IRS to delay payment app reporting requirements until 2024

Don’t say the IRS has never done anything for you.

The Internal Revenue Service announced on Friday — just in time for Christmas! — that it will delay the new tax-reporting requirement that would punish Americans who received more than $600 through third-party payment apps like Venmo and PayPal for a whole year.

One must wonder if the agency got a glimpse of Sen. Rand Paul’s (R-Ky.) annual Festivus list.

According to acting IRS Commissioner Doug O’Donnell, the agency’s decision is the result of “concerns” brought by the American people.

“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” O’Donnell said, according to Fox Business. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes.”

“The rule change – approved by Democrats in March 2021 with the passage of the American Rescue Plan – would have required payments platforms including Venmo, PayPal, Etsy, and Airbnb to send Form 1099-K to the IRS and users if their transactions totaled more than $600 over the course of the year,” Fox Business explains. “Previously, the payment apps were required to send users Form 1099-K if their gross income exceeded $20,000 or they had 200 separate transactions within a calendar year.”

O’Donnell said the extra time will gift taxpayers with clarity.

“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,” he said.

Of course, Republicans had the opportunity to reduce the scope of the new rule, but with so many GOP Senators assisting the Democrats to ram through a $1.7 trillion omnibus spending package that puts Americans last, they blew it.

“In recent weeks, lawmakers rushed to try to increase the reporting threshold to $10,000 in order to reduce the scope of the new rule; however, they ultimately failed to add it to the $1.7 trillion government funding package,” Fox Business reported.

The IRS announcement follows sharp criticism from the National Association of Tax Professionals (NATP), who, in a memo sent this week, described the rule as “overly burdensome” and cautioned it could create “undue issues for taxpayers.”

The industry group noted that the IRS is already swimming in a backlog of years’ worth of unprocessed tax returns.

While business owners are already required to report their online income to the IRS, the new rule means “that the IRS will figure out what business owners earned on the cash apps, regardless of what that individual actually reports on their 1099-K because it broadens the scope of the threshold,” Fox Business said.

Entrepreneurs use form 1099-K to report payments from a business or individual for goods and services in the calendar year, but those amounts that come from selling personal items at a loss, amounts that represent reimbursements, and payments sent as gifts are not subject to income tax.

“This transitional guidance applies only to information returns filed or furnished by brokers,” the IRS said. “In contrast, taxpayers are still required to report any income they receive from transactions involving digital assets.”

As BizPac Review reported earlier this month, the new reporting rule is seen by critics as a “shameless” attack on small business owners, after President Biden promised to go after only wealthy tax cheaters.

“IRS sent a reminder this week that they’ll be violating our privacy and collecting info on all transactions we make on Venmo/Cash apps over $600,” tweeted Tulsi Gabbard at the time. “They’re taking OUR money to hire more agents to snoop on and to take more of OUR money. Shameless.”

https://twitter.com/TulsiGabbard/status/1601940815785312256?s=20&t=eL-deFao2xIe2hHKKqL-gg

 

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