment platform and earned more than a total of $20,000 from them.
Basically, they've reverted back to the original rules for this tax year 2023. Makes sense?
That's about it. I hope you found the blog helpful. Thanks for reading and see you in the next blog!
