The IRS announced on Friday that it would delay the introduction of a new rule aimed at lowering the tax reporting threshold for transactions that companies make through third-party payment platforms such as Venmo and Cash App.
The IRS said in a press release that it had decided to postpone lowering the threshold to $600 due to concerns raised by the agency and Treasury Department about the schedule.
The American Rescue Plan, the $1.9 trillion COVID-19 stimulus package passed by Congress last year, includes a provision that requires sellers to report when their transactions through these third-party networks exceed a total of $600 in one year. This is a significant drop from the previous threshold of more than 200 transactions of more than $20,000 per year.
The provision was supposed to take effect on January 1, 2023, but the IRS said it would delay implementation and the 2022 calendar year would be a “transition period” for the change.
“The additional time will help reduce confusion in the upcoming 2023 tax filing season and give taxpayers more time to prepare and understand the new reporting requirements,” said Acting IRS Commissioner Doug O’Donnell.
The press release states that the introduction of the new threshold for transactions that take place after 2022 will be delayed. The delay is intended to make it easier for third-party organizations and individuals to make an “orderly transition” to compliance, the authority said.
The IRS found that the law has no effect on personal transactions by people who share the cost of a ride, meal, gift, or household bill.
The agency is aware that it must carefully manage the policy to ensure that 1099-Ks, the form used to report business transactions, is only sent to taxpayers who should receive them. It says more information about the delay and information to help taxpayers will be available in the near future.