TaxWatch: IRS pauses rule requiring people to report PayPal, Venmo transactions over $600. Here’s what went wrong.

by | Dec 23, 2022 | Stock Market

To avert taxpayer confusion in the upcoming tax season, the IRS is delaying a rule that would have required e-commerce sites and payment platforms like eBay
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Etsy
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and PayPal
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to send out tax paperwork to a much wider swath of people in 2023. Beginning next year, payment platforms were supposed to send tax forms, known as a Form 1099-K, to people who received at least $600 via these types of sites and payment platforms. The forms are typically triggered when a recipient receives at least $20,000 and has had at least 200 transactions.

E-Commerce businesses, accountants and others pushed for a higher threshold, saying the batch of paperwork would be an administrative headache for companies and the backlogged IRS, and also stir up confusion among taxpayers. These groups applauded the pause announced Friday. The threshold was lowered in the American Rescue Plan of March 2021. Recent lobbying efforts to raise the threshold as one part of the year-end spending deal proved unsuccessful. On Friday, the House passed the $1.7 trillion spending bill, which now awaits President Joe Biden’s signature. The IRS said the upcoming tax year will be a “transition period” for the platforms that were due to adopt the now-suspended reporting requirements, including Venmo, PayPal and CashApp. Acting IRS Commissioner Doug O’Donnell said IRS and Treasury officials heard the concerns about putting the new, lower reporting requirements into practice.

“‘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.’”

— Acting IRS Commissioner Doug O’Donnell

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