IRS Delays Form 1099-K Reporting Threshold

Right before the Christmas holiday, the IRS announced that it is delaying the new, lower $600 reporting threshold for third-party settlement organizations (TPSO), meaning that the threshold of $600 will not apply to transactions in 2022. The IRS had received negative feedback regarding the timeline of implementation of these changes that were due to take effect for the calendar year 2022 as enacted as part of the American Resue Plan of 2021, and therefore decided to delay the implementation.

The IRS has issued guidance (Notice 2023-10) outlining that the calendar year 2022 will be a transition period for implementation of the new lower threshold and is intended to facilitate an orderly transition for third-party settlement organizations (TPSO) compliance and participating payee compliance with income tax reporting. Tax year 2022 will be treated as a transition period for purposes of IRS enforcement and administration, meaning that the IRS will not impose 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.

However, taxpayers still need to be aware that they may receive 2022 Forms 1099-K in error, despite the requirement being delayed. Taxpayers need to pay close attention to any Forms 1099-K they receive and contact the TPSO immediately to request a corrected form if any forms are erroneous (perhaps for personal transactions). Taxpayers are urged to ensure that they include any 1099-K Forms in their tax documentation that they are providing to their HM&M advisor during the upcoming filing season.

Please contact your friendly HM&M advisor if you have any questions.